A chief executive from a mid-size bank in New York has blown the whistle on mid-sized hedge funds, brokerage houses, and small to mid-sized law firms who have all been applying for the small business loans offered through the COVID-19 Payroll Protection Program. Why is this an issue? Well, for two reasons...
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I guess this is sort of a two-fer where subject matter is concerned, but it all centers on COVID-19 and the government’s handling of the event. At the outset, I acknowledge that hindsight is 20/20 but there are some corrective measures that can be taken for at least one of the issues addressed.
The first subject I would like to address is a disturbing report coming out of FOX Business by Charlie Gasparino and Lydia Moynihan. This report highlights activities that some feared would happen in the wake of the Trump Administration’s COVID-19 stimulus plan.
In the report, Gasparino and Moynihan share a conversation with a chief executive from a mid-size bank in New York who testifies that mid-sized hedge funds, brokerage houses, and small to mid-sized law firms have all been applying for the small business loans offered through the COVID-19 Payroll Protection Program. Why is this an issue? Well, for two reasons.
First, each of the aforementioned entities continues to make money during the national quarantine. These are all retainer and fee-based businesses, many whose revenue flows are still quite substantial, even if diminished. This hardly puts them in the dire straits being felt by true small businesses and entrepreneurs. Most certainly these entities exist outside of the spirit of the effort.
Second, the damage that these entities are causing – these mid-sized hedge funds, brokerage houses, and small to mid-sized law firms – is monumental in scale and uniquely selfish in the history of all acts of self-interest.
Small businesses, true small businesses – the kinds that employ CPAs on an hourly basis or even use QuickBooks to do bookkeeping; the kinds that still drive their deposits to the bank each day, make up an estimated 99.9 percent of all businesses in the US, and that’s based on companies with fewer than 500 employees. According to the latest statistics from the Small Business Administration, roughly half of that number is attributed to companies with less than 100 employees.
These businesses are restaurants, small Mom & Pop shops, individual entrepreneurs; these are businesses that employ the lion’s share of our population and power our economy, and without whom we would exist routinely in economic crisis. These are the companies and entrepreneurs the Paycheck Protection Program was meant to stabilize, not hedge funds, brokerage houses and law firms.
I can either file it under the blind squirrel finds a nut category or the Republicans can f-up a one-car funeral category, but the concerns raised by some Democrats and Independents about bailout oversight have come to fruition. Entities that do not desperately need the funding are feeding from the Federal money trough and that’s despicable.
That said, Mitchie McConnell and his establishment swamp buddies in the Federal GOP can snatch victory from the jaws of defeat if they execute legislation – and we all know Democrats would sign on to this (if they didn’t it would expose them as part of the swamp) – if they would execute legislation that would retroactively exclude entities like mid-sized hedge funds, brokerage houses, and small to mid-sized law firms that are still making a net profit over a certain percentage. Further, they should require them to repay – within 5 business days – the disingenuously procured loan monies or face penalties assessed at 10 percent of their after payroll profits for the entire preceding. Make it hurt.
Why is this such an important issue? Because at least half – if not more – of the small businesses that were supposed to be getting the PPP aid (read: a return of their honestly remitted tax dollars) are not getting the help that the program was supposed to provide; it’s being bled off the top by those who truly do not need it. The result will be the deaths of small businesses on a massive scale and the entry into a recession that will make the Great Depression look like a vacation at Disney World.
Small businesses need a lifeline yesterday and because they fuel the tax revenue engines, Federal and State governments – who glean their operating capital from the private sector – have a solemn obligation and duty to make sure they survive.
Should government fail small business; should the rich widen the divide through the pillaging of a program that wasn’t meant for them; that was meant to keep Main Street alive, the establishment class is seriously tempting a revolution that will bring violence to the streets from coast to coast.
Quite honestly, if I were the head of a hedge fund or brokerage house caught grafting money from this program, I’d be racing to give it back to avoid the noose.
Which brings me to the second topic and a defense of someone I don’t normally reference: Dr. Phil.
Phil McGraw – better known as Dr. Phil, is being castigated for inferring that the extended COVID-19 lockdown may end up being more detrimental to the nation’s populace than the COVID-19 virus itself, something the President said he wanted to avoid early on. And, almost on cue, the mask-wearing hoarders who have greedily sucked from the Fauci teat of biased information – without even a hint of effort to divine truth from the facts – knee-jerked themselves into convulsions that McGraw wasn’t with them in their bunkers of quarantine solitude.
McGraw said this on Laura Ingraham’s television program:
What the knee-jerkers fail to consume - or understand – is that prolonged sequestration and quarantine takes a toll on human beings – from depression to domestic violence to resurgence of addiction, because human beings are creatures of habit, complete with an involuntary survival instinct. Old habits quickly become temptations and confining spaces invite desperate and atypical behavior.
Two restaurant owns that I have the good fortune of working with via their podcast, were quite stark about the addiction issue. In their interaction with industry associates, they told me liquor store owners and purveyors are doing booming business – “the best business we’ve ever seen here” – during this event. It doesn’t take a mathematician to calculate the potential for alcoholic recidivism here. Don’t even get me started on drug abuse, both prescription and otherwise.
To put it into perspective, according to the American Addiction Center, more than seven percent of Americans aged 18 and up have a drinking problem; this is nearly 13.8 million Americans, and 8.1 million of them are alcoholic. As of this recording the number of COVID-19 cases in the US stands at 722,372 with 34,386 related deaths and a recorded 59,844 full recoveries, those death numbers obviously padded by with the CDCs directive to include “probable” and “likely” COVID-19 patients (read: untested deceased) into the death number mix.
To go full-circle and return to the small business subject – and specifically the restaurant sector – I have to defer to the exchange between Ingraham and McGraw:
Our elected officials – at the Federal, State and County levels – have to stop playing politics with this event. They have to get smart or at least confer with smart people on what to do. They have to stop carving out Federal and State revenue trough spots for their big donor, Davos attending buddies, and take care of the ones that brought them to the ball: the American people and small business owners.
Wall Street and Madison Avenue will survive, even if they do have to downsize to a G6 or sell the corporate yachts. Mom and Pop – who make Main Street USA thrive – will not.
Washington and the various State legislatures have to stop f-ing around and do the right thing. Pull the money back from the grafters and return it to the revenue generators in their time of need. The failure to do so will light a fuse no politicians will be able to extinguish.
I’ll be right back with one of my two weekly segments on The Captain’s America with Matt Bruce, syndicated to over 2 million people each day on the Salem and Genesis Communications Networks, right after this.