- Jun 6, 2007
- 852
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What really makes me angry and should make every responsible American angry about the two trillion dollar recovery act that Congress and the President enacted into law this past week is how negligent they were in passing up on a good opportunity to mitigate the cost of this legislation for America which already has its standard of living reduced by its 23 trillion dollar national debt; it could have done this by being aggressive about taking equity positions in the businesses it rescues and just riding the stock price wave/increase that will result as the economy recovers! Washington could have really helped future Americans big-time with the bill they will be stuck with over this legislation by not leaving so much money on the table. The major stock indexes lost nine trillion dollars from their peaks this year on February 19 to the lows this past Monday prudence tells you in two to three years if not sooner the markets will have recovered that loss, for the corona-virus pandemic will be over; at least forty percent of that nine trillion gain in value, 3.6 trillion, will go to new investors, investors that did not own the stocks on these indexes prior to February 19 (why should U.S. taxpayers not share in that windfall) our leaders failed us in not setting up the U.S. taxpayers through this legislation to get at least $400 to $500 billion of that growth in stock value.
One of the major sellouts here is Treasury Secretary Steve Mnuchin, he said he wanted to help the businesses through loans because if the government pursued helping businesses by taking equity positions it would dilute the stock thereby lowering the price of the stock thus weakening the business outlook of such businesses. That is such a lamb explanation this guy's background is that he is a sophisticated banker he knows he could have tailored the injection of capital into these business and protected against a precipitous decline in the stock value; he could have injected the capital into the businesses through preferred stocks with a super low interest rate and preserved the upside for the taxpayers by getting warrants that are not triggered until the stock price increases significantly in value. For example, let us say company X has ten million stock shares outstanding that on Feb 19 were trading at $100/share and on Mar 23 were trading at $40/share, set-up the assistance package so that in order to get the infusion of capital that company has to give warrants (rights to buy a stock) in the amount of two million with an execution price of $50.00 but the warrants don't go into effect until the stock hits $70 in value; such a warrant would have minimal effect on a stock trading today in the fifties because it doesn't really affect the value of his or her shares today.
People need to inform the American people about this recovery legislation the "CARES Act" because it was really an abuse of the American people; it was business as usual in the Washington swamp where the political establishments interests were put ahead of American families interests. The legislation's hallmark programs to save jobs - the Small Business Act's $350 billion loan program and the Federal Reserve Board's $450 billion loan program aren't what they appear the framework of these programs are so weak that hundreds of thousands if not millions of Americans will be left out of a job because the programs were designed so ineffectively. These lifeline programs could have been designed to save these American families but Democrat members of Congress were too busy focusing on pork programs, programs that the political establishment loves because it gives them huge amounts of money to pass out to their friends and allies and making these programs effective would have required Democrats and Republicans members of Congress standing up to liberal Democrats with their foolish and anti-capitalism values which culminated in excessive restrictions on the $450 billion program which will dramatically diminish business participation. For a bill that was supposed to focus on saving jobs and saving businesses Congress and the President have no shame considering what they put in the bill. The CARE Act has $1.5 billion for the Economic Development Assistance program, $5 billion for the Community Block Grant program, $25 billion for Transit Infrastructure Grants, $10 billion for miscellaneous capital projects for the nation's airports, etc.; all this robust spending when the bill doesn't even achieve its primary purpose of saving the American worker's job remember their promise we'er all in this together, Not!.
The CARE Acts SBA program that is supposed to help employees in small businesses what this program is in practice the way it is designed now is that it is just a program that will help small businesses start up again once the economy reopens and I don't condemn that feature but it could have been so much more, it could have been a lifeline saving an abundance of jobs at these small businesses, if the Democrats would have stood up to the Republicans and demanded that this program do what it has been purported to offer. Practically what this SBA program does is that it only gives the businesses one hundred and twenty five percent of their payroll expense for "two" months of operation, no more is allowed; now anyone that follows how the reopening of communities across America is going to work is that the government is going to be doing it early in many locales, like late April early May, resulting in a lot of Americans still being scared to death to do unnecessary travel outside their home resulting in these small business still having their revenue in the basement for this time so what are these small business going to have to do many have no choice they have to stretch the government money as long as they can, you got it, they are going to bring back low numbers of workers to lower their labor costs so they can hopefully stay in business long enough until the economy recovers and they start making a profit. This SBA program has a loan forgiveness feature, the way the legislation designs it though is it only applies to the million dollar loans the SBA offers many small businesses have two months of payroll much larger than a million dollars and if they just take out a million dollar loan it won't make economic and business sense for them to do that because they would be better off keeping staffing levels low, that is, bringing back only the number of workers they really need and considering that it is a reputational burden to participate in these types of bailout government program because a lot of people think if you participate you have an obligations to employ certain numbers of people and pay at certain levels, many business will conclude it isn't worth it the program doesn't offer enough and won't participate thereby leaving significant numbers of their employees layed-off!
The $450 billion Federal Reserve loan program will also experience widespread rejection from America's businesses because of the unnecessary onerous restrictions the legislation mandates for these loans. It would have been one thing if one of the restrictions was like while a participating business has a loan outstanding from this program it cannot "increase" its dividend it pays to its shareholder that is reasonable the U.S. taxpayers should be in line first to get their moneyback ahead of the company's stockholder but what does this legislation do it outright bans the payment of any dividend; participating companies have to suspend their dividend for the life of the loan plus for one additional year. It is shocking how anti-capitalism this provision is and how the experienced leadership in Congress Pelosi, McCarthy, Schumer and McConnell could allow this to go through; experienced leaders know what the stock dividend means to capitalism many Americans who are retired have a significant portion of their savings in dividend paying stocks because the dividend is a critical portion of the money that they live off of and dividends are almost a sacred bond between many a company and its shareholders these companies executives tell its shareholders that we will go to incredible ends to preserve the dividend (this is no slight to American companies that have cut or eliminated their dividend during this crisis -survival is the most important priority). Moroever, experienced leaders know when a company dramatically cuts their dividend it dramatically cuts the price of their stock. The legislation has other onerous restrictions such as the restriction that recipient businesses cannot outsource or offshore jobs for the life of the loan plus two years and the restriction that recipient business must remain neutral in unionizing efforts at their businesses during the life of their loan.
To people that fully understand the way the financial markets work in America it blows one away the corruption of this piece of legislation and this is not just a condemnation against Republicans in Congress it is the strongest possible condemnation against all the Democrat and Republican and Independent members of Congress. The outrageous corruption of this legislation especially the $450 billion loan program with its accompanying $50 billion aviation and aircraft manufacturing industry loan program and its $32 billion grant program for the aviation industry to preserve jobs is that the onerous restrictions of these programs will dramatically, like you're talking a fortune is at stake, hold down the stock price of companies participating in these programs. So that what this legislation in effect does is sets up numerous financial windfall days vis-a-vis stock appreciation price for America's wealthy and over-compensated Executives and the real kicker is the legislation instead of protecting workers across the board it puts a big bulls-eye on the backs of workers in these companies who are having their stock price manipulated low because hedge funds and other wealthy investors will buy into these companies at the end stages of their loans and put in executives that will cut jobs like crazy thereby boosting earning big-time thereby big-time boosting the stock price of these companies so these wealthy investors can then sell their stock receiving king-kong size gains!
Really, the cherry on this corrupt legislation for the political establishment is why the $32 billion dollar grant program for the aviation industry to preserve jobs in that industry for six months. Why not six months of job preservation for workers in America's other industries? O it only applies to industries that are heavily unionized, unions are supposed to get special treatment in America I wish you millions of other workers losing you job across America because of this crisis would get with the program! Seriously, that is an outrageous abuse for Congress and the President to divide America like this because what they are really saying to the millions of American families that won't be getting this help your suffering doesn't matter as much of the suffering of these other families that is not right it is unfair and unAmerican! For Americans that really care about America this legislation is a compelling case for term limits for members of Congress, twelve years for Senators and twelve years for House members; this would make it crystal clear to these Congressional members these are not life-time or career jobs just go to Washington to serve all the people in your district or state not to preserve a great job for yourself!
One of the major sellouts here is Treasury Secretary Steve Mnuchin, he said he wanted to help the businesses through loans because if the government pursued helping businesses by taking equity positions it would dilute the stock thereby lowering the price of the stock thus weakening the business outlook of such businesses. That is such a lamb explanation this guy's background is that he is a sophisticated banker he knows he could have tailored the injection of capital into these business and protected against a precipitous decline in the stock value; he could have injected the capital into the businesses through preferred stocks with a super low interest rate and preserved the upside for the taxpayers by getting warrants that are not triggered until the stock price increases significantly in value. For example, let us say company X has ten million stock shares outstanding that on Feb 19 were trading at $100/share and on Mar 23 were trading at $40/share, set-up the assistance package so that in order to get the infusion of capital that company has to give warrants (rights to buy a stock) in the amount of two million with an execution price of $50.00 but the warrants don't go into effect until the stock hits $70 in value; such a warrant would have minimal effect on a stock trading today in the fifties because it doesn't really affect the value of his or her shares today.
People need to inform the American people about this recovery legislation the "CARES Act" because it was really an abuse of the American people; it was business as usual in the Washington swamp where the political establishments interests were put ahead of American families interests. The legislation's hallmark programs to save jobs - the Small Business Act's $350 billion loan program and the Federal Reserve Board's $450 billion loan program aren't what they appear the framework of these programs are so weak that hundreds of thousands if not millions of Americans will be left out of a job because the programs were designed so ineffectively. These lifeline programs could have been designed to save these American families but Democrat members of Congress were too busy focusing on pork programs, programs that the political establishment loves because it gives them huge amounts of money to pass out to their friends and allies and making these programs effective would have required Democrats and Republicans members of Congress standing up to liberal Democrats with their foolish and anti-capitalism values which culminated in excessive restrictions on the $450 billion program which will dramatically diminish business participation. For a bill that was supposed to focus on saving jobs and saving businesses Congress and the President have no shame considering what they put in the bill. The CARE Act has $1.5 billion for the Economic Development Assistance program, $5 billion for the Community Block Grant program, $25 billion for Transit Infrastructure Grants, $10 billion for miscellaneous capital projects for the nation's airports, etc.; all this robust spending when the bill doesn't even achieve its primary purpose of saving the American worker's job remember their promise we'er all in this together, Not!.
The CARE Acts SBA program that is supposed to help employees in small businesses what this program is in practice the way it is designed now is that it is just a program that will help small businesses start up again once the economy reopens and I don't condemn that feature but it could have been so much more, it could have been a lifeline saving an abundance of jobs at these small businesses, if the Democrats would have stood up to the Republicans and demanded that this program do what it has been purported to offer. Practically what this SBA program does is that it only gives the businesses one hundred and twenty five percent of their payroll expense for "two" months of operation, no more is allowed; now anyone that follows how the reopening of communities across America is going to work is that the government is going to be doing it early in many locales, like late April early May, resulting in a lot of Americans still being scared to death to do unnecessary travel outside their home resulting in these small business still having their revenue in the basement for this time so what are these small business going to have to do many have no choice they have to stretch the government money as long as they can, you got it, they are going to bring back low numbers of workers to lower their labor costs so they can hopefully stay in business long enough until the economy recovers and they start making a profit. This SBA program has a loan forgiveness feature, the way the legislation designs it though is it only applies to the million dollar loans the SBA offers many small businesses have two months of payroll much larger than a million dollars and if they just take out a million dollar loan it won't make economic and business sense for them to do that because they would be better off keeping staffing levels low, that is, bringing back only the number of workers they really need and considering that it is a reputational burden to participate in these types of bailout government program because a lot of people think if you participate you have an obligations to employ certain numbers of people and pay at certain levels, many business will conclude it isn't worth it the program doesn't offer enough and won't participate thereby leaving significant numbers of their employees layed-off!
The $450 billion Federal Reserve loan program will also experience widespread rejection from America's businesses because of the unnecessary onerous restrictions the legislation mandates for these loans. It would have been one thing if one of the restrictions was like while a participating business has a loan outstanding from this program it cannot "increase" its dividend it pays to its shareholder that is reasonable the U.S. taxpayers should be in line first to get their moneyback ahead of the company's stockholder but what does this legislation do it outright bans the payment of any dividend; participating companies have to suspend their dividend for the life of the loan plus for one additional year. It is shocking how anti-capitalism this provision is and how the experienced leadership in Congress Pelosi, McCarthy, Schumer and McConnell could allow this to go through; experienced leaders know what the stock dividend means to capitalism many Americans who are retired have a significant portion of their savings in dividend paying stocks because the dividend is a critical portion of the money that they live off of and dividends are almost a sacred bond between many a company and its shareholders these companies executives tell its shareholders that we will go to incredible ends to preserve the dividend (this is no slight to American companies that have cut or eliminated their dividend during this crisis -survival is the most important priority). Moroever, experienced leaders know when a company dramatically cuts their dividend it dramatically cuts the price of their stock. The legislation has other onerous restrictions such as the restriction that recipient businesses cannot outsource or offshore jobs for the life of the loan plus two years and the restriction that recipient business must remain neutral in unionizing efforts at their businesses during the life of their loan.
To people that fully understand the way the financial markets work in America it blows one away the corruption of this piece of legislation and this is not just a condemnation against Republicans in Congress it is the strongest possible condemnation against all the Democrat and Republican and Independent members of Congress. The outrageous corruption of this legislation especially the $450 billion loan program with its accompanying $50 billion aviation and aircraft manufacturing industry loan program and its $32 billion grant program for the aviation industry to preserve jobs is that the onerous restrictions of these programs will dramatically, like you're talking a fortune is at stake, hold down the stock price of companies participating in these programs. So that what this legislation in effect does is sets up numerous financial windfall days vis-a-vis stock appreciation price for America's wealthy and over-compensated Executives and the real kicker is the legislation instead of protecting workers across the board it puts a big bulls-eye on the backs of workers in these companies who are having their stock price manipulated low because hedge funds and other wealthy investors will buy into these companies at the end stages of their loans and put in executives that will cut jobs like crazy thereby boosting earning big-time thereby big-time boosting the stock price of these companies so these wealthy investors can then sell their stock receiving king-kong size gains!
Really, the cherry on this corrupt legislation for the political establishment is why the $32 billion dollar grant program for the aviation industry to preserve jobs in that industry for six months. Why not six months of job preservation for workers in America's other industries? O it only applies to industries that are heavily unionized, unions are supposed to get special treatment in America I wish you millions of other workers losing you job across America because of this crisis would get with the program! Seriously, that is an outrageous abuse for Congress and the President to divide America like this because what they are really saying to the millions of American families that won't be getting this help your suffering doesn't matter as much of the suffering of these other families that is not right it is unfair and unAmerican! For Americans that really care about America this legislation is a compelling case for term limits for members of Congress, twelve years for Senators and twelve years for House members; this would make it crystal clear to these Congressional members these are not life-time or career jobs just go to Washington to serve all the people in your district or state not to preserve a great job for yourself!
