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OpEdNews Op Eds    H3'ed 6/8/20

Rescuing Wall Street while fouling Main Street

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Author 75077
Message Jean-Luc Basle

Let's hand it to the Trump crowd: the operation was beautifully choregraphed and flawlessly executed. In ten days, Republican Senators managed to have Congress approve the "largest economic relief bill in U.S. history": $2.2 trillion - the figure is staggering, 10% of the 2019 gross domestic product (GDP). The Senate approved it unanimously on March 25. It was passed via a voice vote in the House the next day, and signed into law by President Donald Trump the following day (March 27). Common folks will receive $1,200 per person, plus $500 for each dependent. Unemployment benefits are expanded from 26 to 39 weeks with an additional $600 per week. Quite a feat! And should anyone doubt the officials' intentions, the name of the bill will reassure the skeptics: The CARES Act! The truth of the matter is that the package has a little to do with the people and a lot with the stock market. The beneficiaries are the banks and the corporations.

On March 20, the day the bill was introduced in the Senate, the Covid-19 death toll was 55, but unemployment claims, unexpectedly, jumped to 3.3 million, providing a perfect excuse to take action for the real cause was not the rise in joblessness, but the brutal and unanticipated drop in the Dow Jones. The index had been falling precipitously since early March (- 19% in three weeks). Fearing a stock market collapse, the Federal Reserve turned to Congress for help while buying $792 billion of marketable securities to prop up the market. In so doing, it inflated its balance sheet total by 20% in three weeks. The combined action of Congress and the Federal Reserve was a success. The stock market began to rise in April and by early June the Dow Jones has fully recouped its March losses.

If the well-being of the people was the main driving force behind the CARES Act, they should be the main beneficiary. But this is not the case. A $500 billion Main Street Lending Program provides loans to small and mid-sized businesses. The $669 billion Paycheck Protection Program offers loans to small businesses. Tax benefits are accorded to employers to defer payments on their share of social security tax. Wealthy individuals may also avail themselves of tax credits under certain conditions. But the antagonizing feature of the rescue is the $454 billion loss absorption capital provided by the U.S. Treasury to the Federal Reserve to leverage itself ten times through loans to businesses. In plain terms, this means the central bank can dispense $4,540 billion to the corporations and banks of its choice. Were this amount distributed to the 130 million American families, each would have received $35,000.

The CARES Act only serves to increase an already unsustainable inequality. Editorialist Stephen Landman asks himself whether the "new normal" isn't for a privileged class to rule over a serf society with the "destruction of the US middle class entirely". Another editorialist, Eric Zuesse, is even more cynical. Concluding an article on the United States, he states: "By means of dividing the billionaires into these two contending political teams, one Democratic and the other Republican, the post-WW-II myth of a 'democratic' United States continues to be spread both nationally and internationally, in order for the regime to continue to be called 'democratic', long after democracy's having actually expired in the U.S."

 

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Jean-Luc Basle Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Former Vice President Citigroup New York (retired) Columbia University -- Business School Princeton University -- Woodrow Wilson School

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