The auto one is a bit different. The bailout was the government basically buying the two companies, keeping it running, and later selling for a profit. Lots of rich people lost their shares for pennies on the dollar. I don't remember if the c suite lost any jobs or not.
Also while the PPP program was mismanaged and didn't have enough over sight it was intended for the loans to be forgiven if they were used to keep employees on during the pandemic. That's a good idea in practice. I think calling them loans instead of conditional grants was what confused a lot of people. They were never intended to be paid back.
They needed to use a program that directly covered salaries and avoided just giving money directly to ownership.
Instead the PPP program wasn't just built on trust but essentially became a near trillion dollar slush fund (that was almost immediately levered by many to buy houses and financial assets) that promoted outright financial fraud and incredibly enriched the very people that didn't need help.
Meanwhile the press was going bonkers trying to spin how ridiculous it was to send individuals $1,500 one-time checks.
No, the PPP program wasn't a good idea; it was one of our generations greatest thefts by the top 5% of our population and helped set off the housing inflation and affordability crisis we continue to experience til today.
I mean, in the vast majority of cases, if not all of them, the money did directly cover salaries. That wasn't how people grifted the money from PPP loans.
Payroll is often 50% or more of a business' expenditures. So, if a company does $1 million in business a month, ~500,000 of that is likely to go towards payroll. During the pandemic, the assumption was that your business was going to shut down, running on a skeleton crew, so you were only expected to make $250,000 per month, which means the government needs to 'loan' you $250,000 so that you can keep all of your employees on payroll and still pay them even if they aren't working.
But what if you just ... don't shut down? Or your business doesn't actually decrease? Now you've gotten $250,000 from the government for payroll, you use that $250,000 to pay payroll, but you still made your normal $1 million per month. That leaves you with an extra $250,000 profit that you normally wouldn't have that you can just do anything with.
That's how most of the PPP money was 'embezzled', 'stolen', or 'misappropriated'. Nearly all of the money from PPP loans did directly go to paying payroll. They were just paying the payroll for businesses that weren't actually impacted by COVID and thus those businesses just saw a massive amount of free profit which could go directly to the C-suite/business owners.
You are right that the PPP loans weren't a good idea. Instead, it should have been an unemployment type situation where individual people could get X% of their salary for Y months.
I ran a single one-person business and was just about to submit for a PPP loan I absolutely didn't need (to pay my own salary) when they implemented an emergency measure that the business had to be a certain size. I had dragged my feet because obviously this program didn't apply to businesses like mine until my payment processor reached out saying it did and here's how to apply.
Obviously I shouldn't have gotten one anyway, but the fact that it was ultimately yet another measure favoring larger businesses over small ones (on top of mandatory shutdowns etc) certainly didn't help anything.
Are you assuming good intent on the PPP program?? The Steven Mnuchin Inaugural Piggy Bank Fund?
In your last sentence you give away their game: an unemployment type situation?? You mean like the covid unemployment program running in actual parallel with PPP at the time? Or like how I as an employee had to tell my state and the feds what company terminated me in COVID to get my sweet COVIDbux?
It was not an accident that there were no guard rails or meaningful checks on PPP.
It was not an accident that there were no guard rails or meaningful checks on PPP.
Sure, but the PPP loans were also just a failed proposition from the start.
Their intent was to keep people employed so that, after lockdowns/COVID was over, there wouldn't be a period of a huge amount of people all looking for jobs at once and the economy would be able to 'bounce back' faster. Instead, people would just go right on back to working the jobs that they previously held.
It's not a bad idea, but it was just never going to work in practicality. The PPP loans weren't terrible solely because they were, intentionally, poorly implemented, but more so because they attempted to fix a problem with a solution that would never have worked even if you did properly regulate the PPP loans.
In your last sentence you give away their game: an unemployment type situation?? You mean like the covid unemployment program running in actual parallel with PPP at the time?
Unless there is one that I am missing, there were not any real unemployment schemes done alongside the PPP loans.
There was the FPUC which supplemented state unemployment benefits for some people. And there was the PUA which granted benefits to those that normally wouldn't qualify for unemployment such as gig workers and self-employed persons.
The PUA would be part of what I was talking about, but neither of these programs were what I was saying.
The PPP loans existed to keep people employed so that they specifically would not get unemployment. I don't think that this is something that we should have attempted to address. I think it would have been a better move to recognize that mass unemployment was going to happen and to focus on saving the people and maintaining their purchasing power rather than to attempt to salvage businesses. I know it isn't a sentiment that people like to hear, but, any business worth saving through the PPP loans didn't need the loans to survive. But all business could have continued to use a customer base that still have the same level of income.
When you reduce the spendable income of the majority of the population while also try to throw money at closed business to keep them afloat -- you aren't solving anything. You are just pushing out the time line for when those businesses are going to fail. It's basically the Kitchen Nightmares effect.
While, proportionally, I would expect more business to have 'failed' or closed; all of those businesses would have been replaced by equal, new businesses after COVID. As was seen through the stimlus that people got, if you maintain the flow of money to consumers, they will still continue to spend their money. Maybe they can't go out to restaurants, but people bought more hobby items, move games, more movies -- other businesses saw spikes when most things went down.
It would have been better to provide additional funding to state unemployment services so that they could fund more people on unemployment at a higher percentage of their original salary rather than to waste any money attempting to prop up struggling businesses.
And it's a great idea, but you have a problem of being able to do it fast enough to get money out to everyone that needed it at the time. Creating a new system to do that would of taken a lot more time.
Any kind of "free" will cause inflation and risk creating affordability crisis.
Trump also stripped the watchdog part of the law that was passed by congress on day 1 so we had no actual enforcement of the rules or any record keeping to even be able to enforce it later. So thats why it was freely abusable.
Yes exactly, the law only allowed "current inspector generals" to fill the position of overseeing $2T in coronovirus relief effort funds, so with him fired no one could legally fill the role.
Yea and? They passed the law and he immediately abused it. You can argue day and night that "well congress shoulda patched that" but he's still the bad guy who chose to abuse it. And likely if they went out of their way to specifically patch that republicans wouldn't have passed it either, knowing full well how their side was going to abuse it
i dont know about the airline one, but many of the individual bank bailouts ended up profitable. we lost quite a lot in the UK but mainly from one bank (NatWest) and if we'd kept the shares longer we could have pretty much broken even.
essentially the bailouts involve the purchasing of shares or assets which i think a lot of people miss, and think money is just being handed over to companies. this did happen with PPP loans but they were meant to pay salaries, it was just a quickly introduced scheme that got mismanaged and taken abuse of.
2008 banks was different too, the banks didn't want the money, the government insisted and the banks paid it all back with interest. But nah should have let the banks collapse.
Yeah it's a strange post overall. European countries didn't bail their banks out as quickly as the US and it's pretty much universally agreed upon that the US had the far better response. Europe basically had a second recession in 2012 and it also played a role in the Eurozone Sovereign Debt Crisis. Not bailing out the banks led to a lost decade for many European countries and especially our youth. Several European countries had youth unemployment rates of 50% due to that.
The frustration isn’t that the banks should have been left to fail, it’s that individuals, even those who didn’t directly take advantage of the system that created the crisis, still saw a worse outcome and didn’t get any help. I think people are struggling because social safety nets don’t seem to be doing them any good and that’s a valid thing to be upset about.
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u/Norse_By_North_West 6h ago
The auto one is a bit different. The bailout was the government basically buying the two companies, keeping it running, and later selling for a profit. Lots of rich people lost their shares for pennies on the dollar. I don't remember if the c suite lost any jobs or not.