- Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot.
- Part of it is deciding who to lend money to. Makes sense for the bank to decide this with its own money.
- Part of it is regulatory. We don't want money laundering. Have to ask whether this really ought to be up to law enforcement to do, or as it is now a massive burden on the banks, which also have bad incentives.
What if we had the central bank give everyone an account that was interoperable with the rest of the banking system? Then if you want to hand out money, you just do it. If you want to borrow money, find a lender.
This would be fine if it were their own money, but it's not - it's our bank accounts (ie. fractional reserve banking). Unfortunately individuals can't opt out of this because unlike private banks, individuals aren't allowed to open a bank account directly with the government (though these replies show that this is possible in countries like France).
The finance industry does not generate real wealth, it is a wealth extracting industry that profits off the spread between the interest rate decided by the central bank and the interest rates and fees it charges consumers. Banks do not create goods or services, they just decide who gets the money to do so, with money that's not theirs. 80% of bank credit goes to mortgage loans (driving up housing prices and saddling homeowners in debt). Banks have gone from 2% of the U.S. economy in the 1950s to 8% by 2008, and 1.5% of the British economy in 1978 to 15% by 2008.
The first step to fixing this is to give citizens the ability to opt out of private banks and bank directly with the central bank. Private banks should not be the only ones with this privilege.
The great recession after 2008 and the great depression both show what happens when finance stops working. The rest of the economy collapses without it. You can all the way back to medieval Kings to see how important it is.
I don't know where people get this idea finance is not "real". If it wasn't useful, people wouldn't be paying for the services it provides, they're all optional.
Anyway, I think I like the idea of a government-centralized deposit and monetary transfer system. This is the direct electronic equivalent of cash. A single national interest rate seems reasonable since current saving account rates are essentially set by the reserve rate today anyway. But I feel there must be a better privatized lending system than the current one though.
Thanks for your comment. In my experience this is the most misunderstood aspect about money. Your comment explained it really well. I wish this was more widely understood and talked about.
I do not think the original commenter understands the monopolistic as well as parasitical nature of today's money, as they write:
> - Part of it is deciding who to lend money to. Makes sense for the bank to decide this with its own money.
...which is wrong. Banks do not have their 'own money'. They create money out of nothing. They get a license to create debt out of nothing (fiat). Many times today they do not even have to have the fractional reserves for any of it.
If anyone has any doubts please check out Anthropologist David Graeber's book 'Debt: The First 5,000 Years' as well as his explanation of the money system in this article:
"In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There's really no limit on how much banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately, any money a bank loans out will just end up back in some bank again. So for the banking system as a whole, every loan just becomes another deposit. What's more, insofar as banks do need to acquire funds from the central bank, they can borrow as much as they like; all the latter really does is set the rate of interest, the cost of money, not its quantity.
What this means is that the real limit on the amount of money in circulation is not how much the central bank is willing to lend, but how much government, firms, and ordinary citizens, are willing to borrow. Government spending is the main driver in all this (and the paper does admit, if you read it carefully, that the central bank does fund the government after all). So there's no question of public spending "crowding out" private investment. It's exactly the opposite."[1]
[1] https://www.theguardian.com/commentisfree/2014/mar/18/truth-...
The post office in France already offer banking. It's mandated by law as a public service and they can't reject customers. It doesn't offer the more complex products or investments though, it ain't their purpose.
Not sure about the UK post office. Seem to offer a lot of banking services and cards, but it says it doesn't do current accounts anymore.
It's also important to note that the USPS is required to be self-sufficient in its purse strings, but is heavily restricted in what markets it can/can't be in by Congress. I think the "privatize everything" crowd of legislators/lobbyists see the USPS in banking as an existential threat to private banks profit margins and it won't happen without a political black swan (maybe not even in the current black swan environment).
[1] https://en.wikipedia.org/wiki/United_States_Postal_Savings_S...
Why we sent guaranteed money to be held up in banks and did information and credit checks, on already known information from the IRS, well we know why, to pilfer it.
Had they ran it a better way, using the actual market, directly to businesses/individuals, that is lots of money out there for banks to go get and the market knows it is out there as well. Markets like knowing hundreds of billions and trillions are out there to go get. Make them earn the fees if they must.
Instead, it was a direct transfer from the Fed and treasury to QE that was pilfered by the usual suspects: hedge funds, market makers, foreign funds, oligarchs, wealth/value extraction ops, naked short selling, short and distort and more. The SBA money was pilfered by banks and large companies. The 'stimulus' for the economy, routed around the entire actual economy, never reaching individuals or true small business.
How can this be true if innumerable number of individuals received $1200 checks and many small businesses also received varying amounts in the four and five digits?
While they make sense for consumers, our banking system is tightly coupled with another: mortgages. The money that you deposit is loaned out. Could the federal government do the too? Sure, and the government (talking about the US here) does end up owning a large chunk of mortgages via Fannie Mae and Freddie Mac.
But the expertise and the manpower around vetting the mortgages is a _lot_ of work. Work that the federal government couldn’t decide to take on tomorrow, might not even want to, and if they announced that they were going to try would shake the core of the stock markets. (And yes, stock markets matter for more than just making rich people richer.)
On the other hand you suggest de-coupling: “Find a lender.” If you take away the deposits, who has that much money to lend out without being dangerously leveraged?
If you were to design an economic system, this might be the one you’d design. Given the one we have, narrow banks are difficult to allow without some significant “turbulence”.
A narrow bank does not require lending to service deposit accounts. It doesn't even need to pay interest to account holders. It simply needs to accept, store, and distribute fiat on the behalf of its customers via ACH, debit, and credit processing networks. Think prepaid card with no fees and no overdraft capability.
The Federal Reserve is culpable in that it will not approve banking licenses for narrow banks [1], as it challenges the business model of existing entrenched banking organizations. Can you build a narrow bank without getting the Fed to sign off? That is a conversation I would be interested in having over a cup of coffee.
[1] https://www.spglobal.com/marketintelligence/en/news-insights...
mortgages don't have to go through retail banks, and there are plenty of other transaction fees to support banks of all sorts.
in fact, there's no reason we should have allowed the consolidation of banking other than to allow rent-seekers to amalgamate more sources of relatively risk-free cash flows under the control of fewer and greedier hands. we could have maintained lots of small banks that serve the community and region, enriching those communities, rather than a few behemoths that strip-mine them.
a lot of the "work" of mortgages is really mindless paper-shuffling by other rent-seekers taking their little slice of the large transaction price. none of those service providers go away if the government decided to take over (not that i'm advocating such a takeover).
Not to be snarky, but the Great Recession didn't give me a lot of confidence in the expertise involved in vetting mortgages.
Many economists and others have been calling for this [1], and seeing the replies it looks like many countries already implement this.
If this existed, then we wouldn't need to funnel 3% of these emergency loans into the private banking industry, a pretty outrageous loss of money for what amounts to some modest paperwork.
[1] https://www.npr.org/sections/money/2018/07/11/628173553/fed-...
and which nowdays is probably done by a computer system without any paper being involved
Universal trickle up.
Counter argument: Won't this just encourage fuckery from the citizenry? Won't they just be encouraged to game the system (have more kids, take care of people to intercept their checks, etc)?
Single point of failure. Single point of power seizure. Single point of abuse for policy/NSA/FBI/DEA/BATF/CIA.
As an alternative: Each bank must speak a common language for transactions as part of their charter, aka "ACH". The task to accomplish what you wish simply becomes "Improve ACH to realtime, rather than batch" and a bunch of our problems go away. Furthermore, give banks more freedom as to how they want to interchange money so competition is created to force fees and middlemen down. The nice thing about this approach is there's a fast default path via ACH, but banks are free to innovate elsewhere, improving services.
Private banks already get a bank account with the government (the Central Bank), why shouldn't individuals have that same option?
I want to transfer big sum of money, essentially my life savings to someone.
Who do I choose for the job:
- local post office
- some crypto mumbo-jumbo that a lot of criminals use
- huge institution with daily income five orders of magnitude more than the sum I am talking about, regulated up to a dollar with 100 years of history of earning international trust
- some other option
?
Now the trick is to manage it in a way that a prosecutor couldn't convince a jury of structuring. Have an accountant fabricate records and mix it with legitimate purchases and expenses. It's essentially a front...but what corporation isnt one?
End drug prohibition.
Also, the Fed doesn't 'give out money' really.
If the Government wants to 'give out money' it can write a cheque - or - use some kind of IBN/SWIFT style coding to direct deposit.
The government needs: better identity management so you can 'login' an 'prove' who you are, where you live. And banks need better routing/transfer.
FYI there is 'paperwork' and 'process' involved in doling out money, it might have been better not to use the banks.
Except nobody knows if PPP money is a loan or a handout yet. The criteria for determining that is in the future, and central banks are as equally incapable of time travel as anyone else. That's why they're administered as forgivable loans. All PPP money is a loan right now.
Can you explain this? It's never made any sense, at all.
1. If you earn excess unreported income, eventually the IRS will figure it out and come get their cut.
2. If you earn it through criminal means, you're already committing a crime for which, if caught, you will be punished.
Why is the act of obfuscating the source of income a crime? Who gets harmed by this, that isn't already harmed by either the potential crime committed or taxes evaded?
If drug dealers in the 80s could have started hedge funds (or even deposit funds legally) with their shoeboxes of cash, it would’ve been an even crazier ball game.
a series of legislations right around the time of declaration of war against drugs (91st USA congress) pretty much made 'money laundering' a thing
prior to that, during the prohibition era it wasn't called money laundering yet it was simple tax evasion.
It's no different for a financial institution holding onto a bag of cash.
there's nothing inherently wrong with obfuscating a source of income, although it's hard to do this without committing some sort of fraud along the way. it's a (somewhat distasteful, imo) administrative convenience. people who run criminal enterprises have a variety of methods for distancing themselves from the actual crimes they are making money from. it turns out to be a lot easier to catch them doing funny stuff with money than it is to pin any of the original crimes on them.
Because we don't trust the central bank enough (edit: to not arbitrarily give their friends money directly - still happens though). And they don't want to be politicized by giving up autonomy. So the current compromise is that by law they can't lend directly except by Congressional statute, such as the CARES Act stipulates.
What does this actually mean? "Trust" isn't a one-dimensional version. What don't you trust them to do or not do? Do people really "trust" Wells Fargo, opener of fraudulent accounts, more than the Federal Reserve? Why?
The central bank is not a regular bank, it’s a “reserve” bank. Very different function.
Today's banking, tomorrow is Telcos, the day after...
What if the problem is the lobbying?
Statements like this require proof.
What do you think a lender is? Why do you think they can lend money?
More seriously, compare the UK's former state-run consumer bank: https://en.wikipedia.org/wiki/Girobank
> The organisation chalked up notable firsts. It was the first bank designed with computerised operations in mind; the first bank in Europe to adopt OCR (optical character recognition) technology; the first bank to offer interest-bearing current accounts, and the first bank in Europe to offer telephone banking, operating several years prior to the start of Midland Bank's First Direct service. It is widely credited for shaking up the UK banking market, forcing competitors to innovate and respond to the needs of the mass market.
It was literally by the socialist government to give cheap and effective banking to the unbanked working class in the 1960s.
Another issue for the US: the EU has an explicit remit for a single market. The US does not, and in some areas it's much less harmonised. Banking is one of them. The US would benefit from a central organisation coordinating things like Faster Payments. Everybody should have the opportunity to do fast, secure, free interbank payments.
The government has the ability to send funds directly to people obviously...that’s how they are sending the stimulus checks and send tax refunds.
Banks are basically being compensated for doing paperwork.
sincerely,
"the civil liberties lobby"
I am not a banker, so this is all second hand information I have read on r/smallbusiness and other forums while trying to figure out my own stuff.
Don't get me wrong, I think they are getting paid a ton, probably too much, but it is not zero risk.
[0] https://www.reuters.com/article/us-health-coronavirus-stimul...
They're really being compensated for having the network to do what the government wanted to. No one else has the capacity to give money to small (and some large) businesses in a record amount of time.
I'd pay 5% to get the stimulus cash a few days after the bill is passed...and I guess the same for the government /taxpayers. Corona loans that go out in October are no good, so you pay a fee for performance. Call that $10B a Bank Stimulus Act
But even the banks who blatantly processed the applications in an unfair or discriminatory manner probably aren’t losing much sleep. The clients with the resources & connections to make a stink are the clients who got approved. Funny how that works.
In the future, we'll have better systems for this kind of thing but we don't have them today. The bank plan was the most expedient one.
Actually a major issue with the stimulus is that the government does not have this ability, which is why it will takes months for some people to get their checks. Many people don't have to file income taxes, so the government doesn't have their info.
the problems relate to unemployement systems (completely different system) or our administration holding things up (trump demanding his name be on the checks)
$10B seems like a pretty low number for this risk plus the cost of servicing the loans over time.
Anyone who works in the financial industry knows that client onboarding is painful.
Most banks are only working with existing customers, so the DD is 99% complete. Few are reviewing applications from brand new clients.
Quick read looks like 2.8% off the top, for 0 risk (10/349).
Total businesses receiving loans was 1.6M (https://www.pymnts.com/loans/2020/sba-lenders-approval-ppp-l...)
Average money a bank made per loan was 10,000,000,000/1,600,000 (assuming all banks made an equal distribution of loans)
Or $6250 per loan. Given that all loans ran out about 1 week after the program was started.
I imagine the person effort per loan was pretty variable, but that's some pretty crazy capture by the banks.
(Banking sector employs almost 1.5M people), So even if every employee working at all banks, was allocated to work on one loan each for a week. (HINT THIS DIDN'T HAPPEN) the annualized salary for each of these people would have to be 6250*52, or 325K, which it's not).
I guess my question, is how was the decision made to offer banks such a big kicker for administrating loans with nonzero, but practically 0 risk?
(of note, theoretically banks are going to need to do some serving of the loan over it's lifetime, and deal with this loan forgiveness program, etc.. so if that's the case and it's more like 2-3 weeks of person work per loan, you still get some pretty big numbers, but they feel a bit more sane)
I’ve seen stories of small business owners talking about how difficult it was to get the loan through due to having to go back and forth with documents etc. although I’m sure it varied per bank.
2.8% doesn’t seem like that much for me, especially considering the goal was to get the money out the door as fast as possible due to the emergency, and setting up and hiring a government bureaucracy to administer and give the loans would have cost far more in time than the solution of giving it through the banks.
From what I read a number of national banks (eg. BofA, Chase, etc) only offered to loan to customers with previous/existing loans (banks reducing risk). I think they were wary of underwriting risk (even though the USA government made assurances to banks) and risk of perception / reputation risk if any companies they applied on behalf of turned out to defraud the PPP program (possible future reputation damage).
That makes it sounds like bank is taking on some form of risk, but they're not.
Sure, bankers are paid more and there's labor involved.
But $10 billion is 1 year salary for 100,000 people making $100,000 / year.
It's obscene amount of money.
They did take on some risk -- they need to ensure the loans they make conform to the law passed mere days ago in order to get the government guarantee. Beyond the massive overtime put in by bank lawyers to understand the rapidly passed law, there are apparently ambiguities and contradictions in the law that are not resolved, and losing the guarantee is a huge risk considering how many businesses on the brink are applying for free money. It's not clear where the line between risk premium and profit is, but it's not zero.
The problems are pretty simple. Big banks prioritized big customers, especially those with debt to the banks. If your monthly payroll is $2.5M, are you really a mom and pop shop? Big banks then collected ridiculously high fees for a simpler process than they normally conduct. I'm guessing they literally had a team that estimated the highest fee they could charge without being punished by the government.
I don’t think they deserve undue sympathy, but they are far from unaffected.
Look at any global bank's stock price throughout this crisis. Being a lender to the businesses of a shut down economy is not very profitable.
With "people" you mean private businesses in this context I suppose?
If so you could call these incentives "regulations".
Retailers have been forced to invested in 2 meter rule things and, perspex everywhere.
Why can't the Banks of all institutions be expected to, you know, give something back? You'd almost think that money is their core business so they always know how to come out ahead.
Why would you assume that?
You sound like the PR department of a bank.
Alternately, what do you think the pay per man-hour ended up being?
Now suddenly everyone is questioning if a bank should charge such huge fees, if I should be allowed to markup N-95 masks, etc.
When Nike make a pair of shoes for $4 and sell it for $400 nobody seems to care. By now it's illegal and banned in many places to mark up toilet paper and hand sanitizer.
Not only should we be asking if banks should be making $10B in fees during this time, we should be asking if every company should be doing what they were doing just a few months ago.
An uncharitable reading might assume a spurious correlation.
With these kinds of insane numbers ($350B!) even tiny percentages are huge.
Boggles my mind that anyone jumps to defend the banks in this scenario for what effectively amounts to a racket.
From this NPR article:
> We funded more than twice as many loans for smaller businesses than the rest of the firm's clients combined," the bank said in a statement to clients. "Each business worked separately on loans for its customers. Business Banking, Chase's bank for our smaller business customers, processed loan applications generally sequentially"
Note "Each business worked separately on loans" and "processed loan applications generally sequentially". They divide their consumers up into large business and small business groups, assigning dedicated staff to each group. There are far more small businesses, making the queue for small businesses much deeper. Even though there were more workers (staff) pulling from the small business queue, there weren't enough to make up for the discrepancy in queue depth.
From the Bloomberg article:
> More than 300,000 customers of JPMorgan’s business banking unit, which serves smaller firms, applied for loans through the Paycheck Protection Program
> By comparison, about 5,500 larger, and sometimes more sophisticated, customers of the commercial banking business applied for funding.
> The data reveal that, in the race to get a loan in the first-come, first-served program, larger businesses had a leg up over smaller ones -- even when applying through the same bank.
> its commercial bank, with fewer clients, was able to process applications faster, said a person familiar with the matter.
On a $350k loan, the fee was 5%, or $17.5k. On a larger loan, the fee as a % goes down, but the total value goes up. These larger loans, to my knowledge, carry no more risk, nor any more work by the bank.
Yes, the banks should earn a minimal (and probably fixed) filing fee. No, they should not receive 3% of the amount set aside for small-business assistance.
This program made them 1/3 of 1 month's normal revenue
They've lost far more even with the fees they collected from this program.
As someone said above - doctors are not working for free, why should bank employees?
Hopefully investigative journalists will be able to find the corruption/fraud in a few years.
If recessions actually helped reduce income inequality and directly triggered UBI or some other system, more like the types of policies that were enacted after the Great Depression, you can bet there would be many less recessions.
As of right now, it is an every decade, or maybe less now, wealth extraction market raider party. Why wouldn't there be as nothing in the market or policy pushes back on it.
We need a new Teddy Roosevelt or FDR, someone from wealth that will shake it up, break up companies at the top, bring back to markets for all again, FDR's moves (SEC, FDIC, Social Security which buys half of all treasuries) made the most investable market in the world for nearly a century.
The market raiders are back.
What made the Roosevelt's unique was that they were from mega wealth, but they created a market and system that all classes benefitted from. Other wealth hated them [1]. FDR/Teddy put in more safety nets and the market made a great investable area for the investor class. To this day Social Security and the SEC still stand and they were just that, investments in the country and part of fair capitalism instead of Gilded Age type predatory capitalism.
> As the New Deal took hold, and as FDR prepared to run for re-election in 1936, the Liberty League launched a major effort to unseat him. In the end, however, the wealth behind the Liberty League sealed its fate. Never one to shy away from “a good fight”, FDR took on the forces wealth behind the Liberty League and other like-minded groups in a devastating full frontal attack. Characterizing the League as a tool of what he called “selfish big business,” FDR would go on to remind the public that the wealthy interests behind such groups tended “to consider the Government of the United States as a mere appendage to their own affairs.” Indeed, based on the experience of the late 20s and early 30s, he continued, we “know now that Government by organized money is just as dangerous as Government by organized mob.” He then fully acknowledged their contempt, when he famously said:
> Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.
> FDR won the 1936 election in an unprecedented landslide, taking 46 states and more than 60% of the popular vote. The American Liberty League never recovered; and as for fascism, the United States would go on to destroy it, not only through the military might we unleashed during the Second World War, but also through the effective regulation of capitalism that was established in the New Deal.
Social Security buys half of all t-bills while it is regressive so that it flew under the radar more from being cut by wealth but allows many people to have good retirements or people without parents or disabled that need assistance, highly underrated program that Republicans want to get rid of. Social Security is an investment so that the low end is brought up and not a crisis.
SEC made our markets trustable unlike overseas for a long time and even now, who trusts China's market? SEC made US an investable market for the world and all classes. Private equity is killing that off and the public markets are constantly under attack. Wall Street forgot that the SEC is here to make investments sound, which leads to more investment.
We need another FDR or Teddy Roosevelt badly. Teddy would definitely round house kick many 'representatives'. FDR would call us fearful as we vote and do policy based on fear not opportunity anymore.
We need a Newer Deal to defeat fascism and Gilded Age resurgence, like they said it was a national security issue then as it is now "and as for fascism, the United States would go on to destroy it, not only through the military might we unleashed during the Second World War, but also through the effective regulation of capitalism that was established in the New Deal.
Time for a Newer Deal is overdue.
[1] https://rooseveltinstitute.org/how-fdr-took-forces-wealth-an...
I find this perspective interesting. Presumably the fees charged by the banks form part of their revenue and their profits. I would have thought that this funds the salaries and bonuses from the CEO to the janitor and everyone else in between. The bottom line is the people "getting their cut first" could potentially include many people commenting on this thread. Disclosure: I have worked for one or two banks directly or otherwise.
I'm not disputing that there may be corruption/fraud going on. But I see that as a separate issue.
Everyone needs their cut to do work...
Another example how the 10% is taxed to pay for the 0.1%.
- 10bn in Fees
- 4975 Lenders
- $2m per Lender
I think this number doesn't seem unreasonable given the fact that the banks themselves are businesses - they have employees, training, technology, risks etc.
Anyone who attempted to obtain a PPP loan from their local bank knows that yes, it was a ton of extra work for them.
Do you know?
It is however a little aggravating and a little reminiscent of 2008, where well connected get rescued, where the rest is left to fend for themselves. That is a recipe for pitchforks.
1. https://www.marketwatch.com/story/here-are-the-public-compan...
What's the fee per loan?
>Loans worth less than $350,000 brought in 5% in fees while loans worth anywhere from $2 million to $10 million brought in 1% in fees.
I've read that the average loan is $50K, so that's $2500 per loan, which seems high, And 1% of a $1millio loan is ridiculous, as it's not subsidizing the smaller loans, AND these loans are scaled to #employees, so the size of the loan is proportional to the #people benefited and so the fees should be per loan (cost based), not per $ lent.
So now we blame Banks instead of Trump. Yet if Trump repeats the plan without prioritizing actual small businesses, the co's big enough for in-house accountants and big loan relationships will keep getting the lion's share.
Imagine your boss was running this program. You're in a regulated industry, so he's forced to ask another team to pick the budget and the basic design... though the majority are actually his guys. His job is to keep sending it back with fixes until he's confident enough to put his name on it. It's just a design, so his job then switches to putting together the team to run the project and then actually running it.
The first project ended up giving the wrong people tons of money and then running out of funds. He's free to propose something else, but if he doesn't have any real ideas, the board tells him to try to at least get this right. He's seen what other orgs have done, but rather try this again..
You know, the president doesn't write legislation or appropriate money. That's on Congress.
The system is inefficient and unfair, great lets put it on the list of things to fix, but a ~3% fee is not world ending (unlike some other things) and seems like a low priority.
3% is 3%. It's nonzero, so that's unfortunate. It's not a large fraction, so it's just not a time sensitive problem.
Is it worth tying up media, political and financial resources in blaming+lawsuits over the optics of a 3% fee, instead of just waiting to deal with it next year?
Your question implies that 3% of loan applicants get nothing because of this fee (which is inaccurate, since congress will just authorize more loans as long as it's politically convenient). As I said, it's unfortunate, but it's not world ending.
The current crisis has been a real eye opener. Our entire government and economic system is bailing out corporations and preserving the wealth of asset owners at the expense of taxpayers and society. This should be a perfect opportunity for smaller companies to step in and win business from corporates who have engaged in monopolistic practices for years and engaged in excess risk taking. But that isn't being allowed to happen because corporates are judged as too big to fail. I find this whole system intolerable.
It feels like we need to add more restrictions against corporates. Restrict their ability grow via M&A, restrict executive compensation to a multiple of median income and stop them growing too large. I say this as a capitalist.
Watching all this going on makes me feel so disillusioned, and I don't want to participate in society anymore.
Banks should help the river and get access to the flow, they shouldn't be a dam that holds back the flow, filtering only for their customers or large companies masquerading as "small business".
Had policy sent the money directly to companies from the SBA/IRS, customers then would choose the banks to service that guaranteed government grant/loan essentially. Much like the FAFSA system for student loans, you get your amount, then a servicer handles the actual loan but there is literally no risk to them as it is guaranteed.
Why we sent guaranteed money to be held up in banks and did information and credit checks, on already known information from the IRS, well we know why, to pilfer it.
Had they ran it a better way, using the actual market, directly to businesses/individuals, that is lots of money out there for banks to go get and the market knows it is out there as well. Markets like knowing hundreds of billions and trillions are out there to go get. Make them earn the fees if they must.
Instead, it was a direct transfer from the Fed and treasury to QE that was pilfered by the usual suspects: hedge funds, market makers, foreign funds, oligarchs, wealth/value extraction ops, naked short selling, short and distort and more. The SBA money was pilfered by banks and large companies. The 'stimulus' for the economy, routed around the entire actual economy, never reaching individuals or true small business.
Companies that received SBA funding many are listed on the public markets. I doubt most people would call "small business" companies that have IPOed and been on the market for years. These companies have other access to funds, they just wanted the 1% loans and took from hundreds and thousands of small businesses that supply them, subscribe to their services, buy their software, consume their products, feed them and other services.
Examples of companies that got SBA PPP and other [1]:
- Drive Shack Inc. (DS) $5,276,742 - Golf company like TopGolf... wow. That would have funded many, many small businesses.
- New Age Beverages Corp. (NBEV) $6,868,400 - Revenues 250~ million...
Isn't it safe to say if you have a stock ticker and one of 3812~ companies on the public markets that you aren't "small business"?
How to fix it...
We need a micro small business emergency stimulus.
- Less than 50 employees across ALL locations, less than 2-3 million revenues and sole proprietors.
- There can be no gaps to allow this to go to the already serviced.
- Include sole proprietors and really small companies (< 10 employees) with priority that matches their numbers in the market.
The current "small business" designation is really small to medium to large businesses. However, sole proprietors are 73% of all small business.
America is mostly small businesses.
SBA/Chamber of Commerce has 30.2 million for companies under 500 people. [2]
Lots are sole proprietors or very small companies with < 5 people.
22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner.
99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer.
Small business is the engine of America.
Small businesses comprise what share of the U.S. economy?
Small businesses make up [3]:
- 99.7 percent of U.S. employer firms,
- 64 percent of net new private-sector jobs,
- 49.2 percent of private-sector employment,
- 42.9 percent of private-sector payroll,
- 46 percent of private-sector output,
- 43 percent of high-tech employment,
- 98 percent of firms exporting goods,
- 33 percent of exporting value.
It is time to help the lower/middle, sole-proprietors and small business or America as we know it is much much different after this.
About 8 trillion in 'stimulus' and QE, at a cost of 20k to every citizen, for that individuals got $1200 many haven't got yet and small businesses finding out how small of fish they a really are.
The banks helped the big fish, but the big fish need the small fish to survive.
Money trickles up and down and all around, but money only trickles where other money is found.
This market is broken for lower/middle and people or small business. It is gangbusters for wealth and value extraction ops. How long can this go on?
The stimulus for individuals, families and small business is vaporware, time for some vaporwave as we fade away into the ether.
Good luck wealth and big business with no one to skim from and no small business to use as research and development or suppliers.
Maybe it needs to be framed in the way that it is an additional bailout for their own companies and interests. Most of that money makes it back into banks, larger companies, wealth, top end etc. If consumers have purchasing power and small companies buy up their services, supply them, and are where they make their money broadly, maybe their self-interest will align with the actual market.
Our policies already downplay the importance of wages, consumer base purchasing power and just keep piling on the backs of a finite resource. How long do can the wealth extraction keep happening before there is none left and stagnation takes over in a big way? Rich people and large companies can only buy so much, the long tail of small businesses and consumer purchasing power is America, it is under attack.
Real wages and purchasing power have barely budged in 40 years [4].
Worker share of GDP being on a long dwindle down [5] and velocity of money is off a cliff [6], that is why we are so stagnant.
Richest 1% of Americans Close to Surpassing Wealth of Middle Class [7]
Money trickles up and down and all around, but money only trickles where other money is found.
If there isn't purchasing power or demand, that is hard to create. Why are we widdling it down day by day, year by year, decade by decade?
What happens when The Giving Tree is a stump?
[1] https://www.wsj.com/articles/these-are-the-public-companies-...
[2] https://www.chamberofcommerce.org/small-business-statistics/
[3] https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
[4] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
[5] https://fred.stlouisfed.org/series/W270RE1A156NBEA
[6] https://fred.stlouisfed.org/series/M2V
[7] https://www.bloomberg.com/news/articles/2019-11-09/one-perce...
Every article on CNN right now for me is a click bait headline with some weird mention of Trump like it's some sort of requirement to get it to go to press.
they were overtly pro-clinton and anti-trump (as was i) during the 2016 election cycle, and lamented the election results for weeks afterwards. you see it with this election cycle and the covid coverage too.
If you have a dependent - ie a child - whom you are a primary source of care. Should you qualify for a bigger helping hand than say, the 25 year old with no children?
If you agree - then now imagine you have 500 dependents. Or in the case of some corps 500,000.
You have half a million dependents who rely on you every other week for a paycheck.
Do you qualify for a larger helping hand than the 25 year old who lives alone?
> Do you qualify for a larger helping hand than the 25 year old who lives alone?
No, because the "helping hand" you're getting is not helping the "children" eat in this situation. None of this $10B is going to small businesses, is it? It's literally just a payday for the bank. If you give a parent $400 extra a month, that is going towards daycare, food, etc. for their child. Your metaphor misses the mark completely.
