Treasury is offering **forgivable** loans for small businesses from stimulus legislation

In case this information helps any of my readers:

CNN – What small businesses need to know about the government’s new forgivable loan program

–article text below–

Treasury Secretary Steven Mnuchin has promised that by this Friday small business owners can apply for a new, forgivable loan to help keep their businesses afloat during the coronavirus crisis.

Nearly $350 billion has been allocated for that purpose in the new economic aid package signed into law last week.

Unless further technical guidance is issued soon, it might be tough for many lenders to launch on Friday, according to Chris Hurn, CEO of Fountainhead, a non-bank direct Small Business Administration lender. Otherwise, he thinks lenders should be ready to go by next week.

Many have already done what they can to prepare for an expected surge in demand. Hurn estimates his company alone is likely to process loan applications for more than $1 billion right off the bat.

Who is eligible to apply?

Generally, any small business with 500 or fewer employees is eligible.That includes sole proprietorships and independent contractors. It also includes nonprofits, veterans organizations and tribal businesses.In certain circumstances, businesses with more than 500 employees also may qualify.Applications will be accepted up to June 30. But the program is on a first come, first serve basis.

What is the money for?

The goal of the loan program is to help small businesses continue to pay their employees and their overhead costs in orderto stay afloat for the next couple of months.So long as you use the borrowed funds to make payroll and to pay expenses, such as utilities and your rent or mortgage, you won’t have to repay the loan and you will not owe income tax on the forgiven amount.In order for your loan to be fully forgiven you must maintain your headcount and not reduce employees’ pay.

But I had to let my employees go already. Does that mean I can’t get a loan?

You still can, so long as you can show you had employees as of Feb. 15, 2020. Once approved for a loan, you can use the money to rehire your staff.The loan forgiveness provisions will apply so long as employees are rehired by June 30, according to senior Treasury and Small Business Administration officials.

What do I need when I apply?

Lenders will ask you to fill out a two-page application, which can be found here.You must show lenders proof that your company was in operation on Feb. 15, 2020 and that you had employees for whom you paid salaries and payroll taxes.In addition, you’ll need to show proof of your average monthly payroll costs in 2019 (or for the first two months this year if your business is new).Independent contractors and the self-employed, who must wait until April 10 to apply, need to show proof of “payroll and other certain expenses” according to Treasury.You will not have to provide a personal guarantee or collateral to secure a loan, as you normally would for an SBA loan. But if you use the money for fraudulent purposes you will be subject to criminal charges.You will not be charged loan fees.

How much money can I get?

Loans will be made in an amount equal to 2.5 months of your average monthly payroll costs in 2019 (or the average of the first two months of this year if your business is new).

Does the money need to be paid back?

You will not have to pay back the loan so long as you use at least 75% of the money you get on payroll costs (including wages, benefits, payroll taxes plus state and local wage taxes). and the rest of the funds are spent on your business’ rent or mortgage, utilities and other overhead expenses. The money must be spent in the first eight weeks after you receive the loan.In other words, if you spend the borrowed money for authorized purposes over the first two months of the loan, that obligation will be forgiven. And the amount forgiven will not be treated as taxable income to you.At the end of eight weeks, you’ll have to show your lender proof of your expenses during that period.Payroll costs eligible for forgiveness may not exceed $100,000 per employee.

When would I have to pay the loan back if it’s not forgiven?

If any part of the borrowed money is used for unauthorized purposes, that amount will not be forgiven. And you will have to repay it over two years at a 0.5% interest rate.There’s an automatic six-month deferral on payments for all borrowers. So you would need to start paying it back, with interest, after six months.

Where can I get the loan?

All SBA-approved lenders as well as federally insured depository institutions, federally insured credit unions and Farm Credit System institutions will be able to make these loans if they choose. Senior Treasury officials said they are also looking into allowing some fintech companies to make loans as well.The SBA will be posting a tool for you to key in your zip code to find lenders near you participating in the program.If you’ve never taken out an SBA loan before, you might go to your primary bank first because lenders will be operating under so-called Know Your Customer regulations and that process will be streamlinedif you’ve previously workedwith the lender.

Do I have to go to a bank to apply?

No. The expectation is that you should be able to apply online.

Is it true that I can get the money the same day I apply?

Possibly, at some lenders. But it’s more reasonable to assume it could take two to three days after you submit an application, Hurn said. It’s up to every bank to decide when it disburses the money after an application is approved.

This loan will only support two months of my costs. Then what?

Good question. If the coronavirus crisis goes on for a long time, the Treasury and Congress will need to come up with more ways to provide capital to keep small businesses afloat.

Where can I go for more information?

For more detailed information on the loans, guidance put out so far by the Treasury and the SBA can be found here and here.

Disney furloughs non-union park employees starting April 19th

The jobs carnage continues as long-term shutdowns force major employers to toss in the towel. First Boeing this morning, now Disney. That’s close to half a million layoffs right there.

From CNBC:

Disney will furlough its non-union park employees starting on April 19 as the coronavirus pandemic keeps its theme parks closed.

“Disney employees have received full pay and benefits during this time, and we’ve committed to paying them through April 18, for a total of five additional weeks of compensation,” the company said in a statement Thursday. “However, with no clear indication of when we can restart our businesses, we’re forced to make the difficult decision to take the next step and furlough employees whose jobs aren’t necessary at this time.”

During the furlough, employees will receive full health-care benefits, with Disney paying the cost of employee and company premiums. They also will be able to continue with their Disney Aspire education programs, the company said.

Employees will also be eligible for $600 per week in federal compensation through the $2 trillion economic stimulus bill, as well as state unemployment insurance, according to Disney.

The entire Disney Parks, Experiences and Products segment has around 177,000 cast members, this includes people who work in its theme parks and at retail locations like the Disney Store. Disney declined to say how many of those employees will be affected by Thursday’s announcement.

“This reality has been sobering to all of us,” executives from Disney Parks, Experiences and Products wrote in a letter to staff Thursday. “As difficult as this decision was, we know it was the right one to help protect our cast members, our guests and our communities.”

Disney’s theme parks across the globe are closed indefinitely since large gatherings have been restricted. Parks in Asia have been closed since February and parks in the U.S. and Paris have been closed since March.

It’s unclear how the closure of the two California Disney parks will impact the opening of the Avengers Campus expansion at California Adventure. The new land was expected to open in July. It is unknown if workers have been able to continue working on the project.

Disney’s Parks, Experiences and Products is a massive piece of the company’s business. Last year, the segment accounted for 37% of the company’s $69.6 billion in total revenue.

Vermont bans the sale of “non-essential goods” within major retailers

I thought the states that banned fishing during their coronavirus shutdown were peak stupidity for local government officials. I mean, you’ve lost your job and the Trumpbucks are going to take weeks and even months to be distributed, and now you can’t even fish for dinner?

And then I saw a picture from Vermont of the vegetable seed display at a Walmart with a sign saying the sale of vegetable seeds was prohibited. Surely this is fake, I thought. Not only are they trying classify specific physical businesses as “essential” and “non-essential,” they are applying that to items for sale inside the stores. And apparently starting your own victory garden is non-essential?

Turns out, it’s not fake:

[Vermont] is ordering places like Walmart, Costco, and Target to stop in-store sales of arts and crafts, beauty products, carpet and flooring, clothing, electronics and more. They must restrict access to these items by removing them from the floor or closing aisles.

The state admits the variety of products in these stores attracts customers, that’s why they are restricting what you can buy so you will stay home to stop the spread of COVID-19.

A spokesperson for the Agency of Commerce and Community Development tells WCAX News that these aren’t new restrictions. This is part of Gov. Phil Scott’s original executive order.

The governor couldn’t talk to but told us via his spokesperson that he “appreciates everything Vermonters have done thus far and recognizes it’s been very disruptive, but every action taken has been to slow the spread of this virus, which if successful, will save lives. But it requires everyone to make some sacrifices.”

Trump and Mnuchin are effectively running the Federal Reserve now

I wrote a piece earlier, Federal Reserve policy is getting crazier and crazier, about how the Federal Reserve has dramatically reduced capital requirements for the largest banks in the country – requirements that were put into place following the 2008 financial crisis to stabilize the financial system and prevent future crises – so that those banks could help finance the deficit. There’s essentially no other way for Treasury to keep up with the insane amount of economic value the coronavirus panic has nuked and continues to nuke with every day the economy is shut down.

I believe that Trump and state and local governments have made a catastrophic mistake in (1) pushing for this shutdown in the first place and (2) drawing it out as long as they have. I think there are far more intelligent ways to protect vulnerable populations than what is being currently done (which is basically lock everyone down and wait for vulnerable people to arrive at the hospital on death’s door). But the worst thing that is happening right now is the amount of risk the financial system is assuming to keep the country operating at anything approaching economic survival. The word “existential” has been abused in Washington DC through a billion manufactured crises over the years, but I think this is legitimately an existential crisis. And it’s totally unnecessary.

Much like the infringements on civil liberties that the shutdown has involved, the Federal Reserve is moving into areas that are, well… not even remotely legal. And they aren’t legal for very good reasons. The Fed has pretty much given up any semblance of independence from the Trump administration. And the more policymakers feed the panic machine, the more the Federal Reserve has to do ever more insane things. It’s quite the negative feedback loop.

The problem is, unless the shutdown stops, the Fed cannot stop doing these questionably legal maneuvers. Because once the music (liquidity) stops, we are in a Great Depression.

This article in Bloomberg says everything I have been thinking for weeks now:

The economic debate of the day centers on whether the cure of an economic shutdown is worse than the disease of the virus.  Similarly, we need to ask if the cure of the Federal Reserve getting so deeply into corporate bonds, asset-backed securities, commercial paper, and exchange-traded funds is worse than the disease seizing financial markets. It may be.

In just these past few weeks, the Fed has cut rates by 150 basis points to near zero and run through its entire 2008 crisis handbook. That wasn’t enough to calm markets, though — so the central bank also announced $1 trillion a day in repurchase agreements and unlimited quantitative easing, which includes a hard-to-understand $625 billion of bond buying a week going forward. At this rate, the Fed will own two-thirds of the Treasury market in a year.

But it’s the alphabet soup of new programs that deserve special consideration, as they could have profound long-term consequences for the functioning of the Fed and the allocation of capital in financial markets. Specifically, these are:

CPFF (Commercial Paper Funding Facility) – buying commercial paper from the issuer.

PMCCF (Primary Market Corporate Credit Facility) – buying corporate bonds from the issuer.

TALF (Term Asset-Backed Securities Loan Facility) – funding backstop for asset-backed securities.

SMCCF (Secondary Market Corporate Credit Facility) – buying corporate bonds and bond ETFs in the secondary market.

MSBLP (Main Street Business Lending Program) – Details are to come, but it will lend to eligible small and medium-size businesses, complementing efforts by the Small Business Association.

To put it bluntly, the Fed isn’t allowed to do any of this. The central bank is only allowed to purchase or lend against securities that have government guarantee. This includes Treasury securities, agency mortgage-backed securities and the debt issued by Fannie Mae and Freddie Mac. An argument can be made that can also include municipal securities, but nothing in the laundry list above.

So how can they do this? The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury.

In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades.

This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.

In 2008 when something similar was done, it was on a smaller scale. Since few understood it, the Bush and Obama administrations ceded total control of those acronym programs to then-Fed Chairman Ben Bernanke. He unwound them at the first available opportunity. But now, 12 years later, we have a much better understanding of how they work. And we have a president who has made it very clear how displeased he is that central bankers haven’t used their considerable power to force the Dow Jones Industrial Average at least 10,000 points higher, something he has complained about many times before the pandemic hit.

When the Fed was rightly alarmed by the current dysfunction in the fixed-income markets, they felt they needed to act. This was the correct thought. But, to get the authority to stabilize these “private” markets, central bankers needed the Treasury to agree to nationalize (own) them so they could provide the funds to do it.

In effect, the Fed is giving the Treasury access to its printing press. This means that, in the extreme, the administration would be free to use its control, not the Fed’s control, of these SPVs to instruct the Fed to print more money so it could buy securities and hand out loans in an effort to ramp financial markets higher going into the election. Why stop there? Should Trump win re-election, he could try to use these SPVs to get those 10,000 Dow Jones points he feels the Fed has denied everyone.

If these acronym programs were abused as I describe, they might indeed force markets higher than valuation warrants. But it would come with a heavy price. Investors would be deprived of the necessary market signals that freely traded capital markets offer to aid in the efficient allocation of capital. Malinvestment would be rampant. It also could force private sector players to leave as the government’s heavy hand makes operating in “controlled” markets uneconomic. This has already occurred in the U.S. federal funds market and the government bond market in Japan.

Fed Chair Jerome Powell needs to tread carefully indeed to ensure his cure isn’t worse than the disease.

I think we are a long ways away from Trump even being able to do something like what the author has described here. But much like the abuse of civil liberties, I am willing to think that if governments will engage in this sort of behavior now, they will do it in the future with much less impetus. We are already seeing how quickly financial crisis-era regulations went out the window. It seems safe to say no practical limitation in the financial realm has any teeth.

All of this seemed like a good idea last week when the administration was still in “reopen the economy by Easter” mode. But right now, the entire country is being held hostage for an epidemic that is primarily centered in New York. Now we are looking at the large-scale destruction of our economic output, again, and all of the good that the stimulus had accomplished is melting away.

Once the Federal Reserve has nationalized pretty much every aspect of the financial markets, it’s going to be hard to argue that Trump is not the United States’ first socialist president. He did not start off on that path, but he sure got there fast. What a legacy.

New York City-centric media in a nutshell

New York State currently has 92,381 coronavirus cases. It makes up nearly half of all cases in the entire country. Of those, 48,462 are in New York City proper. New York has more coronavirus cases than most countries in the world, to the point that other states are banning travel to and from New York.

Here in Florida, coronavirus tourists from New York brought the epidemic to resorts and vacation homes in droves. The state has had to physically set up checkpoints on the freeways to stop them from coming in. There was not a single coronavirus case in our county until the New Yorkers showed up, trying to flee their own state’s quarantine.

So what are the NYC media types trying to get trending on social media?

Let’s take a moment and ponder why the lockdowns in New York City have not done much to slow the spread of the virus.

In the South, people do not live on top of each other. It is possible for me to spend the next month without ever talking to another human being, because I have a house with a large yard surrounded by forests and a month’s worth of food in my pantry. There isn’t even pollution in my area. At night in the summer, I can see the Milky Way.

Your average apartment in New York City does not have a pantry. In fact, your average apartment in New York is probably smaller than my pantry. The flip-flops piled on the floor in my closet have more personal space than New Yorkers. New Yorkers have to go out into the world, and they have to be up in each other’s faces. To get out of their building, people need to ride in an elevator crammed with others. They pile into grocery stores. Telling them to stay inside decreases their contact with other people, but it hardly eliminates it. And that’s under ideal circumstances.

While New Yorkers gasp at heat maps of Southerners who are still driving over two miles a day (spoiler: your average grocery store in the South is more than two miles away from where most people live) that’s actually the detail here that keeps Southerners relatively safe. We aren’t up in each other’s business unless we choose to be. (Much like how Mardi Gras spread the illness in Louisiana and surrounding states.) It’s also 90 degrees here. I know journalists think this is a super-special cold virus that actually loves the heat, so let’s not spoil things for them and tell them what the biological purpose of a fever is.

And while the New York media likes to squawk about how “healthy” they are relative to the rest of the country, that’s not even remotely close to true. I’ve been to Manhattan, and it’s as full of fatsos as Atlanta. In fact, you are more likely to have access to fresh, healthy food in the South (even now) than you are in NYC. They live in a city that is full of air pollution, which in itself puts them more in line with China as far as being at risk for a respiratory illness.

There are millions of impoverished people in New York who do not have access to top health care. Paul Krugman doesn’t see them on his walks on the Upper West Side, but they are the reason New York had a Medicaid-driven multi-billion dollar budget gap before this crisis even started. And why DeBlasio is famous for putting up people in rat-infested public housing. And let’s not even get started on the homeless.

These are major, major issues when it comes to covering the spread of illness in the country and public health. The population density and economic inequality in New York City make it impossible for the city to respond effectively to an epidemic. It should be a public policy initiative to get people to move away from densely populated areas. For their physical health, for their mental health, and for the health of our environment. But that would involve folks pondering for a second that maybe their lifestyle isn’t as great as they like to think it is.

Eaglet update

While the human environment is growing progressively more insane, life is marching on as usual in the bald eagle nest in our neighborhood. The eaglets are getting their feathers and soon will be learning how to fly! They kind of look like grumpy vultures at the moment, but they will be majestic in no time.

Difficult to believe they only hatched in mid-February.

Even demons believe

You believe that there is one God. Good! Even the demons believe that—and shudder.

James 2:19

Think of all the hate there is in Red China
Then take a look around to Selma, Alabama
Ah, you may leave here, for four days in space,
But when your return, it’s the same old place,
The poundin’ of the drums, the pride and disgrace,
You can bury your dead, but don’t leave a trace,
Hate your next door neighbor, but don’t forget to say grace.

P.F. Sloan, Eve of Destruction

I am a person who is easily attracted to wisdom traditions. I love Christianity, but I also enjoy reading works from each of the world’s major religions and secular philosophy. I feel like I take away something worthwhile from all of them. This has been the case ever since I was young. My crazy mother was all about getting me to read great literature, and had me reading books like Candide in middle school. By high school, I was reading Kant and Leibniz. That’s probably how I ended up a homeschooler, if I think about it. I’m now the crazy mother.

*pauses to let that moment of clarity sink in*

What is less easy is holding fast to one’s beliefs when your community profoundly disappoints you. If you ask younger generations why they do not go to church on a regular basis, most will likely not tell you that it is because they are unbelievers who think they will derive nothing from religious discipline. They will tell you that they are “spiritual” in their own distinct way, and that’s probably true. What they don’t want to do is share a pew with people they perceive as hypocrites or listen to a hypocrite minister deliver a sermon.

The purification of the church is a theme in pretty much every religion. In Christianity, this is a function of the Jewish diaspora historically. The church fathers were not people with fixed audiences, but missionaries who carried the message to Jewish Christians scattered throughout the Roman Empire, and who circulated among their social networks for the sake of holding believers accountable.

I was talking to a neighbor recently who was deeply invested in bringing me over to her purely political interpretation of current events. For this person, everything that is happening lately is one colossal battle between good and evil. There are the on-message team players (good) and everyone else (evil). I suspect there are a lot of people like her out in the world now. They are the same people who are going to call the police because your kid is playing out in the front yard during the quarantine. And they will furiously slap their own back for doing it. Because they are on the “good” side.

This kind of behavior – trying to bully people into believing something they otherwise do not believe, often for good reasons – has been ubiquitous online for years now. But the coronavirus is giving the worst actors an excuse to bring that behavior into their real-life interactions. I expect that after a few weeks of this behavior, communities are going to be deeply divided with a very durable form of hatred and contempt. People are going to remember this event and who said what for the rest of their lives.

I responded to her by explaining that in times of crisis, my main concern has always been maintaining my purity of mind. This is true both intellectually and spiritually. You cannot be a good investor if you allow people to bully you out of facts. Moreover, you need to be able to seek out situations where the consensus is wrong, because that is what is ultimately profitable. I have not watched the news for weeks now, but instead consume primary sources and raw data for all things. Instead of listening to Fox News or CNN summarize data, I look at the data. Guess what? Both Republicans and Democrats believe a lot of bullshit things right now. And I stop talking to toxic and political people as much as I can.

Do you know how difficult it is to talk to someone who relies on NBC for literally all information about the world after you have sat down and parsed models? Don’t even try it. Just walk away.

Watching this kind of pettiness play out – now, and across all the years that social media mob mentality has been a feature of our existence – has given me a great deal of sympathy for the early church leaders, who lived with the constant risk of being persecuted and having their lives destroyed for the simple act of believing something different than their neighbors. It is not difficult to think the world has gone absolutely mad when you are surrounded by people without a smidgen of intellectual humility.

I’ve watched the little church ladies in our neighborhood and online defend hoarding essential goods and even participate in it. They get into physical shoving matches in the grocery store over canned goods. But ooooh do they love Jesus.

I’ve watched little church ladies in our neighborhood and online shrug off millions of people losing their jobs. As someone with a background in finance and economics, it’s almost worth a shrug to me too. In June they get to see how much their pensions have been destroyed, so until then it’s them versus the whippersnappers.

I’ve watched fellow homeschooling mothers gloat about all the other children who have experienced the government laying waste to their education. Many of them shrug off job losses too, because they’ve been housewives so long the real world has become an abstraction to them. It’s frankly kind of disgusting.

And all of these people, at the end of the day, blather about God and how other people’s misery is God’s plan. As if simply invoking the idea of a deity is sufficient to relieve them of their own agency. It’s like listening to a bunch of Joel Osteen bots, with the implication that other people are experiencing misery because they are of lesser metaphysical status and can be redeemed solely by expressing gooey thoughts about Jesus on Facebook. This is everything sane people hate about organized religion, and it’s why the church fathers keep trying to bring people back to the basics of faith and compassion.

The Bible is very clear about what to do in situations like this. Guard your own purity of mind. Care to live justly even when it is inconvenient. When other people hoard, share. When other people gloat, hide. Separating the pure of heart from those who are invested in the madness is not something that is only happening out in the world. It happens in the pews too, unfortunately.