Bridge loans for economically troubled firms

Andrew Ross Sorkin explains (NYT):

The fix: The government could offer every American business, large and small, and every self-employed — and gig — worker a no-interest “bridge loan” guaranteed for the duration of the crisis to be paid back over a five-year period. The only condition of the loan to businesses would be that companies continue to employ at least 90 percent of their work force at the same wage that they did before the crisis. And it would be retroactive, so any workers who have been laid off in the past two weeks because of the crisis would be reinstated.

Strain and Hubbard call for $1.2 trillion in lending to smaller businesses (Bloomberg).  John Cochrane considers a version of the plan.  Here is Brunnermeier, Landau, Pagano, and Reis.  I have been pondering the following points:

1. If you are an optimist about the cycle of recovery, this is very likely a good idea.  If you let those companies fall apart, there is a significant loss of organizational capital and the matching problems in the labor markets have to be solved all over again.  Recent experience on that front is not so encouraging.

2. If you are a pessimist about the cycle of recovery, I am less sure how well this will work.  Let’s say a vaccine is difficult and there a few waves of the virus.  Many of the smaller or even larger businesses may be going under anyway, as they cannot live off aid forever.  In the meantime, you might actually want those resources to be reallocated to good transport, biomedical testing, and so on.  If the wartime analogy is apt, you don’t want to freeze the previous capital structure into place, unless of course you get lucky and win the war early.

3. If you a pessimist about the solvency of banks (have you ever seen a stress test for 30% unemployment?), you have not gotten the government out of the business of capital allocation.

4. The bridge loans might work especially poorly for start-ups.  Yes, StubHub or some company like that is around for the long run, and if the bridge loans can keep them up and running until concerts return, so much the better.  But what about the eighty wanna-bees next in line, most of whom are likely to fail?  Do they too get bridge loans?  (Do note the ecosystem as a whole is yielding positive value.)  The market itself chose the venture capital financing form for those entities, not debt.  And yet now the government is stepping in and propping them up with debt, even though we know virtually all of them are likely to fail (even pre-coronavirus that was the case).  You might think “well, we will know not to do that.”  But on what legal basis would those other “likely to fail start-ups” be excluded from the bridge loans?

4b. Is it all about “banks decide”?  How do we stop banks from simply hoarding the new money?  (The Fed already has flooded the banking system with liquidity.)  Just loaning the money to super-safe firms for de facto negative rates?  What exactly are the regulatory requirements here?  To the extent the loans are de facto guaranteed, won’t banks lend to a large number of lemons?  What do the interest rates and collateral requirements look like on these loans and how are those set in what is now a non-competitive setting?

5. Overall my sense is that American policy, if only for cultural reasons, has to proceed on an optimistic basis.  It is not clear what the relevant alternative is, and I do not oppose bridge loans.  Nonetheless I am seeing too many people jump uncritically at bridge loans with a “throw everything at the wall” approach and not thinking hard enough about their possible downsides.  At the very least, being critical about bridge loans will help us make bridge loans better.

6. No, I don’t favor governmental bridge loans for non-profits.  De facto, that this means this is a huge relative shift of resources away from non-profits and toward businesses.  YMMV.

7. I have received numerous reader emails telling me how bad, slow, and cumbersome is the Small Business Administration process for getting loans.  Will this new regime do better?

8. It is the same government that could not organize testing and mask production that we are expecting to run what might amount to a $1 trillion plus bridge loans program.

Have a nice day.


Banks here in Australia are already offering to defer business and home loans for six months on account of how they don't make money from debtors who go bankrupt.

The government's also doing a whole slew of things to keep credit flowing:

Aus Government is also handing loans to small businesses and will likely guarantee the banks as it did last financial crisis

Sensible, and addresses a few of your issues above

Italy did this March 10.

Mortgage payments will be suspended across Italy as the Italian government places the population on lockdown because of the coronavirus outbreak.

Asked about the possibility of mortgage payments being temporarily frozen, the country’s deputy finance minister, Laura Castelli, said on Tuesday, „Yes, that will be the case, for individuals and households.“

The British bank RBS also said it would defer mortgage and loan repayments for up to three months for customers affected by the coronavirus outbreak, the BBC reported on Tuesday.

Bridge loans to nowhere. Sure, why not. The elite are quickly revealing themselves to be idiots- pretty much all of you at this point.

If this panic doesn't basically come to an end by May with us just focusing our efforts on isolating the most vulnerable to death and the rest of us getting on with our lives, none of these ideas mean jack shit.

You are going to see unemployment at 25-40% by the end of Summer if we continue on as we have done the last 2 weeks. I wouldn't be surprised if it is 10%+ when reported 13 days from now, though the lag will probably keep it under 7% for the first month.

I am just laughing my ass off at all the politicians picking which businesses are non-essential and which aren't. Morons , all of them. These are people who couldn't run a lemonade stand.

Comments like these are reassuring...but then I check my Twitter and Facebook and talk to people in the office and just lose hope. It's like everyone WANTS the destruction.

Politicians and the elite are cowards falling over themselves to out-do each other with "an abundance of caution" and the populace seems content to jump off the cliff with them.

Even if unemployment goes up to 40%, it's a better alternative than allowing the uncontrolled spread of a virus that will kill 0.2% of the 20-40 population and permanently cripple at least 2-3% of those surviving.

Economy does not matter. This should be contained even if it means 80% of the workforce stays in place for an year eating cereal.

Taking this as a serious comment, you won't be eating cereal for a year- you will be eating the pets a year from now.

If it was snark, then well done.

I said "80% of the workforce".
Do you really think we cannot guarantee utilities + food supply chain with 20% of the population working?
Are you a moron?

50+% of the workforce is engaged in bullshit jobs anyway.

On what basis do you say that? That 40%+ of the economy is government? Is that the part you meant?

An anecdote. A customer had a cheese display case fail on Friday, component failure. I'm 4-8 hours drive away from the nearest parts wholesaler, so we get stuff shipped in. Usually overnight. I expected it on Saturday, was going to get it working for him. But no, for some reason service is curtailed. Why? I'll find out on monday.

So which part of that equation is unnecessary? Do you know how the economy actually works in detail? How soon does transport stop functioning when some jackass closes down some business because they don't think it is necessary?

There are number of ways this thing could get worse that are not about infections or intensive care beds.

Your example is idiotic.
Cheese displays are not necessary to ensure the food supply chain.
Fridges, transport and warehouses are.

Basically, 80% of office workers are either unneeded or can do distance work.
Restaurants, bars, tourism, most services are not needed as well.
A lot of the rest can function at reduced capacity.

Yes, ~20% of the workforce should be sufficient to ensure basic functioning of society.

"If this panic doesn't basically come to an end by May with us just focusing our efforts on isolating the most vulnerable to death and the rest of us getting on with our lives, none of these ideas mean jack shit."

I don't get the impression you understand the issue. This isn't about isolating the most vulnerable. This is about the prevention of a healthcare collapse by a human tidal wave of coronavirus patients, meaning the average person with treatable problems unrelated to COVID-19 will be denied or delayed access in the event of emergency. Your mild infection could lead to an amputation or worse because there's no capacity left in the system. I won't even get into the issue of overworked medical workers that lack basic protective gear like masks and get sick themselves but that also affects capacity. These are the type of triage issues that we are trying to head off.

He not only doesn't understand that even if every 60+ years old is quarantined in a bunker, the system will still be overwhelmed because the hospitalization rate for 20-40 year olds is still north of 10%, he does not understand that economic collapse is inevitable no matter the way we play this. The difference will not be an order of magnitude, it will be 50% contraction vs 70% contraction in GDP for a year - year and a half.
May as well save some lives meanwhile.

Current official guidance from the UK is that 1.5 million people (cancer patients, for example) should self-isolate for the next 90 days. Basically, the ventilators are being reserved for those who are going to get sick in the next few weeks, and reducing demand is critical.

However, this is only a delay, as that group will still be facing infection even after a successful 90 day isolation.

These are the sorts of choices that public health systems are facing. At least those with the reality of what is happening in Italy and Spain staring them in the face. It helps that basically no one in Europe appears to be playing any political games in the face of a pandemic that will be killing family members.

"If this panic doesn't basically come to an end by May with us just focusing our efforts on isolating the most vulnerable to death and the rest of us getting on with our lives"

What part of "flattening the curve" is unclear to you? Some variation of that probably will happen but it really surprises me how little familiarity there is with the concept of exponential growth. There is a huge difference right now between the number of cases doubling every three days and doubling every five or even four days. The former scenario will be a humanitarian disaster just 4-6 weeks away -- and is entirely realistic in the absence of quarantine rules -- while the latter is manageable. Even better would be a Japanese or Singaporean trajectory of doubling every 10 days.

Before calling others idiots, why don't you crack open a spreadsheet, look at some simple data, and read what people are actually saying instead of knocking down strawmen?

"If you let those companies fall apart, there is a significant loss of organizational capital and the matching problems in the labor markets have to be solved all over again."

What ever happened to Schumpterian creative destruction? Not that I'm disagreeing but what's to prevent using this excuse for every business in danger of failing?

Schumpterian creative destruction is for normal times, not acts of war. The Covid-19 crisis is like an act of war, or a force majeure.

Let me give actual examples of how Covid-19 is affecting business from a real businessman, that's me. First, I don't need loans. I have money. I self-finance. My 1% family buys real estate in cash, unleveraged. We don't need banks (but they need us, many prominent bankers actually call our unlisted number to solicit funds, but that's a brag for another day). It's funny during closing when we write a check for over $1M how surprised some people are (and when interest rates were higher how annoying even losing a few days interest from the bank is when the banks mishandle the money and delay it, as they often do, few of you 99%-ers know what I'm talking about but some of your 1%-ers and higher do; 1% problems, lol). No, the problem is supply constraints: workers can't get to their jobs easily, supply chains break down. Right now I want to demolish some old houses in Greece and rebuild, renting out the new building. But workers--this is outside of Athens--can't get the necessary permits since the government workers are de facto 'on strike' due to the virus (also Greek bureaucracy is to blame, never fast even in the best of times). Another project is to install natural gas in one of my Athens apartment buildings, also delayed for lack of workers, afraid of the virus and 'sheltered in place' (perhaps wisely, I'm not sold on 'herd immunity' though I do think de facto that's how this crisis will end, I hope I'm in the 40% of the population that doesn't get the virus when and if that happens however). A final example, as a gentleman farmer (do it for fun, very little profit in agriculture unless you have huge economies of scale and even then) I can't order needed farm equipment for my livestock since the machines come from Italy.

Those are some real world examples from somebody with capital to employ, not a keyboard warrior like most of you reading this, and that includes you, Y. Ward, lol. Peace and good luck! It will get worse in the USA IMO.

Is more debt-bondage the solution to an economic depression caused by government ukase?

Greece GDP shrank 25% after 2008 and never recovered.

Stanley Fischer and David Beckworth both have advocated money-financed fiscal programs, aka helicopter drops, even before the COVID-18 scare, and as a response to a garden-variety recession.

My guess is Fischer today would say {perhaps off the record), "No, don't send in helicopters. Send in money-dropping B-52s."

Fischer is a man of extraordinary intellect and experience, as in serving as a central banker on two different continents (US and Israel), and having been professor to Mario Draghi and Ben Bernanke.

Jeez, if ever there was a time to stop worshipping totems in the Temple of Orthodox Macroeconomic is that time....

Hi Ben. I'm rooting for your Nobel Prize in medicine, along with Dr. Robin Hanson of GMU and Dr. Furgusen of the UK, when and if 'herd immunity' solves this crisis (at a huge cost I'm afraid).

As for the post here, I wish to rebut it by pointing out that Japan did huge 'helicopter drops' (don't you agree?) and their GDP has been flat since 1993, almost 30 years ago: (zoom to "Max" on the chart)

Don't you think 30 years of helicopter drop is enough to disprove that theory? Or, like your soul mate Dr. Scott Sumner (yes, he's your evil twin!) do you think the JP central bank 'did not do enough helicopter drops' and should send in the B-52s? Where does that end, as JP has a nominal 200% Debt-to-GDP ratio as it is now, should it be 1000%? Weimar Germany in other words was ahead of it's time? Burn it down with hyperinflation and/or Jewish style "Debt Jubilee" and start all over ahead? (I'm actually OK with that as long as I end up again in the 1%).

Ray Lopez: we may in fact see a debt Jubilee, that is people no longer paying their rent when they figure out there's not enough County Sheriffs to evict everybody.

My take on Japan in the Great Depression is that they went to helicopter drops then, and they were effective and they were in fact the only developed nation to sidestep the Great Depression. From 1990 they have been doing helicopter drops, but on Wall Street.

Japan, and the United States, and Europe need helicopter drops but on Main Street, hard and heavy. Make It Rain Pennies from Heaven.

I am no longer certain of the wisdom of raising consumer taxes, that is sales taxes, when you have gluts of capital but aggregate demand is weak.

I think we just collapsed the global economy, soon to wreck our financial system, on the basis of death rates among elderly smokers, or old people with multiple comorbidities, aggravated by the cold virus called COVID-19.

However, in the early stages of a war it is politically impossible to say the war might be a bad idea, nor does anyone want to concede they collapsed the economy to save elderly people who already had one leg in the grave.

To even make such a statement is forbidden.

The public health officials are in Nirvana, finally getting the budget boost they wanted and acting pious about saving lives. It is true, it is not a doctor's role to decide about money and saving lives.

Evidently our political leaders and the media have purchased this idea, that comparing lives and life years saved to enormous expense is not PC.

Perhaps we live in a gerontocracy. The "me generation" is occupying the old age homes? We don't care if we collapse a global economy, we want our ventilators?

My own two cents: if this was children dying I would be all in. Cut the military outlays in half and focus on healthcare, and if we have to wear hazmat suits and. adult diapers the rest of our lives so be it.

How do you know that a Wuhan or Lombardy won't happen in the US?

Why do you believe this is a conspiracy by the American media and politicians when the rest of the world who care nothing for the US politics is treating the pandemic with similarly forceful measures some even more draconian?

Why is spending trillions on foreign wars and trillions on corporate bailouts acceptable but spending trillions on public health is not?

If a disease doesn't affect children but kills their parents is that an acceptable compromise in your view?

Benjamin Cole: The virus is called "SARS-CoV-2," you miserable twat.
"COVID-19" refers to the disease that you get when infected.

When a Republican is in the White House, another round of corporate bailouts is in the air. The moral of lack of moral hazard is to make the house look pretty on the outside even though there's a raging fire inside and keep that sucker running on fumes until a BIG convenient excuse appears. A financial crisis. A pandemic. Anything politically palatable to make taxpayers open their wallets. After all taxpayers want to be seen as reasonable and generous not gullible. Lather. Rinse. Repeat.

"CNBC reported that hotels want $150 billion, restaurants want $145 billion, and manufacturers wants $1.4 trillion. And the International Council of Shopping Centers wants a guarantee of up to $1 trillion. The beer industry wants $5B. Candy industry wants $500M."

"Take Boeing. The aerospace giant of course wants a $60 billion bailout ...... The corporation paid out $65 billion in stock buybacks and dividends "

One man's corporate bailouts is another man's strategic industrial policy (aka "infant industries"). Industry is going the way of agriculture: if you don't subsidize it, it will go away. When one factory can supply all the light bulbs in the world, as it can these days with automation and economies of scale, the Adam Smith / Thomas Jefferson model of perfect competition no longer holds and game theory takes over.

" Is it all about “banks decide”? How do we stop banks from simply hoarding the new money? "

Put money directly into the hands of citizens? The issue isn't the supply side. It's demand. A lot of businesses but not a lot of customers.

If I am an indebted shale oil producer, thank you for giving me a bridge loan if Opec and Russia do not reach a cartel agreement.

Looks like the oil patch, and its investors, win again. Thank you Houston

Maybe we need to exclude some industries that got too leveraged to help the market work.

Perhaps we need to have some capital/debt ratio or prior to the crisis bond rating as a threshold for getting a loan, otherwise we will be rewarding companies that had bad credit ratings going into the crisis, or we will be giving a windfall to junk bond holders.

What if the company is a multinational, and the cause of its distress is its investment in China.

We give a loan to our domestic firm, or give them a bridge loan, China wins if those plants stay open.

China should thank us for our stupidity in supporting foreign operations of domestic corporations.

Well, at least we are not giving loans to foreign domiciled corporations. Or, are we. What about the cruise industry?

I think the loan or assistance should be proportional to the amount of domestic employees.

America First!!

Or, maybe it should be proportional to the amount of US taxes they paid on total operations.

how does a bridge loan actually help a low margin business?
You shut them down for 3 weeks, 6 weeks, maybe a year. You lend them zero interest money to pay people to hang around and do nothing. But they are acquiring debt. And producing nothing. When the debt comes due, why is there ANY reason to think it won't be a huge burden? They may be destroyed by the shutdown anyway, in which case it's just bad debt.

Such schemes can paper over the issue for a while and mititgate personal misery, but for the economy as a whole, the shutdowns cannot last nearly as long as epidemiologists would like.

Because we'll forgive the loan later. The two step plan for democratic socialism.

Seigniorage taxes going up and they are being passed down to the middle class in cash and account user fees and high rates. No one is really proposing a helicopter drop (or helicopter take up) with this loan policy. Hence, the seigniorage money comes from interest paid by the tax payer to bond holders then returned to government, like a tax..

You are correct. I do not know a single small business owner who is willing to be encumbered by debt to pay employees to stay at home while their business collapses. Perhaps they would do it if there was some certainty that this pandemic would be over in a matter of weeks, but that’s not what we got here.

I already got into so much debt getting my degree, now you're asking me to take on more just to survive the summer.

Buy out ALL the toilet paper in your neighborhood and then sell it for 7X. Do the same for hand sanitizer. Though you might end up in jail, the comments section here will morally support you for being such a jerk.

They'd be really happy if I could figure out some way to make the scheme 'vaguely' eugenicist in suggestion.

"8. It is the same government that could not organize testing and mask production that we are expecting to run what might amount to a $1 trillion plus bridge loans program."

I don't like Trump one bit but that's not fair. Your neoliberal globalist funders outsourced test and mask production to Asia. That's not Trump's fault. That's the result of profit first, damn the consequences policy your buddies forced on the American people.

It is not fair, it is far too lenient. This is the same government that utterly squandered 6 weeks, with a president saying “The virus that we’re talking about having to do, a lot of people think that goes away in April, with the heat, as the heat comes in, typically that will go away in April” just a couple of weeks ago.

Who was the same president that suggested going to work sick was no big deal. “If we have thousands of people that get better just by, you know, sitting around and even going to work – some of them go to work, but they get better.”

We closed travel to China at the end of January. 2 weeks after the WHO was telling us there's no human to human transmission.

We have half the government telling firms to keep employees home and now another half telling them to keep their workers at work.
Democrats call for stimulus to boost Social Security benefits by $200 a month
Wait a minute. Retired folks are at home, their expenses remain the same. They need extra monitoring due to the virus affecting old people, but that is a medicare thing. What doe $200/month get them? More masks?

We have a case of piling on, politicians getting their bailouts for a number of reasons not having anything to do with the virus.

As near as I can tell, the best stimulus right now is mask production and more white gloves for work. More people trained in social distance, the more people who can work. Stimulating workers to sit around coughing at each other does not help.
Newsom says California enlisting Elon Musk, Tim Cook for coronavirus help

Politician with zero intelligence. Elon and Tim are not trained in virus biology, they are of no help. Someone tell Newsom that he needs the help of of epidemiologists. Politicians are piling on, they are using the recession to clear a bunch of political obligations.

Absent some social distancing rules that work the stimulus does nothing. Produce masks and gloves, train workers on social distance, and keep looking at the details of transmission method. Use the stimulus money to do a Manhattan project on a vaccine.

Whether it’s flu, a cold or coronavirus, Bruno said, “you really need to get some rest.”

There is no specific treatment for COVID-19, so besides taking it easy, you’re going to want to treat your symptoms. Honey works better than most cough syrups. Antihistamines, including Zyrtec and Claritin, help if there is congestion.

[Full Coverage: Coronavirus in Maryland] »
Bruno recommends Tylenol over Advil for pain because it’s less harsh for people with most chronic health conditions. He said there’s not much science behind advice to avoid Advil-style anti-inflammatory drugs for coronavirus. (Tylenol is acetaminophen; Advil is ibuprofen.)

Stay hydrated with warm fluids like tea.

And this part gets repeated a lot by the public health community these days, but cover coughs with tissues that you throw away and wash your hands frequently for 20 seconds each time with soap. Singing the birthday song is optional.

If you suspect you have it, don’t rush off to the emergency room or even go to a doctor. Call your doctor, a nearby clinic or the local health department instead when symptoms start to ask for advice. The good news is that 80 percent of those with coronavirus have mild to moderate cases and recover well at home, doctors say.
Symptoms are almost like the flue or common cold. Dink lots of hot chicken soup and take Tylenol. Do not rush off to the emergency room, you will just spread the virus.

If you have to work, wear a mask and gloves and keep your distance. And finally, be prepared to pay a hundred billion in bank fees after the politicians go crazy with the seigniorage tax.

Most of the rest of this is fine but please don’t wear a mask and gloves if you go to work. You mostly will use them wrong. You’ll simply use the gloved hand surface to spread contamination as opposed to your skin, which isn’t a pathway for infection anyway unless you then touch your face. Which you’d still do with the glove.

And you’ll be preventing medical care workers who do need them and know how to use them from having them.

Switzerland did exactly that in a 42 billion program (about 7% of GDP). And the implementation is quite clever: instead of handing out the money directly, it provides a repayment guarantee up to 500k for all banks that provide credit to Corona-affected business. For credits above 500k, the government guarantees 85%, sharing the risk with the bank. The nice thing about this is that it does not bind much capital for the banks. Under Basel III, the credit can be considered low-risk thanks to the guarantee by the government. Letting the banks decide about who will get a credit reduces the amount of administrative work for the government and puts the decision with the institutions that knows the financials of the recipient best.

But this would mean that various resorts and hotels that are already not worthy of loans are unlikely to get loans.

Which could provide insight into why the Trump Organi.... Administration will never go for something allowing banks to make independent loan decisions.

We face a bigger problem than coronavirus. We are facing another Roosevelt Shock, or worse, a Nixon Shock. Our regularly scheduled generational default is upon us, millennials want to write off a bunch of 'This time is different' frauds generated after the Nixon Shock. It is time to write off the B1-B2 failures, the Ford Class carrier failures, SDI, Obamacare start up costs, Texas S&L bailout costs and a bunch of medical costs.

We have been trying to get the Shock method changed to a Default process spread over several years rather than overnight or over several weeks. We have failed, the 'This Time is Different' frauds are proliferating like crazy from our nutty economists. We will end up with a Nixon style overnighter, we do not want that, at least do a Roosevelt version. Be prepared for another 40 years of millennials touting yet another 'This time is different' fraud.

We made no headway, now we have most politicians jumping at the chance to write off interest bearing debt that pays for past losses.

Some stats from

This is about flue deaths in my home town. We suffer about 20 deaths per year, reduced since 2000 via flu vaccines. So far we have had no deaths from coronvirus and six cases, over Q1.

The lock down we have was to prevent panic rushes to the emergency room, like Obamacare told us to do. The disease spreads in the emergency room and hospitals are forced to take patients who otherwise should be home in bed taking chicken soup.

On the other hand, California was getting into deep problems with the tax issues, we are spending money due from a commercial property tax not yet voted upon. Counties and cities were under extreme pressure with sales taxes slowing down the economy and public sector expansion all but stopped. Growth was less than 2% and our stall speed out here is about 1.5%.

So we are getting the pile on effect very quickly, politicians rushing to get their bankrupt programs under federal subsidy. Uncle Milt hasd it right, it is a seigniorage tax, collected from banks every quarter and now being passed down to the retail banking sector which is rolling up.

the same government that could not organize testing and mask production

Given the constant berating of government in the U.S. its a wonder that it works at all.
A new study of COVID-19 cases in Wuhan, China, estimates that the death rate among people who were infected and developed symptoms was 1.4 percent. That is far lower than the crude case fatality rate (CFR) produced by dividing total deaths into total confirmed cases (4.5 percent) and far lower than the global CFR initially calculated by the World Health Organization (3.4 percent). The study, reported yesterday in Nature Medicine, suggests that the overall CFR—including people who are infected but do not develop symptoms—will prove to be much lower in the United States than many people feared.

During congressional testimony last week, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, estimated that the overall CFR in the United States would be about 1 percent. The worst-case scenario sketched by the U.S. Centers for Disease Control and Prevention (CDC) imagines 214 million infections and 1.7 million deaths, which translates into a CFR of about 0.8 percent, similar to the crude CFR in South Korea, which has a much more robust testing program than the U.S. has managed. But all of these estimates exclude people infected by the coronavirus who have no symptoms or symptoms so mild that they never register in the official numbers.
For comparison:
"Despite the morbidity and mortality with influenza, there's a certainty The death rate from seasonal flu is typically around 0.1% in the U.S

The expected death rate will drop further as we count those with mild cases. Absent flu vaccines, the two would be quite similar.

Behind the stats is a puzzle soon to be solved. Why do some folks just get very mild symptoms? That puzzle is easily solved with the enormous data we are collecting. We will find pre-existing anti-bodies that lead to a suppressant and we will refine out social distance training and get back to work within a month or two.

It's been 51 days since Italy was first exposed to the virus and yet the number of registered cases continues to increase exponentially. It would be nice to think there are large numbers of young people out there infected with covid-19 who will never show more than minor symptoms but the advocates of this position need to come up with a falsifiable hypothesis.

Italy is almost certainly undercounting its population of infected people but that just means it will learn about these people within the next 5 days. And there will also probably be tens of thousands of new cases that will in turn take another five days to discover until testing really ramps up. There is no evidence right now that millions of Italians are infected and will just glide right underneath the public health radar.

Its crazy for another reason: You are expecting all these businesses to voluntarily shoot themselves in the foot by taking on a huge amount of debt to pay workers to literally do nothing. I mean sure, its nicer to throw away money at a subsidized interest rate, but what is even better is to not throw away money in the first place. Socialize the whole cost via the unemployment system, don't pretend that you can do it for free by getting companies to keep meeting payroll on loans.


Thinking of some of these types of businesses, I don't see why a closed bar would keep anyone on the payroll. A restaurant limited by emergency order to takeout or delivery would keep a small staff, but not everyone.

I'm not sure of the ins and outs of whether owner-operators of these bars and restaurants have access to unemployment pay, but let's pass a quick legislative fix to make sure they do if that's a problem.

Trump has already handled 8. “Anybody that wants a test can get a test. That’s what the bottom line is,” Trump told reporters March 6 during a visit to the Centers for Disease Control and Prevention in Atlanta.

Stop the fake news.

Why no mention of automatic stabilizers? Programs that prevent deflation are valuable in keeping an economy out of a deflation spiral. With a pandemic, that would seem to mean generous illness salary, paid for by the health insurer of the employee.

Lend to everyone is better than lend to a few of the administrations's favorite sectors, but I still think letting banks decide is better. The Fed has still not flooded the system with enough QE to get inflation expectations up to even 2% (and with falling real GDP, it really ought to be more than 2% to enforce Say's Law/NGDP targeting. THAT would give banks an incentive to find borrowers with a reasonable chance of repayment.

Unemployment Insurance should take care of unemployment. Banks would be lending to business that can come back, not to maintain employment. Also, banks could lend to non-profits as well.

Right, tell the banks that. Lines of credit are being called in and canceled, right now, all over the country. We all live on borrowed money, and when the credit is yanked, the whole party stops. We are closer to that moment than most of us want to believe.

This mess requires massive federal spending, period. This would be less irritating if our legislative and executive branches hadn't been so blasé about running trillion-dollar deficits during the days of full employment and robust economic growth.

My faith in government, never keen, just keeps declining.

The experts who are recommending bridge loans have little familiarity with small business finances. Margins in the majority of these businesses are very small. There is no way they are going to want to be encumbered with more debt while their revenue is grinding to a halt- and is doing so for an indefinite period. It’s much easier and safer to lay people off and go into hibernation mode. Then when things return to normal you can restart with no debt and will have your choice of new employees at reduced wages.

I can guarantee this will not work.

1.Bridge loan proposals: Bridge to what; most bridge loans end up being bridges to nowhere and having extensive, banking, loan and debt restructuring, even if you do not want to accept that premise, a 5 year bridge loan borders on the absurd. Bridge loans suppose to be temporary and taken out by some subsequent debt or equity raise. Where is that to come from for small biz? Answer, it not and that small biz. unable to repay means gov. writes it or small biz. at some point closes its doors and loan becomes a write off for the lender
2. Any contemplated loans should be done thru banks; they have the experience, monitoring capability, etc. and not directly from the Fed or other gov agency. Lenders can set up a " bad Bank" vehicle to separate its good biz,( if any!), the old biz. from new activities that are now being backstopped by the gov.
3. SBA loans have been and will continue to be an administrative problem, and have been loans banks do not really like.
4. Ex macro economic effects, and to think all will return to normal, is not probabilistic a happening event.
5.Talk in past of so called "new normal"; well, this is the new normal, a massive increase in gov debt
There will no decision, or steps taken that will please most; action taking in a crisis requires learning as the process unfolds, and taking appropriate steps to pivot as one gets more comfortable with dealing with the unfolding event based on data that presents itself during the process.
I say all this from vast experience as lender, workout banker, and restructuring advisor to borrowers and lenders across many industries and capital markets.
We are in an unprecedented situation and action needed that more than likely will be seen to have some drawbacks and adjustments need to be made.
Unfortunately, Trump is not a war time Don and lacks a wartime consigliere; Mnuchin is a light weight.

Here's my plan:

CorLoanas for American Business are modeled after the mechanism initially used for home improvement loans in FHA Title I of the 1934 National Housing Act. Cover each lending institution's losses up to 20% of their entire portfolio of CorLoanas. They know their local market and can find a suitable mix risks. The federal government covers the risk up to a point. Don't gum up the program with requirements to keep jobs or show lost revenue.

Italian doctors saying:
To have any hope of avoiding that disaster in the U.S., the health care system needs to decentralize and make the community a focus of interventions on a par with patients, said Cereda, a graduate of the medical school at the University of Milan who has been in touch with colleagues in Italy. The coronavirus has now killed more people there (the toll passed 4,000 this week) than in China (3,255).

One such step reflects the finding that hospitals might be “the main” source of Covid-19 transmission, the Bergamo doctors warned. The related coronavirus illness MERS also has high transmission rates within hospitals, as did SARS during its 2003 epidemic.


Great advice, unfortunately we are told to go to the emergency room, it is built into the methods of Obamacare. How many people has Obamacare sent to spend six hours in the emergency room? Most of the medicaid patients. We lost the ability of home triage and it is killing us.

No, my understanding is that we're being told to call or use telemedicine if we think that we have COVID-19 symptoms unless the symptoms are life-threatening (difficulty breathing).

I do fear that we'll make some of the mistakes as Italy, like infecting ambulances, healthcare workers, and other patients in hospitals, but at least that screening step is correct.

On a cheerier note, my wife’s bank has spent the last week restructuring small business loans to allow for either no payments or interest only payments for the next 60 days. Almost their entire client base is small businesses.

When Americans need healthcare, about half the time they’ll head to the emergency room.

That’s the finding of a new study by researchers at the University of Maryland School of Medicine.

The researchers examined data from several national healthcare databases covering all 50 states and the District of Columbia between 1996 and 2010.

In 2010, they found there were almost 130 million emergency department visits in the United States.

Over the 14-year period examined in the study, emergency room visits increased by 44 percent


Emergency room visits. Poor people use it, pack it and they are all getting the virus from it. The packing of emergency rooms got worse with Obamacare, this study doe not go that far.

This is like building a Ford class carrier, spending a trillion in expenses, and have it fail.

#2 If recovery goes a pessimist route creative destruction would still hold. For example, companies that specialize in virtual work and meetings will go up while in person orientated companies will falter. A hotel will go out of business even with the bridge loan but others will shift.

2.1 Our economy is shifting because people are radically downshifting their consumption. This also downshifts the production the economy needs to do. We are starting to see some of the old problems with GDP as a measure of output. GDP only counts production as a good. Install a security system because crime is high, that's good for GDP. If you don't install a system because crime is low, that's bad for GDP even though the second is a better economy to live in.

3. Bank solvency - the Fed is pumping a lot to keep the banks solvent. Also mass bridge loans would mean people, for now, would pay their mortgages, rent, loans, etc. Wouldn't that help bank solvency?

4. I would think the bridge loan would be applicable to having a business before this crises. Ohhh yea I was going to start an electric car company to compete with Tesla, put me down for a $5B bridge loan please! No.

"But on what legal basis would those other “likely to fail start-ups” be excluded from the bridge loans?" You had a payroll that you made for at least two cycles before the crises? A signed lease. On the other hand if you have a checking account with $10M because you just got your financing the day before the crises why would you need a bridge loan?

5. "No, I don’t favor governmental bridge loans for non-profits. De facto, that this means this is a huge relative shift of resources away from non-profits and toward businesses. YMMV." That's easy, just change your position. We are talking 90 days here emergency measure.

6. "I have received numerous reader emails telling me how bad, slow, and cumbersome is the Small Business Administration process for getting loans. Will this new regime do better?" Most likely. This will be funded and there will be huge presure to get the job done. Also unlike the SBA there will be no fretting by the banks that it would compete with their main business.

7. "8. It is the same government that could not organize testing and mask production that we are expecting to run what might amount to a $1 trillion plus bridge loans program." Shall we ask the virus very nicely to give us a time out until we can elect a better government?

Experience says banks make loans to people who don't need them.

No one is stating what will likely happen if this country is not reopened by May 1. Where will the 1,000,000 college grads be getting jobs at? Once you keep people locked up in there homes, it’s just a matter of time before rage explodes. What about those who lost their jobs and they can’t apply got any jobs as everything is closed down. No one talks about hot crime in the form of looting will likely take place. I will say it hear and now that it’s not at all worth destroying the economy and out way of life to prevent 20,000 coronavirus deaths. May 1 is D-Day.

This website is very helpful. I have many know to this website. Sometimes i am talking to my mind the head secretary of the Central Committee.

This website is very helpful. I have many know to this website. Sometimes i am talking to my mind the head secretary of the Central Committee. Would you mind updating your blog with some more additional information?

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