Giant Money Gun

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S1: This ad free podcast is part of your slate plus membership.

S2: Hell, no. Welcome to the giant money gun edition of Money, your guide to the Business and Finance News of yes, another crazy week.

S1: I’m Felix Salmon of axios. I’m here with Anna SHYMANSKY of Breakingviews. Hello. I’m here with Emily Peck of HuffPost. Hello. And we have a great show this week. We’re going to talk about stimulus payments. We’re gonna talk about peopIe payments. We’re going to talk about Amazon and how evil it is. We’re going to talk about dividends. We’re going to talk in Slate plus about the IMF and the World Bank and what they are or are not doing to help the poorest countries in the world. It’s a jam packed show and it’s all coming up on Slate Money. OK. So I’m going to start with a weird kind of guessing game numbers round. And Emily, what proportion of Slate Money’s listeners do you think received a stimulus payment in their bank accounts this week?

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S3: Well, that’s such a good question. I think it’s a very small percentage. I would reckon of 10 percent.

S1: I think the one that I think would be more than I mean, I’m going to go on the assumption that probably 80 percent of our listeners in the US and the overwhelming majority of them are taxpayers and probably they’re banked. You know, they have bank accounts, so they just tell the IRS what their bank account number is. So it’s not like they’re going to have to wait for a physical check. So at that point, the only reason why you shouldn’t get a check is basically if you’re if you earned too much money in 2018 or if you’re somewhere they feel like married to an undocumented alien or a few other things like that, which is probably like edge cases. So I’m going to say it’s 40, 50 percent. Yeah, but I would guess a little over half, I would think.

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S3: But tell us right on and tell us, please. Yeah.

S1: Let us know if you scientific poll. Very, very unscientific poll. But just send us a quick email. Slate money and slate dot com with. Yes. I got my money or no I didn’t. I’m also kind of interested whether it’s mostly binary that most people just get twelve hundred dollars or nothing. Or did a bunch of people fall into that kind of liminal zone where they’d get somewhere in between because they were earning. Enough that the payment started going down, but not so much, they got zero. Well, and also some people should be getting more because of kids. If you if you have a kid, you get five hundred dollars anyway or is that like means tested as well?

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S4: You have five hundred per kid. If you get the stimulus check in the first place and I think it is also means tested. If it goes down, if you make over the seventy five a year for a single or one fifty for married, it’s complicated to be.

S1: Basically the upshot is that it’s complicated and some unknown percentage of Americans wound up getting their stimulus checks this week. At the same time, as some unknown percentage of small business owners wound up getting their BPP checks this week paycheck protection plan. Not all of them have gone out yet, but I’m assuming that within a week nearly all of that initial tranche of three hundred and forty nine billion will go out to small business owners. It is clearly not enough. And while the people who didn’t get stimulus checks aren’t mostly super annoyed about that, I’ve seen some people saying, look, I got some weird windfall income in 2018 and that means I’m not eligible, but I should be eligible because I don’t need any money. There are definitely people who should be getting stimulus checks. And on the real anger I’m seeing is from small business owners who just didn’t have the right banking relationships and didn’t manage to get their PPO applications in. And they are just furious that that money has run out and they are worried they’re going to end up with nothing.

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S3: Fun fact is that thirteen point seven percent of the peopIe loans went to the construction industry versus 9.1 percent of the people in loans, which one small business owner told my colleague stands for. Whoop, whoop, whoop. Went to the restaurant industry. Now, the construction industry so far in March lost twenty nine thousand jobs, jobs and the restaurant industry in March lost four hundred and seventeen thousand jobs.

S5: Yet the construction industry was the top industry beneficiary, beneficiary of the PBB loans, which kind of I think is a very telling way of talking about how the program was poorly structured and like Felix was saying, benefited those who had the good relationships with their banks over those who probably needed the money even more. But just, you know, don’t have that kind of relationship, aren’t as savvy about applying for the money like.

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S3: There are some water rooms that were out there, like drumming up interest and getting these loans.

S5: And like franchise restaurants like Ruth, Chris Steakhouse got 20 million dollars in PPV loans.

S1: Also, it’s just I think it was apparently there was there was definitely this weird carve out. So to be eligible for the PPV loan, you need to be a small business with fewer than five hundred employees. Asterisk. And then there’s this asterisk. Or you can be a restaurant with any number of employees. So Rescore Steakhouse has five thousand employees and they managed to rustle up two different subsidiaries, which they decided were eligible for PPV loans. So they got twice the maximum. And people are looking at them going. Look, you’re a publicly traded company. This money was not designed for you. And that 20 million dollars could have gone to a genuine small business which really needed the cash right now.

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S6: But I think that there’s a little bit of a false scarcity issue here. It’s not real scarcity. No, it’s a real scarcity that’s been created, but doesn’t need to be. I mean, I don’t think the issue here is companies getting too much money. I think the issue here is that it was too small to begin with. It shouldn’t have been designed in such a way to go through the banking system. It should have. I think a lot of it should have just been very similar to how we did the personal payments. You know, I realize it’s going to be harder if it was simply done from like the IRS sending out based on like corporate taxes. But at the end of the day, we need firms to get money. We can allocate so much more money to this than we already are. So I think arguing between firms is less the issue. The issue is that we just need more money to go out. Right.

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S1: And I think that if they hadn’t capped it at three hundred and forty nine billion, a lot of the anger and Agata would not be there like they’re talking about another 250, which I suspect also won’t be enough. But I also suspect that if they add another 350 or so, then it probably will be enough. So I don’t understand why they’re trying to sort of minimize the amount of money that they’re spending on this when it’s obvious that it’s the outcome right now is deeply unfair. And you need to allow the small businesses who didn’t have the right kind of banking relationships to be able to compete on an equal playing field with the ones who did. And so why are they eking out these tranches? Why they think, well, we’ll give you 350 and then if that. Turns out to be not enough, we’ll give you another 250, and if that turns out to be not enough, maybe we’ll give you a little bit more. Just. Allocate like a trillion dollars or something and then any money left over, you can claw back and use for something else.

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S3: I mean, it seems like there’s a real prejudice against it. There’s no other way to look at it and say, oh, the federal government sees small businesses completely differently than the large businesses that are able to tap into this all this this river of bad money and be OK. And then making these small businesses kind of like go begging for money.

S6: Well, the difference there isn’t.

S1: And it allows, Emily, which is that the big river of fed money for big businesses, which is a big river of money and is actually working pretty well, is loans and all of it needs to be paid back every penny. The small businesses are not loans that basically grants dressed up as loans. And for that reason, you need to you need to raise the money from Congress. You can’t just magic the money out of thin air from the Fed. And so Congress is going to be sitting there going, who keep sucking that he is going, oh, this is, you know, fiscal blah, blah, blah. And so it becomes harder. One of the things I wrote about in my news out of this week was the way that the Federal Reserve and. The Treasury have been working together to really maximize the amount of money that is going into the economy. But the peopIe program is somewhere that really the Federal Reserve can’t help much. They they have said they’re going to stop buying up these BPP loans for banks like Wells Fargo who really need to get them off their balance sheets. But that super marginal really you need Congress to allocate this capital and Congress is about as functional as you’d expect it to be right now.

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S3: So now we’re we’re what’s emerging is really this like a two tier response to this crisis where small businesses and individuals are kind of left twiddling their thumbs, not they are not getting the money they need right away. Small businesses are gonna go under and big businesses thanks to the Fed, even though its loans are going to probably be OK and are going to swoop in and take over there. They’re going to be the ones popping up in where the small businesses kind of failed. And at the end of the day, if we ever get out of this, we’re just going to see more inequality in the US.

S6: I mean, the one thing I will say, though, is that like this has been there is so much more aid and so much more aid more quickly this time around than we’ve ever seen before. And it is far from perfect. And I think we’re all in agreement that this should’ve been structured differently and should’ve been structured better. But like, I guess I would say that, yes, you know, it is probably likely that a lot of small businesses are going to fail. And that is horrible. And that shouldn’t be happening. And that is going to be a fault of poor response, a poor response. But like the one thing I will say is we are just really starting to see this money coming out now. So we still don’t totally know what the effect is going to be.

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S1: One thing that we like the one thing that we do know is that in I’ve been hearing from small business owners who literally said I needed that money in the first tranche if I didn’t get it in the first tranche, I have to shut down vs.. Big businesses in the S&P 500, like the biggest businesses in America, is basically what the S&P 500 is bouncing back. Thanks to all of the liquidity that the Fed is providing. I think Emily is absolutely right that it is. This is one of those periods where inequality between businesses has been massively exacerbated. In the bigger your balance sheet, the more access you have to capital markets. And generally, the larger you are, the better off you are with very few exceptions.

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S3: So, I mean, there’s no question that’s going to be bad for everyone. Right. You have more of these big businesses taking over. If it means more monopolies cornering different industries, it means lower pay for people. It means wider pay disparity means it’s really well.

S6: Although if you look at there like that, the companies that I mean, I look I don’t I don’t disagree with you in the sense that, like, I don’t think it’s a good thing of a bunch of small businesses going under. I don’t think it’s a good thing if we have like greater monopoly power. I completely agree with you on that. Although the one thing I will say is that working for a larger company, you tend to be paid better. So the idea that if you you tend to get the worse if working for smaller companies and you have enough jobs as large companies.

S1: This is one of the Long-Term Trends, which is absolutely clear, is that the total employment in the S&P 500 has been trending downwards for decades. And you have, you know, a large company. So certainly, you know, the trillion dollar companies out there like Microsoft have a lot of employees, but they don’t have nearly as many employees as like, you know, a hundred billion dollar companies did 20 years ago. And so, yeah, if you’re lucky enough to work for Microsoft, that’s great. But that’s not the source of employment. Small business is the real place where, you know. Tens of millions of Americans need to find employment. And if small business fails en masse, that’s going to just completely decimate the employment situation in America.

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S6: I mean, I I mostly agree with that. All I have is just basically trying to make the argument that having smart, having larger businesses doesn’t necessarily mean people are going to be paid worse to be unemployed. Yeah, I think it does mean that they’ll be treated worse.

S3: I think one thing this crisis has made clear is that large businesses don’t really care that much about their lowest paid employee. I guess it. I mean, yeilds foods. What it’s like to work for a big business.

S6: Yeah. And I will agree with you that I think it varies by business, although right now if you happen to be lucky enough to work for a large business, you are far more protected than if you’re working. Right. And we’ve all like yeah we we all do. Yeah, that’s one thing that I do. But I don’t disagree that moving forward it. Yes, like small businesses, it’s like 50 percent of employment. Like we definitely need to protect small businesses. I’m just saying that, A, we’re just seeing the money come out now, which it should have been done before. So we still don’t quite know what the impact is going to be. I don’t necessarily think we’re going to completely wipe out small businesses. I think that that’s unlikely. I think that virtually I think we are going to see stimulus after stimulus after stimulus for probably multiple years. So I guess I would just say that I agree with your sentiment. I just don’t know if I think the outcome is going to be what you said.

S1: Yeah, I just I worry. I really do worry that it’s big business, which is well-placed to benefit from multiple rounds of stimulus, much more than small businesses, because the small businesses fail first and fail fastest. And once they’ve failed, they don’t benefit anymore. They’ve gone.

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S6: Right. But I guess what would be the alternative? I mean, you’re right in the sense that it’s always better to be a big business that has more cushion, obviously, just like it’s better to be rich. You have more cushion, of course. But I guess I’m not sure what the alternative would be. I mean, we could’ve gone back in time a few months ago and improved all of this, but we can’t. So I guess what is then the alternative moving forward? Just take a giant money ban, shoot it, everybody, until we’re all in. That’s where I actually would agree with you. The U.S. is in a very, very special position. We, you know, like as long as we’re the reserve currency and foreign countries need to hold our dollars and the worse the economy gets, the more dollars they need to hold. We can basically print as much money as we want. So I think there is a false sense of, you know, I mean, this is the you.

S1: I mean, I this is live from the point at which and this romance he goes for the MMT.

S6: We are not going for it. We will go to another episode.

S1: I can explain why I disagree with many tenets of MNC, but I love this business video and read it like Jay Powell coming in and saving the planet to the tune of late. All we need is a hero. And then there’s this bit in the video where he cures the Corona virus by injecting five trillion dollars directly into the veins of everyone who has it, which I. Yeah, that’s the way to do it. So let’s talk about one of the biggest businesses of all. Which is Amazon, which bless them. Their stock just hit a brand new all time high. Aren’t you happy for the Amazon shareholders? Jeff Bezos is doing well. Good for him. So Amazon as a company seems to be doing great. And yet the headlines don’t seem to be that good for Amazon in the well, a couple which bring to mind. One is that they seem to have run into a huge amount of problems in France, which basically shut them down. And another is that the affiliate fees they pay for sending people to Amazon to buy things. They’ve just slashed those by like 50 to 70 percent, which kind of makes you think that they are in trouble. Like, why would you do that right now when all of these small media companies will ever really need that cash flow? Why would you turn off that spigot? So what’s going on with Amazon?

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S5: Amazon is even though its stock is up a lot. And it’s seeing demand like it’s like beyond Christmas shopping levels of demand. It can’t meet the demand. As soon as this started happening, employees did start calling in sick. At the same time, it saw this huge increase in demand. And right now, the Amazon algorithms are trying to actively tamp down demand, which is kind of crazy to think about and prioritize essential goods. But they’re so kind of cagey about their algorithm and stuff. It’s not even clear what they’re considering to be essential goods at the time. There’s a good story right now about one game in particular called exploding kittens that is sold out on Amazon because everyone’s trying to everyone wants to buy games right now. And Puzzle’s and Amazon isn’t filling orders of exploding kittens quickly. And if you actually go to your app, Amazon app on your phone. But top page just gives you like options of things to download, not even to buy, because they like don’t want you buying stuff anymore. Which is super weird to think about because Amazon’s whole jam is like we get you the stuff super fast. Like we have everything you need and more and we’ll get it to you before you even blink your eyes. But now that’s not happening. And then at the same time, it’s having all these labor issues. And and in France, you really saw this come to fruition in a way you would never see in the United States, where a French court was like Amazon, you’re not doing enough to keep your workers safe. So you can’t really do much business right now until you fix that. And Amazon is just like, you know, we’re not going to do that. We’re just going to shut down operations and brand.

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S6: Well, to be fair, though, I mean, like Amazon couldn’t possibly continue operations with the law with a ruling that they had, because the idea of like you can only deliver these essential goods, an idea of what is an essential good is so hard to determine that there’s no way I’m not look, I’m not defending Amazon and other things, but I understand why they wouldn’t shut down in France then, because what can you explain that they they. Yeah. Like, why can’t you go? Only of only delivering essential goods. Because what is an essential good. Well that is of the French government wasn’t a central good it seems to find it. No they didn’t they did not define it well at all. Like the ability to be abargil suppliers. What is that what is what is this that are in medical supply? What? That’s no problem, right?

S1: I mean, any French company, if they were told by the French government to say you can only deliver essential goods, would just be like, OK. And they started only delivering essential goods. And then if the French government starts like having quibbles with what’s considered essential, they work that out. And they stopped delivering the things to onto central and continued delivering the things that are. I feel like Amazon is like this reminds me a little bit of how they behaved with New York City over HQ to thing that they. It’s like we are going to do it our way. And if you aren’t happy with the way that we do it our way, we’re just not going to do it.

S6: I mean, I get that. I just feel like this particular look, I think there are very, very, very real, genuine concerns about Amazon workers and Amazon workers being protected in the US and in many places. I think that that like one hundred percent, we are all in agreement on that. The issue in France, I think if you actually read the story, it wasn’t that amped like Amazon fulfilled the requirements of what the French health inspectors wanted. They just didn’t then meet with like union representatives. And so that was what. So I guess I’m kind of like, look, we’re in a situation right now where workers are putting their lives on the line. I’m not saying they shouldn’t be doing everything. I just will say French labor laws are very, very complicated.

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S1: And if you operate in France, then you deal with French labor laws like this. This is this is the attitude which you have an issue within within Amazon is that very kind of Silicon Valley like we see we saw this with Uber, a law which was basically we are going to operate according to the laws that we think makes sense. And. Maybe they’re even late. The way that they think they should operate is the way that it is the most sensible way to operate. And then if you government people come in and say, no, do it some other way, then either we are going to break the law or we are just going to shut down, but we’re not going to change the way we operate in order to comply with your laws. And especially now in a situation where we are facing a public health crisis and the first job of every corporate and individual citizen is to just do whatever they’re being asked to do by the government, whether it makes sense or not, because that’s the only way that you can get through a public health crisis. I think that kind of attitude is, you know, let’s just say regrettable.

S6: I mean, like, I don’t entirely disagree with you. I just I would say that the position of U.S. companies in France is not the same as for the position of French companies in France. The legal liability is a lot higher for U.S. companies. We have seen that frequently in the last number of years. I’m not saying that I think Amazon is right. All I’m saying is that when I read that story, I was like, I don’t know. I just feel like it’s not as cut and dried. Perhaps it is as it is being portrayed.

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S1: I’m looking at Amazon. I’m looking at it. You know, obviously having a bunch of difficulty delivering because it is facing unprecedented demand, not only from Amazon dot com, but also from Whole Foods. You know, they built their entire business on delivering directly to people’s doors. And now people really want stuff delivered to their doors and they like we just cannot cope with this kind of demand. And so you can see how there are issues here. But faced with those kind of issues, I look at like what I said, what they did with affiliate fees and I’m like, that doesn’t help anyone or anything. If you’re in France and you just shut down every everything you do that doesn’t help anyone or anything, that you are not being constructive, you are not being a good corporate citizen. You are not trying to do your best to help the societies in which you operate. Get through this crisis, you are really looking internally at your own bottom line and saying like what’s best for us? And that leaves a taste in my mouth. That isn’t great given how big and powerful and rich they are. It’s like now is that the opportunity for them to really step up and say, like in the time of crisis, we are going to do what’s best for everyone rather than just what’s best for us?

S3: And when you say what’s best for us, it’s not even clear to me who us is. Because if you just look at the way Amazon has been treating its warehouse workers over the past month, it’s just really abysmal. I mean, they they’ve given them a little bit extra per hour to come in. At the same time, they’re time them. They’re free to stay home if they feel sick. But they don’t get paid. So it’s like they’ve incentivized people to come in and then when they come in, a lot of these places, a lot of the workers I’m speaking to, they’re not doing social distancing.

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S7: There isn’t enough PPE. They don’t have masks.

S3: They’re getting sick. They’ve fired at least three workers who have spoken up and protested. I mean, that I think it was Byas who had the leaks, meeting notes from one meeting where business was, where they were saying like one protester in particular, you know, Doug, they’re gonna go after him because he is not articulate and other kind of coded language. I just feel like they’ve coming out of this was looking like gross.

S6: And I don’t I don’t disagree with you on that at all. Like I and I think that, you know, the labor issues, especially United States. I completely agree with you on all of these things. I was just saying in that specific instance in France, you read the story. It just feels like it’s not perhaps being reported appropriately the way it is depicted. That’s all I’m saying.

S3: But in the Times, Anna, there was a quote from Amazon that was like, we can’t possibly agree to just ship essential supplies because would have accidentally something nonessential goes out. It was like, are you kidding? No, no.

S6: Incidentally, I mean, accidentally things stupid. But it. It’s one thing if Amazon is going to say, I’m going to take my ball and go home and we’re just done with France. OK. In a in a crisis, I would say, yeah, that’s not me you should be doing. However, if what they’re saying is, well, while we we can’t possibly operate with this particular ruling in place, so we’re going to try to figure something out and then restart and then restart operations, which it kind of sounded to me as like what they’re doing. I just think that that’s a different thing. I am just saying that I think there is a tad bit more nuance in this story than, oh, everything evil. They’re all evil. Some of the things they’ve done are horrible evil. I agree with you. I just think there’s there’s more nuance. Yeah, they’re like nine and your anger emails to anti-hate everybody.

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S1: So, so, so, so so Emily reckons that 90 percent evil. I might even go lower than that. I’ll say like 85 percent. Where where would you say?

S6: I don’t know right now. Maybe I’ll say like 60 percent. They deliver everything to me. Well, except grocers. I know I can’t get groceries, but it comes in for everything. I feel like I’m a total hypocrite if I say, oh, this company is so evil, yet I will use them for everything.

S5: I am a total hypocrite. I will cop to that completely because I have a paper. Subscription is from Amazon. As I’ve mentioned previously and paper towels as well. But I haven’t ordered exploding kittens yet.

S1: OK, so this is the weirdness that I have noted again in my newsletter, which I’m going to plug for the second time this week, edge to Access Dotcom is the in this time of every single business wanting to maximize the amount of cash that it has, drawing down their credit lines as much as they can, going into the capital markets and issuing bonds as much as they can, you know, applying for P.P. loans as much as they can, anything any way that you can get cash, they are getting cash that people companies are laying off, people following people pay cuts. That’s all to save and raise cash. And then there’s one thing that they aren’t doing. Which is suspending dividends. Like, why is it so hard to suspend dividends if the 500 companies in the S&P five hundred, only twenty one of them are reducing their dividends at all. Some of them are increasing that demand. Dividends, only 10 of them, which made most of the airlines suspending their dividends. All of this cash is going out the door in the form of dividend payments in the middle of a global pandemic. And I do not understand why. Why are these companies borrowing money with one hand and sending out the door with the other? Why not just do neither and wind up in the same cash position?

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S6: I think it depends on which company you’re talking about. I would definitely agree that a lot of companies, especially the companies that are going to be getting loans. The companies that are laying off for furloughing workers, paying out dividends. Now I will completely birth you. I think that that doesn’t make any sense. I would actually also tell you that, like you talk with a lot of different shareholder groups, they will say the same thing, that the reaction to two cutting dividends now is not the same as it normally. So I think a.

S1: I don’t think the shareholders are really driving this. This is the weird thing. Retained earnings are just as valuable to me as a dividend right now. If I’m a shareholder, I don’t understand, if not more valuable, because it makes the company more robust. I don’t see as a shareholder like why I want that company to give me the cash when the company could actually use that cash as an important buffer, right?

S6: I would say in normal times there’s a reason why as they get older, you’d rather have them give it out. But this is not normal. These are not normal times. So I don’t disagree with you. And that’s why I’m saying that’s why. Also, a lot of shareholders say we want to make sure companies are in a good position. I think a lot of this honestly has to do with this fairly irrational way that a lot of companies view dividends, which is this idea that if you cut dividends, it is sending a very negative signal about your company. Now, I think we can probably all agree that at this particular moment, like if a company is cutting their dividend, that doesn’t necessarily mean that everybody thinks like this company is so much worse than every other company, especially if you have a number of companies that are cutting dividends. Now, I do think it matters which companies are talking about, which firms you’re talking about, like we’re talking about U.S. banks. I think it actually is a little bit more questionable than if you’re talking about like marryat. So, yes, so $y banks in particular.

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S1: Right. Face it. Have these massive balance sheets which constitute mostly loans to companies and individuals. We have absolutely no idea what the default rate is going to end up being, how long this pandemic is going to last. What the future holds, like while banks normally have some vague idea of where the economy is going and how their borrowers are going to behave, like right now, they have no idea at all. There is a just a huge big question mark. Even in this quarter, let alone like next year. And so basic prudence demands like, well, let’s see how this thing plays out before we start dividend ing profits back to shareholders because we might need those profits in a few. What?

S6: We have no idea when you’re talking about U.S. banks. This is not the same with European banks, but with U.S. banks. Most of the money that’s returned to shareholders, the vast majority is through buybacks. So the fact that they suspended buybacks is a much bigger deal than regardless of whatever they do with dividends. That’s number one. Number two, the way the dividends worked for U.S. banks is they actually have to be approved previously by the Fed. They have to be pre-funded. On top of that, you also have U.S. because you own a lot of us. Banks have been reporting this past week. Banks are provisioning a lot of money, like a lot of money for bad loans. So I can understand why. And also, banks have a lot of internal modeling that is a lot stricter than even the internal market or even the modelling that you would get from the regulators. So right now, I can understand why banks would say, well, why would we not pay their dividends? It doesn’t make any sense. I guess.

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S1: OK. Can you just because like you can understand it. But I can’t so explain it to me on the same basis that we’re talking about all other companies, like there’s a dividend payment which will go out to shareholders at some point. Let’s say that, you know, I’m paying them ten cents a share for this quarter and 10 cents for next quarter and 10 cents a share for the following quarter. What is the harm in just saying, like, listen, I’m going to pay you 40 cents a share in a year? Once it becomes clear that I don’t need that money, I still intend to pay you this dividend. Let me just push it back just on the off chance that I need it, because we are in a period of incredible uncertainty right now. Why not do that rather than what you’re doing, which is saying like, oh, well, we have models and our models are very reliable. So we can trust our models that we don’t need this money because like we learned in the financial crisis, that no models can cope with this kind of a shock.

S6: I mean, like I so this world, like, I’m kind of of two minds of it because I don’t disagree that I think in this particular moment, if you had essentially all of the US bank say we are all just going to be suspending our dividend. I don’t think that there would be a massive negative hit on their share price. I don’t think there’d be much damage. I actually think it might. You know, it really wouldn’t do much harm for them to not pay out their dividend. So I don’t entirely disagree with you. But what I would say is I understand also from the bank side where they’re saying, look, you know, with some of the most negative, even factoring in incredibly negative projections for what we might be seeing for the next few years, we can easily pay our dividend. So why wouldn’t we pay a dividend like again? I don’t think what you’re saying is wrong. But I also just don’t think that’s quite how the banks would see it. And which side you fall on probably just depends on if you work at the bank.

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S5: I think it’s hard not to look at this through like an ethical or moral lens and especially to take into consideration that that business roundtable thingy from a while ago where they claimed that shareholders weren’t their only priority and doing business anymore. They were going to take into account all the stakeholders. The fact that a company like Marea. Mean the banks are paying out dividends in a time of so much uncertainty, at a time when they’re laying off workers, furloughing workers, doing pay cuts. Kind of speaks to the bottom line hypocrisy of that statement. So I feel like even if you if you’re paying the dividends, it and it’s not maybe going to like ruin you or anything like that, the message it sends is so unmistakably down to the word growth that you probably should just cut it out.

S6: I mean, I don’t entirely disagree with that. And I think, number one, I do think if you’re talking about a company like Mary out, that I think you’re 100 percent right. I think the idea that they’re going to be firing all these people and then paying out dividends. I agree with you. I’m like, that’s horrible. And I also don’t entirely disagree with you that if the banks probably it probably would be a nice sentiment to say, like, look, you know, like we’re all we’re all taking our part. I don’t I don’t disagree. I’m just saying from the thinking of how I would imagine banks are thinking, it’s it’s that, well, there’s no reason for us to cut it. So why would we cut it?

S1: I think I think there’s a deeper reason. I think this is just an atavistic. I think that many, many years ago, back, you know, in the 30s, 40s, 50s, and even into the 60s when stocks were held individually by individuals, that the vast majority of shares in the company were not held by mutual funds and insurance companies and hedge funds. But they were just like individuals held individual shares in individual companies. There were no index funds. There were no E.T.s. A bunch of those individuals, especially retirees, especially people who sort of were working before Social Security came into existence, built up a stock portfolio as a form of retirement income. And the retirement income was the dividend payments that they would get from the stocks and. AT&T in the 1930s kept on paying its dividend, even though it laid off one hundred and eighty five thousand people because it actually had a huge number of retirees across America. The famous widows who needed that income from their dividend to live on. And that is just not how the stock market works anymore. Companies, you know, send money to shareholders via buybacks, as you say, more than dividends. If you need money from your stock portfolio, you just sell some stocks rather than waiting for those companies to pay you a dividend. Like everything is financialized in the much more sophisticated way now. And people aren’t just sitting there sort of, you know, paying their rent checks with dividend payments anymore. But there is this sort of path dependency here and people. Somewhere, corporate treasuries is the stock market somewhere still in that mindset? Even if they don’t realize it. Of people need these dividend payments to live on. And I think that is part of the problem.

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S6: I mean, I think that on the one hand, you are correct that I do think a lot of the way that companies view dividends is based on a very kind of old fashioned notion. And a lot of it also is this idea of signaling, though. I would also say that, you know, dividend income is not insignificant in overall return. Dividends are know. No, I’m not saying that for a minute. And I and I agree that those are two different things. But I would also say that, you know, as yields on fixed income have really, really declined over the past 10 years, if you’re talking about income from any type of fund, dividends are going to be more important in that sense. So while I don’t I’m not saying that that is an excuse for companies to be paying out massive dividends in the middle of a crisis. I’m just saying that dividends do still play a major role in moving forward. They will still play a major role.

S5: I’m really glad people get Social Security payments and don’t have to rely on companies to pay dividends anymore in retirement.

S1: That makes me that that’s an improvement. You see, that’s better, right? It’s better to have Social Security than your land dividends. Yes. Yes. Surely you can agree on that one. Mr. Matzke?

S6: Yes. Yes. I think Social Security is good. Good. You’re fine. I also have a retirement fund, if you can.

S1: I’m going to start off the numbers round with a related number, which is 200 billion dollars, which is the amount of money that Neel Kashkari, the president of the Minneapolis Fed, reckons that the US banks should raise to be on the safe side in this crisis. Just in case stuff winds up being much worse than their internal models predict that it will be. And. I think that is just a. Indication of how crazy it is that the banks of bank dividends like Kashkari are saying. Of course they shouldn’t pay dividends. Quite the opposite. They should be raising two hundred billion dollars. And that just gives you an idea of the potential magnitude of this crisis. No one knows how bad it’s going to be. No one knows how bad it’s going to be for the big banks. No one knows how well the Fed is going to be able to jump in and prevent a wave of major corporate defaults. But precisely because no one knows, we want the banks to be as strong as they possibly can be right now. I believe you have a number.

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S4: I. It’s it’s another number. I feel like I did today was just like say how angry I was about company. So this number is five hundred dollars. That is the amount of Smithfield’s responsibility bonus that they gave to workers at their meat processing plant. If they came in and did all their shifts. Meanwhile, Kerbin was spreading like wildfire, particularly through their North Dakota meat processing plant. I think more than 600 positive coverage cases and this one plant. And if you go put a link in the show notes. It’s just a really sad story of how this company completely dodged responsibility for keeping its workers safe with very tragic consequences. They’ve had at least one death so far. And again, one of the biggest outbreaks, if not the biggest outbreak in the country in North Dakota. They gave workers hair nets to use as masks and use these.

S7: That’s that hair.

S4: No beard nets to use as a PPE to keep them protected from coronavirus and incentivize them to come in and get the money. That is all done by their products. Thank you.

S1: Do you have a number?

S7: I do. And I will not be buying those products. Where you are. Good job, Anna. My number is three hundred and twenty million dollars. And that’s the amount of money in these pandemic bonds that were issued in 2017 with the idea. This is a great way that we’re gonna help these poor countries when there’s a pandemic. And turns out these pandemic bonds, which the other two different bonds have, coronavirus as one of the one of the diseases that are included still have not triggered, despite there being, you know, this massive pandemic because of the way that it did say. I mean, it’s I had actually looked at these like a few months ago. And this was kind of first starting at I. At the time, I was like, if you look at the prospectus, it’s like it’s nuts when you look at all the restrictions of what would actually need to happen in order for these to trigger. And that the issue is that the rate of acceleration is not high enough in developing nations. It’s a the formulas kind of kind of amazing.

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S1: Is it pretty much expected that they will trigger or one of them is maturing quite soon? Right. And might not. Both of them are mature and quite him, and so are you. In July 3rd, in this weird way, like if we don’t see a rate of acceleration before July, then they’ll never triggered it yet.

S7: If they and it has to be in nations that are receiving World Bank funding, that rate of acceleration beyond a certain level in those countries, then they would trigger. I think it is unlikely that they will trigger. And so then we’ll all have ended up happening is you’ll just have been paying very high coupons for no money going to help anyone in a pandemic. I think these were a very poor example of trying to use finance to solve everything. And while I am fan of spy hats just off many things, this one is not one of them.

S4: This isn’t a crisis.

S7: Finance can solve it unless the Fed apparently has their their money gone, whether injecting.

S1: The Fed should just parachute into West Africa with the money and inject every 5 trillion dollars and that will solve the problem. I think about the rest this week. If Jay Powell can save America, he can save Africa as well. Right. Why not? Thank you for listening to sleep money. Thank you. To just mean Molly for producing. Thank you for all of your emails. Sleep money, sleep dotcom. We’ve got a big one next week with Richard, Florida. Thank you.

S2: Honestly, to everyone who’s been writing in with comments about density and the relationship between covered and density. And we are going to go into a lot of detail about that with Richard Florida, whose urbanist at the University of Toronto. So look forward to that one. And we will talk to you then on sleep money.

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S1: For Slate plus, let’s talk a little bit more about these pandemic bonds, or rather not so much the pandemic bonds, but the way that the IMF and the World Bank have approached this crisis, because we had the IMF spring meetings and we had the G20 finance ministers meet and. What they’ve done in the first instance seems kind of weak and pathetic. They’ve basically said, well, your next six months of coupon payments on your sovereign bonds, we’re going to give that to you so that you can give it back to us in coupon payments and then you can free up the money that you would have used to make those coupon payments to maybe try and help beef up your health system. And everyone seems to be in agreement that this isn’t remotely enough. The total lending capacity of the IMF has not been increased by its shareholders. The appetite for global coordination to really make sure this pandemic doesn’t sweep across the developing world just doesn’t seem to be there. Is this a major failure of global coordination when it’s needed most?

S7: Yes, I completely agree with you. I think that the way I mean, look, is it better than maybe previous crises? In some sense, I guess. But this is such an unprecedented crisis. And the level of damage that could be done in a lot of these developing nations is just unimaginable. And so I think that the IMF and the World Bank could be doing a lot more. Is it good that the G20 came out and said that through the rest of the year they’re going to suspend all principal and interest payments for certain countries? Yes, that’s good, but that’s not enough. And also, the while they cannot force private creditors to also suspend payments, they can do a lot to incentivize them. And they’re not doing that. All they’re literally saying is we want voluntarily for these companies to take part. And it’s like, no, you need to do more than that because like this is I mean, the amount of people who can die is just unimaginable. And you already have these countries that came into this crisis with so much debt. So these countries like so you don’t want there to be like, oh, we’ll give more loans or something like, no, that is not what’s needed right now. Like right now, what is simply needed is for these payments to be suspended.

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S6: And then and not an inch in, you can just kick the maturity out. But more needs to be done.

S4: So all they’ve done so far is say like we’ll give you a break for a while, kind of like how in the US they’re like, you don’t have to pay your mortgage. Now, you can worry about that in a little bit.

S1: They’re pushing it back. The but they’re not they’re not actually forgiving any debt at all. They’re just saying instead of paying it now, you have to pay them for years with interest and then they’re not getting any other help.

S7: You know, they aren’t giving anything. I mean, to be fair, to be fair like that, there is other aid that is going to a number of different countries and also some debt of certain African countries, I believe actually has been there has been some debt forgiveness. You know, which countries should and should not have debt forgiveness is debt is it is a more complicated question moving forward. But in terms of what is happening right now, like I just feel like it. A. There needs to be can’t just be till the end of the year. I mean, I think that there needs to be a clear sense that you’re not going to have to be making debt payments while this crisis is going on. And I know that they have to put time limits on it, but we all know it’s going to be on more than a year. And I think to me, the key is they need to figure out a way to get private creditors more onboard because they also have to figure out a way to give the multiple at this stage. The multilaterals haven’t even a technically fully agreed to it, which is insane. Like in terms of, of course, the multilaterals also need to forgive, like the World Bank, like they need to not be asking for debt payments back. So a lot more needs to be done, you know. I mean, I do want to give them credit for doing something because they have. And it’s frankly more than, if you would asked people six months ago. It’s far more than anyone would have expected, probably. But this is such a serious crisis. And and as I know, he’s had multiple times when talking about different emerging economies like they do. These countries do not have the capacity. They don’t have the health capacity. They do not have. You know, they don’t they can’t they don’t just have magic money, guns the way that we might in the United States. So it is really the responsibility of nations like the United States, you know, to deal with this problem.