Jerome Powell, chair of the U.S. Federal Reserve System, has more than $11 million of his personal funds invested with BlackRock, a private investment management firm the Fed has chosen to run its $750-billion corporate bond-buying program, as reported in Wall Street on Parade.
According to government-mandated financial disclosure forms, Powell has as much as $11.6 million of his personal wealth invested with BlackRock, Inc., the largest private equity firm in the U.S.
Powell made his fortune first as a lawyer with the blue-chip firm Davis Polk, then as an investment banker with Dillon Read and the Carlyle Group, known for its financial success with leveraged buyouts.
Now the Fed has named BlackRock to manage its program of buying up to $750 billion of bonds, including junk bonds, to bail out large corporations from damage inflicted by the economic shutdown.
Under the program’s terms, BlackRock would be able to use taxpayers’ money through the Fed to buy and shore up its own junk-bond exchange-traded funds.
Before becoming Fed chair, Powell also was a strong advocate of softening bank regulations enacted after the Great Recession.
Another champion of bank deregulation is Randall Quarles, named by Powell as the Fed’s Vice Chair for Supervision and who was a Powell crony at Davis Polk and the Carlyle Group.
TRENDPOST: Powell’s personal relationship with BlackRock creates a conflict of interest that calls on Powell either to resign as Fed chair or to close his personal accounts at the investment firm.
Powell’s and Quarles’ long-standing advocacy of weaker oversight on banking practices also calls into question the soundness of their supervision of BlackRock’s practices in handling taxpayer-funded corporate bailouts.
Moreover, the Fed’s unprecedented massive corporate bond buying scheme and teaming up with mega investment firms to purchase commercial paper and give loans to whomever they deem worthy is anathema to capitalism.
In four words: The Game is Rigged.
Or, as the late, great comedian George Carlin frequently said, “It’s a Big Club and You Ain’t in It.”
Fed’s Bailout Puts Small Businesses in a Bind
The federal Paycheck Protection Program, or PPP, loans money to small businesses that promise to use at least 75 percent of the funds to keep workers on their payrolls. If businesses meet that criterion, much of the loan need not be repaid.
But many companies report that the program still leaves them unable to afford their rent or mortgage payments, especially in high-cost urban centers or upscale suburban locales.
For businesses with small staffs but high space costs, such as businesses with offices in swanky locales or shops and restaurants in pricey downtown shopping districts, that stricture makes the program inaccessible.
In contrast, businesses in low-rent areas found the PPP more inviting.
About 44 percent of businesses in North Dakota, where rent is cheap, were approved for PPP loans by 15 April, compared to 14 percent in New York, where rents are among the nation’s most expensive, according to a study by the University of Chicago and the Massachusetts Institute of Technology.
The 25-percent cap on non-payroll expenses was not part of the law creating the PPP. Instead, it was imposed by the treasury department and Small Business Administration as they drafted regulations to implement the program.
Small-business advocates are lobbying the agencies to abolish the cap and allow businesses to adjust the proportion of the loans they allocate between payroll and other expenses.
“Employees need to have a business to return to if they want to collect a paycheck,” said Karen Kerrigan, president of the Small Business & Entrepreneurship Council. “There needs to be more flexibility in the rules.”
Treasury secretary Steven Mnuchin has not budged. “For every dollar to you spend to hire someone, we save costs related to unemployment insurance,” he noted. “The intent was not for us to give you a grant to pay all of your overhead, you don’t hire anybody back, and [the loan] is forgiven.”
Millions of small-business owners are likely to find the rule impractical, according to Michael Strain and Glen Hubbard, former dean of Columbia University’s business school. The two helped Congress and the Trump administration structure the original PPP legislation.
A program that would adequately support small businesses’ payroll and other essential expenses would total between $1.2 and $1.5 trillion, according to Strain at the American Enterprise Institute, at least twice what the current PPP is funded for.
TREND FORECAST: As we have noted, and Trends Journal contributor Gregory Mannarino has written about previously and in his new article, “THE FED IS HYPERINFLATING,” as a result of government and central bank actions, the small business sector will decline, and the multi-nationals will grow.
As the Bigs get Bigger and consolidation increases, cost-cutting measures will dramatically reduce employment, thus increasing poverty, crime, suicide, and mental illness rates.
States Set Own Rules for Reopening Their Economies
With great disparities, at least 30 states have begun to lift economic lockdowns, as noted in our new article “OPENING UP RULES: SCIENCE FICTION, NO SCIENTIFIC FACTS,” allowing some businesses to reopen under mandates to maintain social distances and observe a variety of newly invented government protocols.
