The Finance 202: The $4 trillion federal bailout missed its mark, leaving millions struggling

Eufemia Didonato

By contrast, about a fifth, $884 billion, went to help workers and families. And even less aimed at the health crisis itself, with 16 percent of the total going toward testing and tracing, vaccine development, and helping states provide care, among other health-related needs. The division of the funds, laid […]

By contrast, about a fifth, $884 billion, went to help workers and families. And even less aimed at the health crisis itself, with 16 percent of the total going toward testing and tracing, vaccine development, and helping states provide care, among other health-related needs.

The division of the funds, laid out in a deeply reported Washington Post investigation into the federal pandemic response, shines a light on the origin of the K-shaped economic recovery. 

It continues to cushion the blow for the well-off while leaving millions of low and middle-income Americans struggling.

“The legislation bestowed billions in benefits on companies and wealthy individuals largely unscathed by the pandemic,” Peter Whoriskey, Douglas MacMillan and Jonathan O’Connell report, “while at the same time allowing special aid for unemployed workers to expire over the summer and leaving some local public health efforts struggling for money to conduct testing and other prevention efforts.”

They point to $651 billion in business tax breaks that “often went to companies unaffected by the pandemic and others that laid off thousands of workers.” That’s in part because the breaks weren’t targeted to sectors that suffered the most acutely during the pandemic shutdowns. And the legislation offered breaks for operating losses dating all the way back to 2018, making companies eligible for relief for setbacks from well before the pandemic struck.

The Cheesecake Factory, for one, said it will claim a tax break for $50 million despite furloughing 41,000 workers. And United Natural Foods, an organic grocer that saw its revenue surge by $1 billion this year, applied for a $28 million refund, the Post team found.

Another source of aid for larger companies came in the form of $454 billion that went to support lending by the Federal Reserve. 

That pot of money helped “stabilize markets, and those efforts enabled many companies — including Wells Fargo, AT&T and Carnival, the cruise company — to borrow at lower rates while also laying off thousands of workers.” 

The Post analyzed data from S&P Global Intelligence and found that “of the 34 companies that offered the largest corporate bond issues between March and August, 1 in 3 have reportedly had or announced layoffs.” 

And $659 billion funded the Paycheck Protection Program. 

The Post team notes the program aimed at helping smaller businesses keep workers on the job hasn’t undergone a complete review. But reporting on its recipients has documented many cases of companies availing themselves of its forgivable loans without preserving jobs. That includes 210 hotel operators that tapped the program but have yet to rehire most of their laid-off workers.

It’s hardly clear at this point how many jobs the program saved. 

President Trump has claimed it salvaged 50 million while providing no evidence for that; JPMorgan Chase CEO Jamie Dimon has estimated it saved 30 million to 35 million, again without evidence.

“In the first two months of the program, when shutdowns were the most widespread, the program saved only 2.3 million jobs, a small fraction of Trump’s estimate, researchers from the Federal Reserve, ADP Research Institute and MIT estimated,” per the Post team. “If their figure is correct, that means the program laid out about $286,000 to save each job.”

The failures of the federal response explain the hole millions of workers now find themselves in. 

Despite the speed and scale of the initial relief efforts from Washington, the economy has regained just half of the 22 million jobs lost from February to April. Some 11 million people remain out of a job, and the unemployment rate has more than doubled from its pre-pandemic level.

From economist Adam Tooze: 

And six months into the economic crisis, deeper scars appear to be forming in the labor market, according to a closer look at unemployment data by the New York Times. “Despite consistent monthly gains in jobs, the number of job losses that are permanent is increasing as the virus shows few signs of going away soon,” the NYT’s Ella Koeze writes, adding the “tally of people who aren’t looking for work because of family or transportation issues is staying much more consistent.”

The unemployment picture could get worse, “especially if cases rise significantly, or restaurants or other types of businesses are forced to shut their doors as the weather gets colder.”

Market movers

Wall Street gains as Trump returns to the White House.

Traders still hope for a stimulus deal: “U.S. stocks rose Monday as investors cheered signs that political uncertainty may ebb following reports of [Trump’s] improving health condition,” WSJ’s Anna Isaac and Logan Moore report. 

“The S&P 500 rose 1.8% as the broad market gauge followed up on gains from last week. The Nasdaq Composite Index climbed 2.3%, while the Dow Jones Industrial Average added 465.83 points, or 1.7%, to 28148.64… Equities remain sensitive to any signals about the state of Mr. Trump’s health, investors said.”

From CNBC’s Carl Quintanilla: 

A clear-cut Biden win could push the market higher: “With Joe Biden’s lead widening in the polls and Trump’s campaign sidelined by the virus, investment strategists now say there’s less of a chance for a contested election,” Bloomberg News’s Justina Lee reports.

“A clear-cut Democrat victory could avoid a long and messy legal battle and provide certainty to markets that have been nervous about election risks, according to strategists from Citigroup Inc. to JPMorgan Chase & Co.”

And there’s reason to believe, despite Biden’s proposed corporate tax increases, a Democratic sweep would lead to some market-friendly policies, Goldman Sachs finds: 

Coronavirus fallout

Trump returns to the White House.

The president continues to downplay coronavirus … even though he was hospitalized: Trump returned to the White House from the hospital, saying that he had recovered from the novel coronavirus and that people should not be afraid of a disease that has killed more than 209,000 Americans,” Toluse Olorunnipa and Josh Dawsey report.

“Trump’s comments a few hours before leaving Walter Reed National Military Medical Center in Bethesda, Md., again downplaying the coronavirus, came despite evidence that White House decisions to flout public health guidelines and engage in practices viewed as reckless have had dire consequences in the West Wing. More than a dozen White House officials have tested positive for the coronavirus in recent days, a steadily increasing total that grew again Monday to include press secretary Kayleigh McEnany.”

More from the United States:

  • White House blocks FDA vaccine guidelines: “Top White House officials are blocking strict new federal guidelines for the emergency release of a coronavirus vaccine, objecting to a provision that would almost certainly guarantee that no vaccine could be authorized before the election on Nov. 3 …,” the New York Times’s Sharon LaFraniere and Noah Weiland report.
  • CDC says airborne transmission plays a role in coronavirus spread: “The long-awaited update to the agency Web page explaining how the virus spreads represents an official acknowledgment of growing evidence that under certain conditions, people farther than six feet apart can become infected by tiny droplets and particles that float in the air for minutes and hours, and that they play a role in the pandemic,” Lena H. Sun and Ben Guarino report.

From the corporate front:

  • Commercial bankruptcies up 33 percent so far this year: “Filings by individuals, however, are lower so far this year courtesy of government relief efforts,” Reuters’s Dan Burns reports.
  • Food makers add staff: “Big food companies are working to increase their output and protect workers as the virus continues to spread, representing an opportunity for elevated sales to persist but also a risk to operations if the public-health crisis hurts their own productivity,” the Wall Street Journal’s Heather Haddon reports.

When superpowers collide

China takes TikTok fight to the WTO.

Beijing continues to ramp up its counteract to the White House’s actions: China said at a World Trade Organization meeting that restrictions by the United States on Chinese mobile applications TikTok and WeChat are in violation of the body’s rules …,” Reuters’s Emma Farge and Phil Blenkinsop report.

“A representative for China said at the closed-door meeting on Friday that the measures ‘are clearly inconsistent with WTO rules, restrict cross-border trading services and violate the basic principles and objectives of the multilateral trading system,’ … In the same meeting, the United States defended its actions, saying they are intended to mitigate national security risks …”

Lighthizer becomes China defender. Since brokering a trade agreement with the country in January, the U.S. trade representative, once a committed China hawk,has become one of China’s biggest defenders within the administration, emerging as an obstacle to lawmakers and other top White House officials who want to punish China over its treatment of ethnic Muslims and begin trade talks with Taiwan,” NYT’s Ana Swanson reports. 

“Over the past several months, Mr. Lighthizer has pushed back on several proposed policy measures that rankled Beijing, arguing those efforts could disrupt the U.S.-China trade pact that he and [Trump] spent more than two years trying to forge, according to several former government officials and other people familiar with the conversations.”

The Trump administration is stepping up efforts to build the American supply of rare-earth metals: “In recent years, the U.S. and other Western nations have invested in projects and approved licenses to mine these resources—essential for the production of electric vehicles, cellphones and wind turbines—an effort these countries are now accelerating given how far they still trail China,” the WSJ’s Alistair MacDonald reports.

“Miners and analysts have welcomed the moves, but caution it takes around 10 years to set up a mine and that the West also needs to develop the capability to process these resources into the materials used in final products … Rare-earth elements, used in batteries and electronics, are one of the 35 types of minerals that the U.S. government has deemed critical to economic and national security.”

Trade fly-around

The trade deficit is hitting record highs.

Exporters continue to struggle to gain ground: “If the U.S. economy is going to recover from the coronavirus recession, it will have to do so without much help from overseas,” David J. Lynch reports.

“Americans have resumed buying imported goods with nearly as much enthusiasm as before the pandemic. But people in other countries are not returning the favor. The resulting gap between what the U.S. purchases from other countries and what it sells them — the merchandise trade deficit — hit a monthly record in August. A broader Commerce Department measure that includes services, scheduled for release on Tuesday, is also expected to reach a new high.”

Trump tracker

Eric Trump deposed in N.Y. fraud probe. 

The president’s son was questioned under oath after dodging the interview this summer. New York’s attorney general has been seeking the sit-down as part of her civil investigation into whether the Trump family business committed fraud. “The deposition came less than a month before the presidential election. And while the interview was not made public, the mere fact that it happened before Election Day was a victory for the attorney general, Letitia James, whose inquiry is one of several legal actions the president and his company, the Trump Organization, are facing,” the New York Times’s Ed Shanahan and William K. Rashbaum report. 

“Ms. James’s office declined to comment about what was discussed in the deposition, which was conducted remotely and ended around 5 p.m. It was unclear when the questioning began.”

Pocket change

Antitrust software entrepreneur charged with tax evasion.

John McAfee was arrested in Spain: “The U.S. Justice Department announced the charges shortly after the Securities and Exchange Commission revealed it had brought civil charges against McAfee, alleging that he made over $23.1 million in undisclosed compensation from recommending seven cryptocurrency offerings on Twitter that were materially false and misleading,” Reuters’s Katanga Johnson and Sarah N. Lynch report.

IRS investigating NRA head for possible tax fraud: “Wanye LaPierre was paid $2.2 million by the NRA in 2018, the most recent year available, the nonprofit group’s public filings show. His total reported pay from 2014 to 2018 was $11.2 million,” the WSJ’s Mark Maremont and Aruna Viswanatha report.

“In August, he was charged in a civil suit by New York Attorney General Letitia James with taking millions of dollars of allegedly undisclosed compensation from the NRA and its vendors, in the form of free yacht trips, private jet flights for his family, exotic safaris and other benefits … The AG lawsuit claimed the NRA’s failure to include certain personal benefits in LaPierre’s W-2 annual-compensation forms ‘permitted him to file false personal tax returns with the IRS.’ ”

Walmart signs trio of drone deals: “Drones, once seen as futuristic or a novelty, have gained traction as a potentially mainstream way for retailers to deliver purchases to their customers. Growing e-commerce sales have intensified pressure on retailers to speed up deliveries and use quick turnaround times as a differentiator,” CNBC’s Melissa Repko reports.

“With the drone tests, the big-box retailer is trying to play catch-up with Amazon’s dominant e-commerce business. Amazon’s robotics team has built its own drones and received certification from the Federal Aviation Administration in late August to operate a fleet of Prime Air delivery drones. It comes under Part 135 of FAA regulations, which gives Amazon the ability to carry property on small drones ‘beyond the visual line of sight’ of the operator.”

JPMorgan probe revived: Investigators probing whether traders at JPMorgan Chase & Co. rigged silver prices seven years ago decided there was no case to bring. Last week, the same agency hammered the megabank with a $920 million fine,” the WSJ’s  Dave Michaels reports.

How a small agency that once walked away from an investigation of price manipulation, only to later impose its biggest fine ever for the conduct, shows the advances government has made in using data to uncover market manipulation, said James McDonald, enforcement director of the Commodity Futures Trading Commission.”

Cisco must pay $1.9 billion in patent lawsuit: “U.S. District Judge Henry Morgan in Norfolk, Va., concluded after a monthlong non-jury trial that Cisco infringed four patents belonging to Centripetal Networks Inc, of Herndon, Va.. He found no infringement of a fifth patent,” Reuters’s Jonathan Stempel reports.

“In a 167-page decision, Morgan said the case was ‘not a close call,’ citing inconsistencies in Cisco’s evidence and that its own technical documents, many of which Centripetal itself introduced at trial, ‘proved Centripetal’s case.’ ”

Campaign 2020

Uber and Lyft are shelling out to kill a California law.

The companies are trying to stop a robust gig-worker law: Together “they are spending nearly $100 million on a November California ballot initiative to overturn a state law that would compel them to classify drivers as employees,” Reuters’s Tina Bellon reports.

“That sum looks less huge, however, than the potential costs of complying with the existing law, according to a Reuters analysis. The two ride-hailing companies would each face more than $392 million in annual payroll taxes and workers’ compensation costs even if they drastically cut the number of drivers on their platforms, a Reuters calculation showed.”


  • Fed Chair Jay Powell speaks via webcast at the National Association for Business Economics’s annual meeting
  • The Census Bureau releases the latest monthly trade numbers
  • The Fed’s FOMC releases minutes of its September meeting
  • The Labor Department releases weekly jobless claims

The funnies

Bull session

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