Daily Clout: Big Business racks up to10x the support and funding than small business, individuals, or health care

Update Three: The War on Small Business Escalates Via the CARES Act The $2.7 trillion Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which was signed into law on Friday, March 27 th , and then amended to add more funds for small business loans, hospitals and testing on April 21 st , is just one of an arsenal of programs that Congress and the Federal Reserve have mobilized to stem the damage from the nationwide shut-down and pandemic. In my previous blogs covering this subject 1 , my chief concern has been the outsized support in these provisions for big corporations – twice as much on the face of it - versus the undersized support for small businesses, not to mention the diminutive support for health care, which is another topic all together. This disparity is important, because small business accounts for 50% of our workforce employment and it drives innovation and the lion’s share of net new job growth. Furthermore, while large corporations have access to private equity, public markets, bank loan facilities and more to secure additional money to keep up and running, small businesses do not. Finally, due to shaky Treasury guidelines, many large, and even public companies, have participated in the small business loan programs. However, going under-reported is the Federal Reserve’s April 9, 2020 announcement that it had launched its own unprecedented $2.3 trillion relief package. This included $600 billion allocated to purchase loans from banks to small and midsize businesses, under its “Main Street Lending Program” which includes businesses with up to 10,000 employees and $2.5 billion in revenue. Is this “Main Street”? The program also included $500 billion to buy state and municipal bonds. The most eye-popping number was the $1.2 trillion to bolster the Central Bank’s own ongoing purchases of treasuries, corporate, consumer and municipal securities 2 . Within this announcement, The Fed expanded another facility so that it could begin to buy highly rated new issues of collateralized loan obligations and commercial mortgage-backed securities. Under the new program the Central Bank can also buy corporate bonds and exchange-traded funds. YIKES! Could small business be made to feel even smaller? This involvement by the Fed unnaturally helps alleviate concerns that large companies that are downgraded due to unfavorable economic conditions, would not receive support from the Fed. Hence, it artificially supports, if not boosts, market pricing. The net effect of all of this is that large corporations—even unhealthy ones – will win again - at the expense of everyone else. 1 April 16, 2020 and March 25, 2020. 2 Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy. Adding up funds from Congress and the Federal Reserve - $1.45 trillion - large corporations are by far the biggest beneficiaries of aid - by a factor of more than two hundred per cent, not including another $275 billion in tax cuts, tucked away in the CARES Act. These tucked-away sections bring total benefits to large corporations and wealthy individuals to upwards of $1.725 trillion! Small business owners have no illusions. In a survey released April 14, 2020 by the Small Business Majority 3 , small business owners reported devastating impacts of COVID-19 4 . Nearly half say they have closed their business or are planning to do so in the next two months. 69% say that the CARES Act favors large corporations over small businesses. 84% say that increased funding is needed for community development financial institutions among many other suggestions. Legislators take note. 38%, 24% and 32% of respondents identified themselves as Republican, Independent and Democrat respectively. The hurt goes across the political spectrum. Read the full blog here: https://dailyclout.io/update-three-th... 3 Small Business Majority. 4 Small Business Opinion Poll.