By Ramin Mazaheri for the Saker Blog
Bloomberg reported that the Federal Reserve’s Main Street Lending Program (MSLP) has left 99.8% of its $600 billion loan pool untapped. So if you work for one of the just 118 medium-sized businesses who have acquired a loan – congrats, you might just make it through 2020.
Just as the Eurozone was emphatically reminded during its pre-Covid “Austerity Decade”, government-issued Quantitative Easing will never flow down (much less trickle) in the endemically low growth Western bankocracies unless strings are attached. However, the defining feature of the Western neoliberal bankocracy is that there are never any strings to free money for the 1%.
The failure of the MSLP proves yet again that QE is wasted on the rich and their fake FIRE economies.
Or, in this case, QE is not even used because in the Western system governments are only permitted to throw money at the banks and hope that banks use it – they are not permitted to give directly to the people nor to compel banks to loan, unlike in socialist-inspired economies like China, Iran, etc.
Why is MSLP not being used? Short answer: even though the government is backing 95% of the loans, multinational corporate banks refuse to participate with just a 5% risk.
Longer answers: They obviously cannot see the forest for the trees; their shareholders would sue them for acting patriotically; foreign banks are quite happy to foreclose on US assets; major domestic banks are quite happy to foreclose on US assets.
The only people in the Western financial world who even decry the bankocracy I so often describe don’t want to change it – these are the vultures who are quite upset that they can’t happily (but patriotically, they insist) foreclose on assets themselves. This “pure capitalism” they Salafistically aspire to would lead to a vast reduction in inequality to the point where we would talk about the “2%” instead of the current “1%”.
As I wrote from the start and ad infinitum (50 articles in 4 months/1 Groundhog Day), this was an easily-foreseeable disaster because their Great Lockdown attempted to (poorly and hysterically) emulate countries like China even though the West has none of the systemic socioeconomic safeguards socialist-inspired countries use in order to weather these types of disruptive events.
Personally, I’ve been so focused on covering the US election – and reporting on genuinely leftist parties like Party for Socialism and Liberation (Total 2016 presidential votes which were denied to the duopoly and made in favor of a rather spectacular campaign platform: 74,401 (0.05% of the total, and counting!)) – that I’ve neglected to keep documenting what a total catastrophe the Western coronavirus response still is.
The MSLP failure is rather a douse of cold water.
‘The program was designed to fail’ because Western bankocracy is designed to fail the average citizen
While the Paycheck Protection Program was aimed at small businesses (less than 500 employees) which were in total desperation due to the impeccable logic of quarantining healthy people continent-wide, MSLP was aimed at medium-sized businesses (less than 15,000 employees), which represent 1/3rd of private sector GDP and which employ 50 million Americans.
After being announced in April but not starting until mid-June, it’s now clear that small community banks, who actually may care about their Main Street not collapsing the entire community, are the only ones doing any lending.
Major banks like JPMorgan are sabotaging MSLP by refusing to participate by – per Bloomberg – doing things like asking applicants for terms which go beyond onerous, such as to “pledge real estate it doesn’t have”. JPMorgan reportedly had 2,000 applicants for MSLP – after finding out what JPMorgan demanded in return for a merely 5% risk only around 100 applicants still applied.
This is a doubly big problem, as MSLP was expressly intended for companies who cannot get loans during even normal times. Triply big problem: we should give JPMorgan some credit, I guess, because Wells Fargo, Citigroup and US Bank are refusing to take new customers.
This why applicants lamented MSLP is “designed to fail” – or in socialist terms, designed to increase market concentration and inequality. Governments can take risks, as they can print money, but in Western neoliberalism they cannot force private banks to take risks. The only choice, obviously, is for direct government control over at least some parts of banking but that is verboten in the US.
MSLP is such a catastrophe – and one surely colluded upon beforehand in a smoky backroom “filled” with the heads of the mere handful of top US banks – that one Florida lender accounts for half of all the loans.
The failure of MSLP shows that without lobbying and/or corporate power the “We the people” US government cannot help you. The “people” in a bankocracy is, of course, corporations and shareholders only – the US Supreme Court formally codified this in the 2010 Citizens United case.
For companies which cannot benefit from the Fed-backstopped corporate bond-buying craze ($1.2 trillion since March) and who needed more than just the Paycheck Protection Program, the failure to secure loans will mean more bankruptcies and social disaster.
Given that US culture is so very German-influenced – in the composition of its citizenry, in its evangelical and supremacist fascism, in its anti-socialism, in the original neoliberalism (ordoliberalism) – it’s ironic that the US cannot preserve these medium-sized Mittlestand businesses which are the backbone of German economic strength. Germany, of course, relies much more on local banks than international corporate ones. And, thanks to the money neoliberally/neo-imperialistically (the two are synonymous, of course) bloodsucked from their Eurozone “allies”, their $1.5 trillion coronavirus fiscal stimulus package – the biggest in the West compared to national GDP and a stunningly hypocritical 52% of all coronavirus aid approved by the European Commission – will allow them to only increase their European supremacy amid the Eurozone’s endless stagnation.
From the individual to the medium-big business, those without lobby influence and without credit at the start of the crisis aren’t getting influence or credit now (and this was widely predicted by capitalist-cynics like myself) even with MSLP. The US government has made a show of being independent from high finance, but MSLP is yet another proof that in the Western bankocracy it is banks who decide on socio-economic policy, even amid unprecedented crisis.
In a crisis you have to dance with the girl that brung ya: That is why I wrote so much about the certain suicide of a Great Lockdown in the capitalist-imperialist West. Contrarily, China, due to their very different economic inspirations, will be the only G20 country with positive economic growth – they’ve even doubled their annual projection from (back in only June) 1.8% for 2020 to 3.7%.
MSLP’s failure will only add to US economic woes, and even if they make changes it will be too late to save so very many jobs, assets, companies, households, etc.
I do not get much pleasure to write in September that my prediction that socialist-inspired countries would economically and socially weather the coronavirus better than Western capitalist-inspired ones has been proven correct. The only thing I can say is that Westerners often do not understand the underpinnings of their own system. That helps explain why they delusionally believed a “V-shaped” recovery was not only possible but certain, when an inequality-increasing “K-shaped” has been the clear result of their Great Lockdown. (Get the Nation of Islam’s take on that economy reality here. Interviewing Black Muslim leaders on national, not identity, issues – what a concept! Interviewing Black Muslims at all in the US – what a concept, LOL.)
The West thinks they are a walking, talking “universal value” but it is not like them everywhere. Just call up someone from Party for Socialism and Liberation to learn how There Is
No An Alternative.
If the West still insists on not massively switching to the socialist alternative, then they should dance with the girl that brung them – i.e., start sending coronavirus-infected blankets to places rich in natural resources, and then claim it was more advanced intellectual ideas which increased the bottom line.
The problem with that is that the coronavirus has been somewhat serious but not anywhere equal to the hysteria evinced in Western nations, so it won’t really decimate populations like in the good old days.
Ramin Mazaheri is currently covering the US elections. He is the chief correspondent in Paris for PressTV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of ‘Socialism’s Ignored Success: Iranian Islamic Socialism’as well as ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’, which is also available in simplified and traditional Chinese.