The horizon is not so far as we can see, but as far as we can imagine

Saving Your Local Economy, 4-6-20

This post is based on some key assumptions:
  • You want to save and preserve small and local businesses in your community or town.
  • You don’t want a local economy that consists almost entirely of chain restaurants and big box stores and a central business district full of empty storefronts.
  • You value the diversity, creativity, idiosyncratic character, and friendliness that thriving small business owners bring to your community or town.


Whenever there are enough links that I think might assist people in organizing responses from their local county and municipal governments, I will post them. It probably will not be every day. 

In a phoned-in interview on CNBC, Wilfred Frost urgently reported that Bank of America has received 177,000 applications for some $32.6 billion in emergency liquidity, but so far, only 100 of these loans have been disbursed.
The bank hopes to get most of the stack processed by mid-week, but it’s unclear what they’re basing these hopes on.

Unsanitized: Why Banks Don’t Want to Help Small Businesses [David Dayen,  The Prospect, April 3, 2020]
So why the reticence from the banking sector? I think liability is a red herring; are they really afraid of the heavy regulatory hand of Steve Mnuchin (or any law enforcer involved in the financial crisis)? It looks to me like they don’t want to do the work. Every expectation is for an absolute crush of applications. Thirty million small businesses could be on the line here. The compliance requirements are minimal but banks always whine about the expense of that; that’s why BofA is restricting to already-vetted customers. And the guidelines, which have been “changing by the minute,” could change again. So why bother with the hassle? The money’s good, but it’s marginal, and the big banks think in billions, not millions….
…I’ve talked to dozens of small business owners who are confused by this program, but who are also desperate to participate. There’s not going to be enough money — Congress gave $350 billion — to begin with. If lenders are slow to open the spigot, a lot of these businesses will go down. They don’t have any cash reserves. There’s a lot of concern. Maybe SBA should have found someone more willing to act quickly.

Germany Announces “Limitless” Aid Program for Small Business: SBA Are You Listening? [Zerohedge, 4-6-20]

…Angela Merkel’s government announced a new “limitless” aid program for small- and medium-sized companies (Ed. Note: not a bailout of Germany’s mega corporations) as part of an effort to support Europe’s largest economy in the coronavirus pandemic.
Merkel’s government will provide guarantees of as much as 100 percent, German Finance Minister Olaf Scholz announced at a joint press conference with Economy Minister Peter Altmaier Monday, Bloomberg reports, adding that loans of up to 800,000 euros ($862,000) that will pay out very quickly will be available.

The existing program only provides for an 80 percent to 90 percent loan guarantee and banks have been reluctant to take on new risk as the economy falters. Private lenders have thus pressed the government to expand the existing program by guaranteeing 100 percent of the loans, which it now appears to be doing.

Over the past week, it has come into focus for policymakers just how much strain state and local government budgets are under. They have to make emergency healthcare expenditures among other emergency expenditures, expand unemployment insurance with very low levels of reserves in unemployment insurance funds and do this while tax revenues fall off a cliff since incomes and sales have collapsed. The CARES act provides $340 billion all together with 80 percent or so going to financing  Coronavirus-related expenditures. 150 billion of which is direct aid to state and local governments. Given the scale of the crisis, this is far from adequate….

….As we briefly discussed last Friday, the Federal Reserve is authorized to purchase short maturity state and local government debt directly from state and local governments. The problem is that local governments don’t like to issue short maturity debt, and what happens when the Fed stops providing support?

An easy solution to this is to issue debt with little interest rate uncertainty- small denomination tax receivable IOUs. Since people can pay their taxes, fines, fees and utility bills with them (note, make sure to require investor-owned utilities to make them receivable) there is always a demand for them that there isn’t for conventional municipal debt. If I can save 1% on my tax bill by buying these IOUs off your hands, that’s worth it to me….

All sorts of local monetary experiments were extremely widespread during the Great Depression, as this 1948 dissertation’s map shows:


….At the risk of making it seem like central bank swap lines are the solution to every problem, a swap line for local and state governments is the perfect tool using the Federal Reserve’s existing legal authority and can facilitate supporting these local currencies. It immediately puts a stop to spending cuts and ensures they can focus on focusing on the task at hand — coordinating resources to fight the public health crisis.
The Orange County Arts Commission [an agency of the county government] has created an Orange County Arts Support Fund and has provided initial seed funding from money that was allocated towards upcoming, and now canceled, events. Artists and arts industry workers [such as musicians] who have been impacted by COVID-19 can apply here for funding. The application deadline is Friday, April 10 at midnight. The application for nonprofit arts/culture organizations is coming soon.

For the sake of speed, Congress chose to build on an old program run by the Small Business Administration that guarantees loans made by private banks. (Why would banks make loans the government will probably just wipe away? Because they’re getting paid commissions to do the underwriting.) This may be a faster way to get money out the door than creating a new lending program from scratch, as most small businesses already have some kind of banking relationship. But it’s still not entirely clear how quickly the effort will scale, and if it takes too much time, many restaurants and shops risk failing while they wait for help; according to the JPMorgan Chase Institute, only half of small businesses have enough cash to survive for 27 days without new revenue.



April 6th US Covid-19 Data


April 7th US Covid Data: Some Signs of Flattening


  1. Joan

    Thanks for this. In my country someone started a website where local businesses can sign up and link their website for orders, to try and keep business going locally instead of to Amazon. Both Amazon and Starbucks pay almost nothing in taxes here because they route things through tax havens apparently.

  2. Mojave Wolf

    I don’t have anything to add at present, just wanted to say this post is a great idea and please do keep it up going forward

  3. StewartM

    Yes, saving small enterprises is highly desirable.

    Example just last week. I had the most unpleasant surprise a week ago, getting a letter from my bank saying my homeowners insurance had been cancelled. I had never received a cancellation notice nor had my bank until they had tried to pay the insurance company.

    After many phone calls, I received the reason why. The insurance company had sent an inspector to look at my house when no one was there. He/she either exaggerated some things, neglected others, and had some things completely wrong. Based on his assessment, my insurance company cancelled my policy. They said they sent mail and the reports to both me and to my bank, but obviously neither one of us got anything.

    I contested the findings of the report in an email to my old insurance company. No response. Then I reached out to other insurance companies, and I was told I was “high risk” because 1) I had gone more than 30 days with no insurance (because, uh, I’d never been told) and 2) my home had failed an inspection report, no matter how wrong or how bogus the findings of the report. I was told I might qualify for “high risk’ insurance.

    Finally, I was given the address of a local insurer. The agent drove out to my home, and I showed her the report, and we went through the items one by one while she took pictures. I also told her of the repair plans I had going (waiting for the company to begin the work; but for something not cited in the report—while the report cited problems that weren’t problems, it completely missed problems that we were addressing). She agreed with my assessment, saying “your home is in reasonably good shape” and in particularly, the roof that was cited in the report (and is only 8 years old) was “fine”. She then told me I didn’t need high-risk insurance, that I qualified for a normal policy, and I settled my problem.

    All because I found someone local who would actually come out to talk to me, and to look themselves, and to hear my case. The people talking to me on a phone probably hundreds or thousands of miles away were following rules written down on a sheet of paper, that didn’t make sense in many cases and didn’t make sense in mine. Nor did they think to question that their inspector may have gotten it wrong.

  4. Willy

    After Home Depot’s founders retired and they got a new CEO, even I noticed that whole departments were going to hell (consumer quality). So I found a local lumber yard, tile center, paint store… all small businesses with far superior quality products and prices. Lesson learned. Big corporate box stores first put the smaller places out of business, then jack their prices, lower their quality, and BS the public with baloney ads in their endless quest to improve their quarterly statements.

    But sometimes employees at large corporations are more entertaining, though. They’ll tell you exactly what they think of the place.

  5. Joan

    Willy: “Big corporate box stores first put the smaller places out of business, then jack their prices, lower their quality, and BS the public with baloney ads in their endless quest to improve their quarterly statements.”

    Yes exactly. Another example: getting a local tailor means having clothes that fit you, and that weren’t produced in a slave shop in Bangladesh that then collapsed and crushed everyone inside. I’ve heard people say that they have to buy cheap clothes because they can’t afford a tailor, but they don’t realize that tailor-made clothing will last years, whereas sweat shop clothes are practically disposable. Not only that, but if something goes wrong with the item, the tailor is eager to fix it for you for free, to keep your business. And if there really is a small business owner who doesn’t care and is churning out a shitty product, it’s easy to take your business elsewhere and encourage competition.

  6. Aqua Lung

    Good intentions pave the road to hell. Nice ideas but it’s not going to happen. The arts, for example, is largely by & for the rich. It’s poor sots doing a monkey dance so rich donors will bankroll them.

  7. 🎶 But if you carrying picture of Chairman Mao,
    you ain’t gonna make with anyone anyhow.

    Israeli troll.

  8. Stirling S Newberry

    The question is not saving small business, it is saving it for the non-elites.

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