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What I've been hearing on the internet is that companies are racing to lay off as many people as they need to now, before applying for their free bailout money

What I've been hearing on the internet is that companies are racing to lay off as many people as they need to now, before applying for their free bailout money from the government. It also sounds like businesses are trying to lay off more than they actually need to lay off, in order to get the maximum benefit. The terms of the bailout loans are such that they can lay off people before they apply, get the money, and so long as they don't lay off any additional people after they get the money, the loan converts into a grant (i.e., a free bailout from the Federal government). My personal opinion is that giving free money to companies is a terrible idea, and they should just give helicopter money to individuals. Companies are going to engineer this to their maximum benefit, and the amount of money going to companies is much much greater than the amount going to individuals. Interesting times we live in. It's important to ignore what people say, and instead focus on what they actually do.

apta 7y ago
Are we really surprised though? This is just capitalism at work.
- brenden2 7y ago
  Surprised, no. But if you listen to the talking heads on the TV they will tell you a different story about how great this is for everyone.
- deleted 7y ago
  [deleted]
fonkyyack 7y ago
I agree with you with the first point, giving money to companies isn't a good idea but I think it's also a bad idea to give it to "the people". I think it would be better to change. My opinion is most people are going to buy thing they don't need. Instead we could focus on better ideas for the future.... I don't know maybe I'm too utopist...
- LocalH 7y ago
  In the meantime, what do you propose people do who have been displaced from their jobs? Or who are unable to work due to social distancing and stay at home orders? Sure, some billers have stated “we will not disconnect/cancel due to nonpayment” but what answer do you have for those people? This corporate welfare is garbage, and they’re then being stingy with what they’re giving to individuals? Fuck the politicians.
- FillardMillmore 7y ago
  "Bad idea" vs. "Good idea" seems too restrictive to me. I think there are pros and cons to it and the sum total of those pros and cons may be different depending on your circumstances, finances, and personal beliefs. There are some people who need economic relief now and not a moment later. Giving money to 'the people' can help with this but also carries long term consequences like inflation of the currency. Not to mention, the range of people getting money may be too broad - for example, I'll be receiving a check but I don't think I need it at all. Creating a more restrictive or specific criteria for the delivery of this relief though would likely become somewhat of a bureaucratic nightmare and would inevitably slow things down. We've had similar stimulus packages in the past and whether they were effective in their goals is up for debate. https://taxfoundation.org/did-2001-tax-rebate-checks-stimulate-consumption-economic-evidence-stimulus/ https://taxfoundation.org/did-2001-tax-rebate-checks-stimula... https://www.thebalance.com/bush-economic-stimulus-package-3305782 https://www.thebalance.com/bush-economic-stimulus-package-33...
- Reelin 7y ago
  > My opinion is most people are going to buy thing they don't need. That's... kind of a large part of the point as far as I understand. It doesn't matter where the money gets spent (rent, necessities, luxuries, hobbies, whatever) - the important thing is to keep the economy moving. When large portions of the economy are disrupted all at once (jobs lost, businesses failed) there's the potential for a domino effect.
- econcon 7y ago
  As someone who know a lot of people, just giving us food and water and shelter would be good enough.
andybak 7y ago
People like to compare the current situation to wartime and I think some of the parallels are useful. In wartime there is a much stronger moral backlash against perceived profiteering. We're seeing it in the UK with campaigns to boycott companies that have already shown no desire to share the nation's pain. Hopefully companies that cynically abuse the bailout will find themselves tarnished in a way that is harder to shake off than it usually is.
- brenden2 7y ago
  Unfortunately there's little visibility into this, so we can raise our pitch forks and go after companies with angry mobs, but at the end of the day we don't really know what's going on inside every company. The law makers are the ones who write the cheques and make the system the way it is. The real problem is how laws are made and how the government functions.
  - coding123 7y ago
    There are usually people that know about the abuse. You have to hope for whistleblowers at that point.
    - FillardMillmore 7y ago
      If a company is behaving unethically (but not necessarily illegally), whistleblowers can help in informing the public as to the abuse. It is especially needed in times of crisis (like this one), but because it's a time of crisis, I would assume the motivations of whistleblowers may be less strong if they don't feel entirely financially secure.
      - coding123 7y ago
        Which is a shame since our country continues to shame and discredit real whistleblowers, instead of giving them job loss immunity (or at least some form of protection that is equal or higher than the monetary loss that could befall them for speaking up).
matwood 7y ago
Do you have a good link explaining the details on the loans -> grants? I’m having a hard time finding an analysis of the final signed bill.
- runarberg 7y ago
  I don’t know how this works in the US, but in Iceland they are offering loans with 50% backing from the state. Meaning that if they fail to pay back the state will pay 50%. This is effectively a grant in all but name since the company has no intensive to pay, but full incentive to have have the state pay.
  - Reelin 7y ago
    In the US, small businesses (<= 500 employees) can get loans (among other things). Any portion of it can be forgiven, depending on how the funds are used. https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package https://www.npr.org/2020/03/26/821457551/whats-inside-the-se... > Forgivable loans: There is $350 billion allocated for the Small Business Administration to provide loans of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.
    - matwood 7y ago
      I found this which has the full text of the bill and a summary. https://www.sbia.org/resources-for-small-businesses-impacted-by-covid-19/ https://www.sbia.org/resources-for-small-businesses-impacted...
praptak 7y ago
"And the principle of really existing free market theory is: free markets are fine for you, but not for me. That’s, again, near a universal. So you — whoever you may be — you have to learn responsibility, and be subjected to market discipline, it’s good for your character, it’s tough love, and so on, and so forth. But me, I need the nanny State, to protect me from market discipline, so that I’ll be able to rant and rave about the marvels of the free market, while I’m getting properly subsidized and defended by everyone else, through the nanny State." https://chomsky.info/19960413/ https://chomsky.info/19960413/
- brenden2 7y ago
  Private profits, public risk.
- throwqwerty 7y ago
  >it’s good for your character, it’s tough love, and so on it's funny how so few people recognize the real effects of capitalist ideology. realize that these exact words (deployed by many many conservatives/puritans/weberites/libertarians/etc) aren't business-y words - they're emotional, affective, human, whatever. if you've ever looked at someone you're not in business with them and judged them as lazy, of poor character because they don't have money, etc then realize that you've been transformed from an empathetic human being into an organ (not just a proponent since by judging you enforce/enact) of capital. the ultimate result is that capitalism has a deep effect on how we feel and relate to each other exactly through this kind of rhetoric whose sole purpose is to preserve power and wealth. even right now people are reading my comment and completely dismissing it, presuming i'm just some facile sjw.
- zapttt 7y ago
  people in this forum pretty much control if any SaaS live or die. if we care enough we can compile a simple list of layoffs happy companies to boycott.
- onetimemanytime 7y ago
  They have a gun pointed to the government, we'll lay off 12,870 employees, unless. And so on. So it's not always that easy.
op03 7y ago
Companies (with enough lobbyists) will take advantage of things sure. But thats a small subset of companies that will definitely need help restarting. Many businesses forced to shutdown ops thanks to the lockdown continue to pay staff, bills, rents, suppliers etc etc even though there is zero cash flowing in. Everyday the loss mounts. And its not like govt paying the employees directly wipes that loss out when they return to work. Most business aren't run by people just sitting around waiting for Godzilla to show up, to lay people off and get bailouts from govt.
zaroth 7y ago
> The terms of the bailout loans are such that they can lay off people before they apply, get the money, and so long as they don't lay off any additional people after they get the money, the loan converts into a grant. This is false. The formula for the maximum amount of the loan is based on last years employment levels, or optionally, for companies that were not in business last year, based on January-February employment levels. Any layoffs now do not help make the loan any larger, they will in fact reduce the size of the loan. See Section 1102(a)(2)(36)(E) and 1106(d)(2). The formula for the amount of the loan which can be forgiven is based on the employment levels remaining at last year's levels. There is an exemption in the case of tipped workers, as long as any layoffs are hired back by June 30th. (that is to say, the number of employees, not the same employees) EDIT: https://www.congress.gov/bill/116th-congress/house-bill/748/text?format=txt https://www.congress.gov/bill/116th-congress/house-bill/748/... The amount of loan forgiveness under this section shall be reduced, but not increased, by multiplying the amount described in subsection (b) by the quotient obtained by dividing-- (i) the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period; by (ii)(I) at the election of the borrower-- (aa) the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019 and ending on June 30, 2019; or (bb) the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on January 1, 2020 and ending on February 29, 2020; (II) in the case of an eligible recipient that is seasonal employer, as determined by the Administrator, ...
- danans 7y ago
  Just following that section is this: ----------- (3) REDUCTION RELATING TO COMPENSATION.—The amount of loan forgiveness under this section shall also be reduced by the amount of any reduction in excess of 25 percent of compensation in the most recent full quarter in which the employee was paid in compensation during the covered period of any employee who was compensated— (A) in an amount less than $33,333 during the period beginning on March 1, 2019 and ending on June 30, 2019; or (B) not more than $100,000 on annualized basis during 2019. ------------ IANAL, but that sounds like employers can reduce employee compensation by 25% without any reduction in loan forgiveness, for any employee making less than $100k/yr. Also, unless the individual workers are being tracked, they could also fire the existing workers, and hire replacements at a 25% reduction in compensation. Especially at the more easily replaceable sectors of the labor force, there are a lot of people desperate for employment right now. EDIT: The Application section states: ------------- (e) Application.—An eligible recipient seeking loan forgiveness under this section shall submit to the lender that originated the covered 7(a) loan an application, which shall include documentation verifying the number of full-time equivalent employees on payroll and pay rates for the periods described in subsection (d), including— (1) payroll tax filings reported to the Internal Revenue Service; (2) State income, payroll, and unemployment insurance filings; (3) financial statements verifying payment on debt obligations incurred before the covered period; and (4) any other documentation the Administrator determines necessary. ------------- So it says they are interested in the number and fulltime-equivalent employees and pay rates, but nothing about the replacement of existing workers, although that information should be available in the payroll, state, and unemployment tax filings. With all likelihood, they are just looking at totals, just for efficiency's sake in processing the number of loan applications. This seems to leave a loophole open for unscrupulous employers to dock employee pay 25% without cause. This is all an emergency drill of course. We're all going to see how this shakes out.
goatherders 7y ago
"What I've been hearing on the internet..." Good grief
- carapace 7y ago
  Seriously. "Here are some rumors..." C'mon with that.
- jasonv 7y ago
  Where do you think the California unemployment filers came from? The SF company I worked at (public, $B revenues, familiar name) laid off all contractors one week into shelter in place, two days after their quarterly financials investor call. There’s been zero press about this particular company and their cuts. FTEs, not yet... but those contractors, working for contracting companies (and some, like me, corp temps... so employed by said SF company) are all eligible for unemployment benefits. But still, laid off.
deleted 7y ago
[deleted]
ViViDboarder 7y ago
Some may do that, but if we don’t offer loans or bailouts to many companies (as well as bolster unemployment for the individuals) companies will surely lay even more people off, no?
- kitotik 7y ago
  The U.S. could give each household ~$15k instead of trying the trickle-down experiment again. This is not a bailout, it’s another transfer of wealth using the same model that was prototyped during the last financial crisis.
  - SpicyLemonZest 7y ago
    I don't think it's fair to call it a trickle-down experiment. We're bailing out companies because we think it would be bad for society if they all went bankrupt, not because we expect that money to trickle down as such.
    - kitotik 7y ago
      How is propping up the “top” of the economy not a trickle down approach? It’s the definition. The opposite approach would be “bottoms up” aka propping up the workers. It will be bad for society if the companies at the top all go bankrupt. It will likely be worse for society if the results are even remotely similar to the previous crisis: further concentration of assets/wealth resulting in increased income disparity and loss of workers rights.
      - deleted 7y ago
        [deleted]
      - SpicyLemonZest 7y ago
        I'm not sure there's a clear definition of "trickle down". When people say that, I normally imagine something like a huge tax cut for the rich, and people arguing "well maybe they'll use that money to create jobs or something". It's a very different story to say "you know, many businesses are being legally mandated to shut down, let's give them some life support so they'll be there for all the workers they employ".
hyperpape 7y ago
There's a good reason to support businesses: if you airdrop money to individuals, businesses will go under because they don't have any revenue. That'll result in job losses, and when the virus is under control, there won't be jobs for people (you can't start a business and ramp up to a large number of employees overnight--it's a big organizational problem). But the support for businesses should be limited to those that aren't laying off people. Not with some window to lay them off now, and meet a requirement later. Support for businesses needs to be designed to help workers.
- klyrs 7y ago
  A huge number of folks, perhaps an overwhelming majority of americans, are living paycheck to paycheck[1]. When they get "airdrop" money, these folks tend to pay their outstanding bills or make large purchases that they would otherwise need to save up for. Who's getting that money in the end? Businesses whose services are in demand. This, in turn, incentivizes hiring and maintaining capacity to deliver their services. But what's happened when we've airdropped money on businesses? They pocket the cash. Executives get bonuses, companies buy back stock and cut dividends to their shareholders. And to show their commitment to belt-tightening, they punish consumers and lay off workers. Trickle-down economics does not work. Paying companies does not help the workers as much as paying the workers directly. [1] https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/ https://www.forbes.com/sites/zackfriedman/2019/01/11/live-pa...
  - hyperpape 7y ago
    It's a hard pill for people to swallow that they deserved to be laid off because their employer was non-essential. In an advanced economy, an enormous number (maybe even the majority) of jobs are non-essential. If they all disappear overnight, we'd have to rebuild the majority of the economy, and we'd extend the economic crisis by years. "Non-essential" businesses that are in trouble under major social distancing include: most retail, gyms, yoga studios, massage therapy, most things related to office supplies/maintenance/provisioning, hotels, auto mechanics (they'll have some business but a lot less), airlines, coffee shops, restaurants, probably some manufacturing...there's really no way I can give a complete list. Some large corporations will go out of business, though lots will be fine. The real hit will be small businesses, which typically have less than 2 months of cash reserves. Note that I'm not advocating that more should be given to businesses than individuals, just that keeping businesses from closing is an important part of having an economy to recover. Giving money to individuals is the most important thing--it has an immediate impact, and targets the most vulnerable people now. But avoiding business closures is also important, and is important to ensuring we don't have 25% unemployment 12 months from now. I do see how my original post wasn't strong enough in saying helping individuals is the most important thing. But please don't confuse the claims "the current stimulus is a poorly targeted shitshow full of bailouts for wealthy corporations" (true) with "nothing needs to be done for businesses" (false).
ttul 7y ago
Business owner here. First, let me dispel the myth that business owners are wealthy. All of my friends from school have more liquid assets than I do. I am utterly broke unless you count for the paper wealth of my company shares. When COVID hit, within a week we had customers dropping out of our sales funnel. Half of our expected revenue growth disappeared as customers decided to reduce risk and stick with existing solutions. This is what happens when the market goes “risk off”. My company, like most, is leveraged. If I don’t earn positive cash flow, covenants on my debt will trigger a default, instantly ruining the firm. One default cascades to all the facilities, because that’s how debt works. So, if I need to get to cash flow neutral, I am going to lay people off. I have no other option. It’s either that, or ruin. This is why the government is supporting businesses by effectively becoming a lender of last resort. By tapping government loans, I can maintain my employees while we wait out what will probably be a short period of downturn. The money I have been offered is three year. Three years from now, we have either figured this thing out or we are living in caves. I’ll pay back the loan and my employees will keep their jobs. That’s how this works. If I could provide feedback to policy makers: government should get something in return for the largesse. A small stake in each company, for instance, that we have the option of buying back at cost later. Because if society is supporting my business, society should have a stake in its recovery. I have not seen that happening anywhere.
- pdeuchler 7y ago
  If a 50% drop in expected revenue _growth_ causes you to default on your debt you are either a startup that had trouble raising money, in which case now you know that you do not have a viable business plan, or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.
  - ttul 7y ago
    Common misconception. It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics. It’s not a mistake to operate a company using venture debt. In a highly competitive market, if you don’t lever up, your competitors will eat your market.
JakeAl 7y ago
It's not a bailout, it's relief from the effects of the government's solution to a perceived problem. There were much better, rational, scientific solutions that wouldn't have destroyed the global economy, starting with mandatory masks and gloves and highly restricted travel starting as far back as January 20th. Smart people acted accordingly as soon as they saw the Chinese doing this, you know, people who knew their government were liars and corrupt. The governments shut things down for people who aren't able to think for themselves, and instead rely on doing what the government tells them to survive.
chinathrow 7y ago
This is totally backwards and makes no sense, I agree. Bailout money should come only for those who keep the work force in place. European countries have a thing called "short-time work", where you put staff on restricted schedules and the government pays e.g. 80% of the difference between the normal and the shortened hours. This is thightly coupled to not being able to do mass layoffs while "short-time work" is in place.
Ericson2314 7y ago
Yeah all this "keep the payroll going" is an excuse to keep all the existing ownership in place. Helicopter money and let the firms go bankrupt, or if you must (ugh) take equity and create a sovereign wealth fund or disburse the shares among the people. We can't keep the old oligopoly and bail them out. Loans and grants are both bailouts.
twblalock 7y ago
Let's remember that the businesses need this bailout because state and local governments forced them to cease operations for an unspecified amount of time. It's entirely reasonable for businesses to be compensated by the government in this situation. It's also reasonable to point out that the compensation is not enough, and it won't come soon enough, and some businesses will need to lay off staff to survive until they get the check.
- wool_gather 7y ago
  Why does this rationale apply to businesses but not to individual employees? The government forced them to stop working.
  - twblalock 7y ago
    They are also getting help from the government, in addition to the normal unemployment benefits which have always been available. It's not like nothing is being done for them. Both businesses and workers are getting some help, which may not be enough. But let's not act like the government is only helping businesses.
    - deleted 7y ago
      [deleted]
    - wool_gather 7y ago
      All right, I misunderstood what you were saying.
jdkee 7y ago
This. The money needs to go to individuals/families so they can survive and stimulate demand. Corporations are nothing more than fictitious entities that organize people for particular tasks and goals. If equity goes to zero, that is simply creative destruction and new corporations can be organized to fulfill the needed roles.

apta 7y ago

Are we really surprised though? This is just capitalism at work.

brenden2 7y ago
Surprised, no. But if you listen to the talking heads on the TV they will tell you a different story about how great this is for everyone.
deleted 7y ago
[deleted]

fonkyyack 7y ago

I agree with you with the first point, giving money to companies isn't a good idea but I think it's also a bad idea to give it to "the people". I think it would be better to change. My opinion is most people are going to buy thing they don't need. Instead we could focus on better ideas for the future.... I don't know maybe I'm too utopist...

LocalH 7y ago
In the meantime, what do you propose people do who have been displaced from their jobs? Or who are unable to work due to social distancing and stay at home orders? Sure, some billers have stated “we will not disconnect/cancel due to nonpayment” but what answer do you have for those people? This corporate welfare is garbage, and they’re then being stingy with what they’re giving to individuals? Fuck the politicians.
FillardMillmore 7y ago
"Bad idea" vs. "Good idea" seems too restrictive to me. I think there are pros and cons to it and the sum total of those pros and cons may be different depending on your circumstances, finances, and personal beliefs. There are some people who need economic relief now and not a moment later. Giving money to 'the people' can help with this but also carries long term consequences like inflation of the currency. Not to mention, the range of people getting money may be too broad - for example, I'll be receiving a check but I don't think I need it at all. Creating a more restrictive or specific criteria for the delivery of this relief though would likely become somewhat of a bureaucratic nightmare and would inevitably slow things down. We've had similar stimulus packages in the past and whether they were effective in their goals is up for debate. https://taxfoundation.org/did-2001-tax-rebate-checks-stimulate-consumption-economic-evidence-stimulus/ https://taxfoundation.org/did-2001-tax-rebate-checks-stimula... https://www.thebalance.com/bush-economic-stimulus-package-3305782 https://www.thebalance.com/bush-economic-stimulus-package-33...
Reelin 7y ago
> My opinion is most people are going to buy thing they don't need. That's... kind of a large part of the point as far as I understand. It doesn't matter where the money gets spent (rent, necessities, luxuries, hobbies, whatever) - the important thing is to keep the economy moving. When large portions of the economy are disrupted all at once (jobs lost, businesses failed) there's the potential for a domino effect.
econcon 7y ago
As someone who know a lot of people, just giving us food and water and shelter would be good enough.

andybak 7y ago

People like to compare the current situation to wartime and I think some of the parallels are useful. In wartime there is a much stronger moral backlash against perceived profiteering. We're seeing it in the UK with campaigns to boycott companies that have already shown no desire to share the nation's pain. Hopefully companies that cynically abuse the bailout will find themselves tarnished in a way that is harder to shake off than it usually is.

brenden2 7y ago
Unfortunately there's little visibility into this, so we can raise our pitch forks and go after companies with angry mobs, but at the end of the day we don't really know what's going on inside every company. The law makers are the ones who write the cheques and make the system the way it is. The real problem is how laws are made and how the government functions.
- coding123 7y ago
  There are usually people that know about the abuse. You have to hope for whistleblowers at that point.
  - FillardMillmore 7y ago
    If a company is behaving unethically (but not necessarily illegally), whistleblowers can help in informing the public as to the abuse. It is especially needed in times of crisis (like this one), but because it's a time of crisis, I would assume the motivations of whistleblowers may be less strong if they don't feel entirely financially secure.
    - coding123 7y ago
      Which is a shame since our country continues to shame and discredit real whistleblowers, instead of giving them job loss immunity (or at least some form of protection that is equal or higher than the monetary loss that could befall them for speaking up).

matwood 7y ago

Do you have a good link explaining the details on the loans -> grants? I’m having a hard time finding an analysis of the final signed bill.

runarberg 7y ago
I don’t know how this works in the US, but in Iceland they are offering loans with 50% backing from the state. Meaning that if they fail to pay back the state will pay 50%. This is effectively a grant in all but name since the company has no intensive to pay, but full incentive to have have the state pay.
- Reelin 7y ago
  In the US, small businesses (<= 500 employees) can get loans (among other things). Any portion of it can be forgiven, depending on how the funds are used. https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package https://www.npr.org/2020/03/26/821457551/whats-inside-the-se... > Forgivable loans: There is $350 billion allocated for the Small Business Administration to provide loans of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.
  - matwood 7y ago
    I found this which has the full text of the bill and a summary. https://www.sbia.org/resources-for-small-businesses-impacted-by-covid-19/ https://www.sbia.org/resources-for-small-businesses-impacted...

praptak 7y ago

"And the principle of really existing free market theory is: free markets are fine for you, but not for me. That’s, again, near a universal. So you — whoever you may be — you have to learn responsibility, and be subjected to market discipline, it’s good for your character, it’s tough love, and so on, and so forth. But me, I need the nanny State, to protect me from market discipline, so that I’ll be able to rant and rave about the marvels of the free market, while I’m getting properly subsidized and defended by everyone else, through the nanny State." https://chomsky.info/19960413/ https://chomsky.info/19960413/

brenden2 7y ago
Private profits, public risk.
throwqwerty 7y ago
>it’s good for your character, it’s tough love, and so on it's funny how so few people recognize the real effects of capitalist ideology. realize that these exact words (deployed by many many conservatives/puritans/weberites/libertarians/etc) aren't business-y words - they're emotional, affective, human, whatever. if you've ever looked at someone you're not in business with them and judged them as lazy, of poor character because they don't have money, etc then realize that you've been transformed from an empathetic human being into an organ (not just a proponent since by judging you enforce/enact) of capital. the ultimate result is that capitalism has a deep effect on how we feel and relate to each other exactly through this kind of rhetoric whose sole purpose is to preserve power and wealth. even right now people are reading my comment and completely dismissing it, presuming i'm just some facile sjw.
zapttt 7y ago
people in this forum pretty much control if any SaaS live or die. if we care enough we can compile a simple list of layoffs happy companies to boycott.
onetimemanytime 7y ago
They have a gun pointed to the government, we'll lay off 12,870 employees, unless. And so on. So it's not always that easy.

op03 7y ago

Companies (with enough lobbyists) will take advantage of things sure. But thats a small subset of companies that will definitely need help restarting. Many businesses forced to shutdown ops thanks to the lockdown continue to pay staff, bills, rents, suppliers etc etc even though there is zero cash flowing in. Everyday the loss mounts. And its not like govt paying the employees directly wipes that loss out when they return to work. Most business aren't run by people just sitting around waiting for Godzilla to show up, to lay people off and get bailouts from govt.

zaroth 7y ago

> The terms of the bailout loans are such that they can lay off people before they apply, get the money, and so long as they don't lay off any additional people after they get the money, the loan converts into a grant. This is false. The formula for the maximum amount of the loan is based on last years employment levels, or optionally, for companies that were not in business last year, based on January-February employment levels. Any layoffs now do not help make the loan any larger, they will in fact reduce the size of the loan. See Section 1102(a)(2)(36)(E) and 1106(d)(2). The formula for the amount of the loan which can be forgiven is based on the employment levels remaining at last year's levels. There is an exemption in the case of tipped workers, as long as any layoffs are hired back by June 30th. (that is to say, the number of employees, not the same employees) EDIT: https://www.congress.gov/bill/116th-congress/house-bill/748/text?format=txt https://www.congress.gov/bill/116th-congress/house-bill/748/... The amount of loan forgiveness under this section shall be reduced, but not increased, by multiplying the amount described in subsection (b) by the quotient obtained by dividing-- (i) the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period; by (ii)(I) at the election of the borrower-- (aa) the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019 and ending on June 30, 2019; or (bb) the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on January 1, 2020 and ending on February 29, 2020; (II) in the case of an eligible recipient that is seasonal employer, as determined by the Administrator, ...

danans 7y ago
Just following that section is this: ----------- (3) REDUCTION RELATING TO COMPENSATION.—The amount of loan forgiveness under this section shall also be reduced by the amount of any reduction in excess of 25 percent of compensation in the most recent full quarter in which the employee was paid in compensation during the covered period of any employee who was compensated— (A) in an amount less than $33,333 during the period beginning on March 1, 2019 and ending on June 30, 2019; or (B) not more than $100,000 on annualized basis during 2019. ------------ IANAL, but that sounds like employers can reduce employee compensation by 25% without any reduction in loan forgiveness, for any employee making less than $100k/yr. Also, unless the individual workers are being tracked, they could also fire the existing workers, and hire replacements at a 25% reduction in compensation. Especially at the more easily replaceable sectors of the labor force, there are a lot of people desperate for employment right now. EDIT: The Application section states: ------------- (e) Application.—An eligible recipient seeking loan forgiveness under this section shall submit to the lender that originated the covered 7(a) loan an application, which shall include documentation verifying the number of full-time equivalent employees on payroll and pay rates for the periods described in subsection (d), including— (1) payroll tax filings reported to the Internal Revenue Service; (2) State income, payroll, and unemployment insurance filings; (3) financial statements verifying payment on debt obligations incurred before the covered period; and (4) any other documentation the Administrator determines necessary. ------------- So it says they are interested in the number and fulltime-equivalent employees and pay rates, but nothing about the replacement of existing workers, although that information should be available in the payroll, state, and unemployment tax filings. With all likelihood, they are just looking at totals, just for efficiency's sake in processing the number of loan applications. This seems to leave a loophole open for unscrupulous employers to dock employee pay 25% without cause. This is all an emergency drill of course. We're all going to see how this shakes out.

goatherders 7y ago

"What I've been hearing on the internet..." Good grief

carapace 7y ago
Seriously. "Here are some rumors..." C'mon with that.
jasonv 7y ago
Where do you think the California unemployment filers came from? The SF company I worked at (public, $B revenues, familiar name) laid off all contractors one week into shelter in place, two days after their quarterly financials investor call. There’s been zero press about this particular company and their cuts. FTEs, not yet... but those contractors, working for contracting companies (and some, like me, corp temps... so employed by said SF company) are all eligible for unemployment benefits. But still, laid off.

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ViViDboarder 7y ago

Some may do that, but if we don’t offer loans or bailouts to many companies (as well as bolster unemployment for the individuals) companies will surely lay even more people off, no?

kitotik 7y ago
The U.S. could give each household ~$15k instead of trying the trickle-down experiment again. This is not a bailout, it’s another transfer of wealth using the same model that was prototyped during the last financial crisis.
- SpicyLemonZest 7y ago
  I don't think it's fair to call it a trickle-down experiment. We're bailing out companies because we think it would be bad for society if they all went bankrupt, not because we expect that money to trickle down as such.
  - kitotik 7y ago
    How is propping up the “top” of the economy not a trickle down approach? It’s the definition. The opposite approach would be “bottoms up” aka propping up the workers. It will be bad for society if the companies at the top all go bankrupt. It will likely be worse for society if the results are even remotely similar to the previous crisis: further concentration of assets/wealth resulting in increased income disparity and loss of workers rights.
    - deleted 7y ago
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    - SpicyLemonZest 7y ago
      I'm not sure there's a clear definition of "trickle down". When people say that, I normally imagine something like a huge tax cut for the rich, and people arguing "well maybe they'll use that money to create jobs or something". It's a very different story to say "you know, many businesses are being legally mandated to shut down, let's give them some life support so they'll be there for all the workers they employ".

hyperpape 7y ago

There's a good reason to support businesses: if you airdrop money to individuals, businesses will go under because they don't have any revenue. That'll result in job losses, and when the virus is under control, there won't be jobs for people (you can't start a business and ramp up to a large number of employees overnight--it's a big organizational problem). But the support for businesses should be limited to those that aren't laying off people. Not with some window to lay them off now, and meet a requirement later. Support for businesses needs to be designed to help workers.

klyrs 7y ago
A huge number of folks, perhaps an overwhelming majority of americans, are living paycheck to paycheck[1]. When they get "airdrop" money, these folks tend to pay their outstanding bills or make large purchases that they would otherwise need to save up for. Who's getting that money in the end? Businesses whose services are in demand. This, in turn, incentivizes hiring and maintaining capacity to deliver their services. But what's happened when we've airdropped money on businesses? They pocket the cash. Executives get bonuses, companies buy back stock and cut dividends to their shareholders. And to show their commitment to belt-tightening, they punish consumers and lay off workers. Trickle-down economics does not work. Paying companies does not help the workers as much as paying the workers directly. [1] https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/ https://www.forbes.com/sites/zackfriedman/2019/01/11/live-pa...
- hyperpape 7y ago
  It's a hard pill for people to swallow that they deserved to be laid off because their employer was non-essential. In an advanced economy, an enormous number (maybe even the majority) of jobs are non-essential. If they all disappear overnight, we'd have to rebuild the majority of the economy, and we'd extend the economic crisis by years. "Non-essential" businesses that are in trouble under major social distancing include: most retail, gyms, yoga studios, massage therapy, most things related to office supplies/maintenance/provisioning, hotels, auto mechanics (they'll have some business but a lot less), airlines, coffee shops, restaurants, probably some manufacturing...there's really no way I can give a complete list. Some large corporations will go out of business, though lots will be fine. The real hit will be small businesses, which typically have less than 2 months of cash reserves. Note that I'm not advocating that more should be given to businesses than individuals, just that keeping businesses from closing is an important part of having an economy to recover. Giving money to individuals is the most important thing--it has an immediate impact, and targets the most vulnerable people now. But avoiding business closures is also important, and is important to ensuring we don't have 25% unemployment 12 months from now. I do see how my original post wasn't strong enough in saying helping individuals is the most important thing. But please don't confuse the claims "the current stimulus is a poorly targeted shitshow full of bailouts for wealthy corporations" (true) with "nothing needs to be done for businesses" (false).

ttul 7y ago

Business owner here. First, let me dispel the myth that business owners are wealthy. All of my friends from school have more liquid assets than I do. I am utterly broke unless you count for the paper wealth of my company shares. When COVID hit, within a week we had customers dropping out of our sales funnel. Half of our expected revenue growth disappeared as customers decided to reduce risk and stick with existing solutions. This is what happens when the market goes “risk off”. My company, like most, is leveraged. If I don’t earn positive cash flow, covenants on my debt will trigger a default, instantly ruining the firm. One default cascades to all the facilities, because that’s how debt works. So, if I need to get to cash flow neutral, I am going to lay people off. I have no other option. It’s either that, or ruin. This is why the government is supporting businesses by effectively becoming a lender of last resort. By tapping government loans, I can maintain my employees while we wait out what will probably be a short period of downturn. The money I have been offered is three year. Three years from now, we have either figured this thing out or we are living in caves. I’ll pay back the loan and my employees will keep their jobs. That’s how this works. If I could provide feedback to policy makers: government should get something in return for the largesse. A small stake in each company, for instance, that we have the option of buying back at cost later. Because if society is supporting my business, society should have a stake in its recovery. I have not seen that happening anywhere.

pdeuchler 7y ago
If a 50% drop in expected revenue _growth_ causes you to default on your debt you are either a startup that had trouble raising money, in which case now you know that you do not have a viable business plan, or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.
- ttul 7y ago
  Common misconception. It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics. It’s not a mistake to operate a company using venture debt. In a highly competitive market, if you don’t lever up, your competitors will eat your market.

JakeAl 7y ago

It's not a bailout, it's relief from the effects of the government's solution to a perceived problem. There were much better, rational, scientific solutions that wouldn't have destroyed the global economy, starting with mandatory masks and gloves and highly restricted travel starting as far back as January 20th. Smart people acted accordingly as soon as they saw the Chinese doing this, you know, people who knew their government were liars and corrupt. The governments shut things down for people who aren't able to think for themselves, and instead rely on doing what the government tells them to survive.

chinathrow 7y ago

This is totally backwards and makes no sense, I agree. Bailout money should come only for those who keep the work force in place. European countries have a thing called "short-time work", where you put staff on restricted schedules and the government pays e.g. 80% of the difference between the normal and the shortened hours. This is thightly coupled to not being able to do mass layoffs while "short-time work" is in place.

Ericson2314 7y ago

Yeah all this "keep the payroll going" is an excuse to keep all the existing ownership in place. Helicopter money and let the firms go bankrupt, or if you must (ugh) take equity and create a sovereign wealth fund or disburse the shares among the people. We can't keep the old oligopoly and bail them out. Loans and grants are both bailouts.

twblalock 7y ago

Let's remember that the businesses need this bailout because state and local governments forced them to cease operations for an unspecified amount of time. It's entirely reasonable for businesses to be compensated by the government in this situation. It's also reasonable to point out that the compensation is not enough, and it won't come soon enough, and some businesses will need to lay off staff to survive until they get the check.

wool_gather 7y ago
Why does this rationale apply to businesses but not to individual employees? The government forced them to stop working.
- twblalock 7y ago
  They are also getting help from the government, in addition to the normal unemployment benefits which have always been available. It's not like nothing is being done for them. Both businesses and workers are getting some help, which may not be enough. But let's not act like the government is only helping businesses.
  - deleted 7y ago
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  - wool_gather 7y ago
    All right, I misunderstood what you were saying.

jdkee 7y ago

This. The money needs to go to individuals/families so they can survive and stimulate demand. Corporations are nothing more than fictitious entities that organize people for particular tasks and goals. If equity goes to zero, that is simply creative destruction and new corporations can be organized to fulfill the needed roles.