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When I was in college in DC during the financial crisis, friends and I were at a bar and some guy comes in and pays the whole bar's tabs. Shouted "TARP MONEY!"

When I was in college in DC during the financial crisis, friends and I were at a bar and some guy comes in and pays the whole bar's tabs. Shouted "TARP MONEY!" and leaves. Pretty sure that guy was doing some fraud, but he was nice enough to share so I guess that's something. It's hard to make a program like that quick enough to be effective without allowing fraud so I get the free for all style distribution. But especially with programs like TARP/PPP where the recipients are generally _already wealthy_ and the payments are relatively large, I'd like to see some after-the-fact scrutiny where people who commit fraud are punished, otherwise it reinforces the impression that money buys impunity.

CrazyStat 4y ago
> But especially with programs like TARP/PPP where the recipients are generally _already wealthy_ and the payments are relatively large, I'd like to see some after-the-fact scrutiny where people who commit fraud are punished, otherwise it reinforces the impression that money buys impunity. This is happening, it's just slow. For example [1]. [1] https://www.justice.gov/opa/pr/california-man-sentenced-over-11-years-27-million-ppp-fraud-scheme https://www.justice.gov/opa/pr/california-man-sentenced-over...
alistairSH 4y ago
t's hard to make a program like that quick enough to be effective without allowing fraud... Wasn't that the reasoning behind structuring PPP as loans? Get the money out as a loan, then forgive/not-forgive later after the borrower submits paperwork proving the funds were used appropriately. It appears that second phase isn't happening - the government is just forgiving everything.
- deleted 4y ago
  [deleted]
- panarky 4y ago
  I don't know if that was ever stated as the rationale, but many people inferred that it was. It's a defensive inference, to defend our belief that authorities wouldn't attempt to solve a crisis by just transferring a trillion dollars from lower rungs on the economic latter directly to higher rungs on the ladder. We want to believe that the distribution of wealth is caused by individual behavior, that every person deserves their station in life however opulent or impoverished. We want to ignore the systems of power and privilege that exploit the low to further enrich the high. But PPP strips away even the veneer of fairness and lays bare the brutal mechanics of wealth distribution based on power instead of contribution or merit. Perhaps the reason PPP was structured as loans instead of grants was to maintain that fig leaf of fairness, to allow us to continue to defend the indefensible.
  - Wyoming23 4y ago
    Do "we" believe any of that? Everything you're suggesting here is just standard left-wing political worldview wrapped in a narrative device of "we believe <the system works>, but really it doesn't". Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? Maybe I'm mistaken about how the program worked, but I thought it was essentially the government stepping in to provide funds for payroll.
    - Loughla 4y ago
      >Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? That's sort of the entire narrative here, though. In theory, you are correct. BUT - the "loans" being forgiven across the board is, essentially, removing the step where businesses prove that the money was used for what it was supposed to be used for. So, absent concrete proof, it is easy to speculate that this was just another wealth transfer to the top. Will we ever know? Probably not. But it's one more thing to throw onto the outrage bonfire for every side. It gives the left something to talk about (look at the wealth transfer to the rich). It give the right something to talk about (look at this gross overspend by the government). It gives the middle something to talk about (look at how smart we are knowing that this would happen). And it's all political theater. These are my opinions. Edit: that being said, look at the comments in this thread for literal arguments that are examples of every single point in that last paragraph.
    - panarky 4y ago
      That's a great example of the power of Orwellian naming. Only 25% of "Paycheck Protection" funds "trickled down" to workers, while 75% was hoarded by owners. If the objective is to get cash into the pockets of workers, you can just give it to them directly, and they'll get 100% of it. The only possible rationale for implementing a Rube Goldberg system like PPP is if you intend for the vast majority of the funds to get siphoned off by the wealthy long before it makes it down to workers.
- Scoundreller 4y ago
  I think the “loan” structure was to allow the corps to defer the revenue. It let them flush themselves with cash while claim a loss on paper and reduce/reverse their taxes that year.
  - panarky 4y ago
    PPP payments are not "revenue" and they're not taxable income. Owners and shareholders can dividend this cash to themselves while still claiming operating losses.
- gumby 4y ago
  An existing program through the SBA was used as it was the fastest way to get cash out the door. That program happened to be a loan program, so they were structured that way with an almost automatic forgiveness. Think of it as an API adaptor.
  - landemva 4y ago
    > the SBA was used as it was the fastest way to get cash out the door. Many non-savvy small businesses missed out in part due to lack of accounting help and lack of banking relationships for the application papers. If this was to keep employees working, then the fastest way would be to credit the employer payroll tax federal withholding back to the employer after the employer sent it to the Feds. That is an existing channel and would be based on verified employee pay withholding.
    - gumby 4y ago
      The could have even credited back more than the withholding (i.e enough to cover the wages). But not sure that would work: company might not have the cash flow to float the payroll, and perhaps it would have invited a different fraud? There weren’t a lot of tools and time was short. Would be worth thinking through for next time though. And let’s hope there isnt a next time.
jandrese 4y ago
The problem of course is that the review process is an enormous problem and there just aren't that many people in charge of reviewing them. I think a lot of people who are tuned into grifting the government saw it as a huge opportunity.
ItsMonkk 4y ago
It appears that we are heading into a recession as we speak. What are law makers doing right now to prepare for the possible effects of this recession? What are we doing to predict which parts of the financial system will collapse? What are we doing to prepare if CO-VID mutates into a deadly strain? We've known for 30 years that the climate will change, have we done anything to prepare for the consequences of that? Why must we always need to react and pass TARP or PPP within a week time-frame or the entire economy crumbles?
- jjtheblunt 4y ago
  > We've known for 30 years that the climate will change to your point, archaeologists have been scuba diving to sunken coastal Greek and Roman era cities all around Mediterranean coasts for decades too, sunken from sea level rising may meters over the last couple thousand years. Just another interesting datapoint straight from National Geographic magazines as a kid, before politicians really grabbed hold of global warming.
  - Wyoming23 4y ago
    That's not a "interesting datapoint" that's an unrelated anecdote. That's the climate change denialism equivalent of "my grandma smoked her whole life and didn't get lung cancer, so these scientists don't know what they're talking about".
    - phpisthebest 4y ago
      It would not call it denialism I would call it taking a different view that we can or should attempt to stop climate change There are 3 groups 1. People that think we should stop at nothing, including resetting the global economy, to stop climate change 2. People that think Humanity can and will adapt to the changing environment and that is the best course 3. People that think nothing is changing, and everything is fine
      - s1artibartfast 4y ago
NovemberWhiskey 4y ago
TARP is nothing like PPP though; the vast majority of TARP bailout money was basically in the form of asset purchases (equity stakes in banks, finance firms and insurance companies), loan guarantees and finally outright loans to large companies in the auto-industry. Although there was an expectation that some of the asset purchases might turn out to be valueless, or that loans not be repaid; there was no concept of loan-forgiveness baked into the bailout. Indeed, basically of the TARP money was repaid in full. PPP's definition of success, on the other hand, was that jobs would be preserved, resulting in the forgiveness of the loans.
- Scoundreller 4y ago
  > Indeed, basically of the TARP money was repaid in full. Sorta. If you invested money at the bottom of the market in late 08/early 2009 and only broke even several years later, you must have set half the money on fire (edit: or embezzled it).
  - NovemberWhiskey 4y ago
    TARP required the banks involved to issue preferred stock for purchase by the Treasury; this prices more like bonds than equities due to the fixed dividend.
    - Scoundreller 4y ago
      Did they pay like $10 or less on each $25 par value or something? Or did they buy at par at like a 10-12% or so rate and duh, the banks redeemed them for par? Still sounds like gov took the downside risk while shielding themselves from the upside.
      - NovemberWhiskey 4y ago
        It was sold and par and redeemed at par. Actually it's a bit more complicated, because the preferred stock was also issued with 10 year warrants to buy common stock with an exercise price based on the company stock at the time of issuance. The warrants could be repurchased at fair market value, or they would end up being auctioned by the Treasury. So the Treasury did also have upside participation. e.g. Morgan Stanley repurchased its warrants for $950M vs. its $10B preferred stock sale. The preferred stock also came with all kinds of covenants that related to government policy objectives (capping of common stock dividends, initial limitations on redemption absent a successful raising of equity, executive compensation restrictions) which really frustrate the notion of "pricing" this. The point still remains; the premise of TARP was "the only way the government loses the entire pot is if the program fails disastrously and the entire financial sector fails" whereas the premise of PPP was "the desired outcome is that all the loans are forgiven and the government loses the whole pot".
pwinnski 4y ago
Referring to "TARP/PPP" is misleading, IMO. TARP disbursed $440 billion in exchange for assets, and received back $443 billion to return those assets[0]. It made a small profit for taxpayers. PPP is... not that. 0. https://www.thebalancemoney.com/tarp-bailout-program-3305895 https://www.thebalancemoney.com/tarp-bailout-program-3305895
- BWStearns 4y ago
  I didn't mean to over-imply the similarities. I was mostly pointing out that large scale interventions rightfully sacrifice oversight for speed/impact, but that it'd be nice to see more after the fact accountability.
jedberg 4y ago
My guess is that person was against TARP and was trying to make a political statement, since you couldn't really spend TARP money like that.
varelse 4y ago
HWR_14 4y ago
> t especially with programs like TARP/PPP where the recipients are generally _already wealthy_ and the payments are relatively large, I'd like to see some after-the-fact scrutiny Or, here me out, we stop giving rich people money regardless. I can see a program that protects businesses in 2020 since they were shut down, but think we could have had a better program than the PPP. I don't understand why we didn't just let companies in 2008 go bankrupt. Can someone explain it to me?
- ls612 4y ago
  2008 was essentially a liquidity crisis not a solvency crisis. Think of it as a bank run on things that looked like banks but didn’t have deposit insurance (hence all the talk afterwards about ‘shadow banks’) Once you understand what was happening the solution of first solving the liquidity crisis (by having the government front the liquidity; note that all of the banks paid back the TARP money), and then instituting strict capitalization regulations on banks (ie Dodd-Frank and Basel II which hurt their profits by reducing risk) to avoid the same thing happening again and remove some of the moral hazard is a perfectly reasonable policy response.
  - HWR_14 4y ago
    But the issue with bank runs is that little old ladies lost their life savings. Who cares if hedge funds lost their money because of a run in the bank. Besides, it seemed from the outside to very much be a solvency/asset price issue. Mortgages were being defaulted on, money was owed. If GS or AIG went out of business and ended up being a subsidiary of Burry's fund, who does that hurt. GS's customers have their money/shares GS manages sequestered so it's not like Main Street would lose their portfolios (although they would have to write down the value)
    - ls612 4y ago
      I’m saying that the fact that the banks all paid back their TARP money in full with interest and those banks still exist today is a signal that it was not fundamentally a solvency crisis.

CrazyStat 4y ago

> But especially with programs like TARP/PPP where the recipients are generally _already wealthy_ and the payments are relatively large, I'd like to see some after-the-fact scrutiny where people who commit fraud are punished, otherwise it reinforces the impression that money buys impunity. This is happening, it's just slow. For example [1]. [1] https://www.justice.gov/opa/pr/california-man-sentenced-over-11-years-27-million-ppp-fraud-scheme https://www.justice.gov/opa/pr/california-man-sentenced-over...

alistairSH 4y ago

t's hard to make a program like that quick enough to be effective without allowing fraud... Wasn't that the reasoning behind structuring PPP as loans? Get the money out as a loan, then forgive/not-forgive later after the borrower submits paperwork proving the funds were used appropriately. It appears that second phase isn't happening - the government is just forgiving everything.

deleted 4y ago
[deleted]
panarky 4y ago
I don't know if that was ever stated as the rationale, but many people inferred that it was. It's a defensive inference, to defend our belief that authorities wouldn't attempt to solve a crisis by just transferring a trillion dollars from lower rungs on the economic latter directly to higher rungs on the ladder. We want to believe that the distribution of wealth is caused by individual behavior, that every person deserves their station in life however opulent or impoverished. We want to ignore the systems of power and privilege that exploit the low to further enrich the high. But PPP strips away even the veneer of fairness and lays bare the brutal mechanics of wealth distribution based on power instead of contribution or merit. Perhaps the reason PPP was structured as loans instead of grants was to maintain that fig leaf of fairness, to allow us to continue to defend the indefensible.
- Wyoming23 4y ago
  Do "we" believe any of that? Everything you're suggesting here is just standard left-wing political worldview wrapped in a narrative device of "we believe <the system works>, but really it doesn't". Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? Maybe I'm mistaken about how the program worked, but I thought it was essentially the government stepping in to provide funds for payroll.
  - Loughla 4y ago
    >Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? That's sort of the entire narrative here, though. In theory, you are correct. BUT - the "loans" being forgiven across the board is, essentially, removing the step where businesses prove that the money was used for what it was supposed to be used for. So, absent concrete proof, it is easy to speculate that this was just another wealth transfer to the top. Will we ever know? Probably not. But it's one more thing to throw onto the outrage bonfire for every side. It gives the left something to talk about (look at the wealth transfer to the rich). It give the right something to talk about (look at this gross overspend by the government). It gives the middle something to talk about (look at how smart we are knowing that this would happen). And it's all political theater. These are my opinions. Edit: that being said, look at the comments in this thread for literal arguments that are examples of every single point in that last paragraph.
  - panarky 4y ago
    That's a great example of the power of Orwellian naming. Only 25% of "Paycheck Protection" funds "trickled down" to workers, while 75% was hoarded by owners. If the objective is to get cash into the pockets of workers, you can just give it to them directly, and they'll get 100% of it. The only possible rationale for implementing a Rube Goldberg system like PPP is if you intend for the vast majority of the funds to get siphoned off by the wealthy long before it makes it down to workers.
Scoundreller 4y ago
I think the “loan” structure was to allow the corps to defer the revenue. It let them flush themselves with cash while claim a loss on paper and reduce/reverse their taxes that year.
- panarky 4y ago
  PPP payments are not "revenue" and they're not taxable income. Owners and shareholders can dividend this cash to themselves while still claiming operating losses.
gumby 4y ago
An existing program through the SBA was used as it was the fastest way to get cash out the door. That program happened to be a loan program, so they were structured that way with an almost automatic forgiveness. Think of it as an API adaptor.
- landemva 4y ago
  > the SBA was used as it was the fastest way to get cash out the door. Many non-savvy small businesses missed out in part due to lack of accounting help and lack of banking relationships for the application papers. If this was to keep employees working, then the fastest way would be to credit the employer payroll tax federal withholding back to the employer after the employer sent it to the Feds. That is an existing channel and would be based on verified employee pay withholding.
  - gumby 4y ago
    The could have even credited back more than the withholding (i.e enough to cover the wages). But not sure that would work: company might not have the cash flow to float the payroll, and perhaps it would have invited a different fraud? There weren’t a lot of tools and time was short. Would be worth thinking through for next time though. And let’s hope there isnt a next time.

jandrese 4y ago

The problem of course is that the review process is an enormous problem and there just aren't that many people in charge of reviewing them. I think a lot of people who are tuned into grifting the government saw it as a huge opportunity.

ItsMonkk 4y ago

It appears that we are heading into a recession as we speak. What are law makers doing right now to prepare for the possible effects of this recession? What are we doing to predict which parts of the financial system will collapse? What are we doing to prepare if CO-VID mutates into a deadly strain? We've known for 30 years that the climate will change, have we done anything to prepare for the consequences of that? Why must we always need to react and pass TARP or PPP within a week time-frame or the entire economy crumbles?

jjtheblunt 4y ago
> We've known for 30 years that the climate will change to your point, archaeologists have been scuba diving to sunken coastal Greek and Roman era cities all around Mediterranean coasts for decades too, sunken from sea level rising may meters over the last couple thousand years. Just another interesting datapoint straight from National Geographic magazines as a kid, before politicians really grabbed hold of global warming.
- Wyoming23 4y ago
  That's not a "interesting datapoint" that's an unrelated anecdote. That's the climate change denialism equivalent of "my grandma smoked her whole life and didn't get lung cancer, so these scientists don't know what they're talking about".
  - phpisthebest 4y ago
    It would not call it denialism I would call it taking a different view that we can or should attempt to stop climate change There are 3 groups 1. People that think we should stop at nothing, including resetting the global economy, to stop climate change 2. People that think Humanity can and will adapt to the changing environment and that is the best course 3. People that think nothing is changing, and everything is fine
    - s1artibartfast 4y ago

NovemberWhiskey 4y ago

TARP is nothing like PPP though; the vast majority of TARP bailout money was basically in the form of asset purchases (equity stakes in banks, finance firms and insurance companies), loan guarantees and finally outright loans to large companies in the auto-industry. Although there was an expectation that some of the asset purchases might turn out to be valueless, or that loans not be repaid; there was no concept of loan-forgiveness baked into the bailout. Indeed, basically of the TARP money was repaid in full. PPP's definition of success, on the other hand, was that jobs would be preserved, resulting in the forgiveness of the loans.

Scoundreller 4y ago
> Indeed, basically of the TARP money was repaid in full. Sorta. If you invested money at the bottom of the market in late 08/early 2009 and only broke even several years later, you must have set half the money on fire (edit: or embezzled it).
- NovemberWhiskey 4y ago
  TARP required the banks involved to issue preferred stock for purchase by the Treasury; this prices more like bonds than equities due to the fixed dividend.
  - Scoundreller 4y ago
    Did they pay like $10 or less on each $25 par value or something? Or did they buy at par at like a 10-12% or so rate and duh, the banks redeemed them for par? Still sounds like gov took the downside risk while shielding themselves from the upside.
    - NovemberWhiskey 4y ago
      It was sold and par and redeemed at par. Actually it's a bit more complicated, because the preferred stock was also issued with 10 year warrants to buy common stock with an exercise price based on the company stock at the time of issuance. The warrants could be repurchased at fair market value, or they would end up being auctioned by the Treasury. So the Treasury did also have upside participation. e.g. Morgan Stanley repurchased its warrants for $950M vs. its $10B preferred stock sale. The preferred stock also came with all kinds of covenants that related to government policy objectives (capping of common stock dividends, initial limitations on redemption absent a successful raising of equity, executive compensation restrictions) which really frustrate the notion of "pricing" this. The point still remains; the premise of TARP was "the only way the government loses the entire pot is if the program fails disastrously and the entire financial sector fails" whereas the premise of PPP was "the desired outcome is that all the loans are forgiven and the government loses the whole pot".

pwinnski 4y ago

Referring to "TARP/PPP" is misleading, IMO. TARP disbursed $440 billion in exchange for assets, and received back $443 billion to return those assets[0]. It made a small profit for taxpayers. PPP is... not that. 0. https://www.thebalancemoney.com/tarp-bailout-program-3305895 https://www.thebalancemoney.com/tarp-bailout-program-3305895

BWStearns 4y ago
I didn't mean to over-imply the similarities. I was mostly pointing out that large scale interventions rightfully sacrifice oversight for speed/impact, but that it'd be nice to see more after the fact accountability.

jedberg 4y ago

My guess is that person was against TARP and was trying to make a political statement, since you couldn't really spend TARP money like that.

varelse 4y ago

HWR_14 4y ago

> t especially with programs like TARP/PPP where the recipients are generally _already wealthy_ and the payments are relatively large, I'd like to see some after-the-fact scrutiny Or, here me out, we stop giving rich people money regardless. I can see a program that protects businesses in 2020 since they were shut down, but think we could have had a better program than the PPP. I don't understand why we didn't just let companies in 2008 go bankrupt. Can someone explain it to me?

ls612 4y ago
2008 was essentially a liquidity crisis not a solvency crisis. Think of it as a bank run on things that looked like banks but didn’t have deposit insurance (hence all the talk afterwards about ‘shadow banks’) Once you understand what was happening the solution of first solving the liquidity crisis (by having the government front the liquidity; note that all of the banks paid back the TARP money), and then instituting strict capitalization regulations on banks (ie Dodd-Frank and Basel II which hurt their profits by reducing risk) to avoid the same thing happening again and remove some of the moral hazard is a perfectly reasonable policy response.
- HWR_14 4y ago
  But the issue with bank runs is that little old ladies lost their life savings. Who cares if hedge funds lost their money because of a run in the bank. Besides, it seemed from the outside to very much be a solvency/asset price issue. Mortgages were being defaulted on, money was owed. If GS or AIG went out of business and ended up being a subsidiary of Burry's fund, who does that hurt. GS's customers have their money/shares GS manages sequestered so it's not like Main Street would lose their portfolios (although they would have to write down the value)
  - ls612 4y ago
    I’m saying that the fact that the banks all paid back their TARP money in full with interest and those banks still exist today is a signal that it was not fundamentally a solvency crisis.