It’s difficult to outdo the crypto community when it comes to making bold quantitative claims that, stripped out of context, mislead the incautious. But Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco recently came close.
Chapter 11 bankruptcy may be many firms’ best hope for surviving the present crisis. But to take advantage of it, they need credit—the cheaper the better. Firms can get cheap credit through either the Small Business Administration’s (SBA’s) Paycheck Protection Plan or the Fed’s Main Street Lending Programs. But there’s a catch: to qualify for these loans, they mustn’t file for Chapter 11.
The Fed’s current business lending plan is actually its second try at business lending. Alas, the first attempt went badly, and a look at what went wrong suggests that history may soon be repeating itself.
Thanks to COVID-19, most of the financial business in the United States that was previously being done on‐site is now being conducted virtually: financial markets are open, investment continues, and public companies continue to report.
Had I had 1500 words rather than 1500 characters to play with, I would have argued for keeping the Fed out of the non‐bank lending business altogether, so as to not involve it in politically‐charged decisions regarding which businesses get thrown a lifeline, and which ones are left to drown.