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  • Law, Interpretation, Code, Checks

    Posted by David Foster on April 26th, 2020 (All posts by )

    Many people in government–including President Trump and several Congresspeople–have expressed dismay about the ‘stimulus’ checks sent to organizations such as Harvard University and Shake Shack.  I haven’t observed much curiosity, though, about why these checks got sent out in the first place.

    Was the CARES act so written as to require money to be sent to such organization?  I haven’t read through this very large document, but here it is if anyone feels inspired to do so.

    Was the language of the law so ambiguous that it was interpreted by the detailed implementers as requiring such funding, even though that was not Congressional intent?

    Was it simply a matter of a coding error in a program that had to be written or modified very hastily in order to send out millions of checks?

    I’m curious about the lack of curiosity re this matter.

     

    8 Responses to “Law, Interpretation, Code, Checks”

    1. Mike K Says:

      I understand that Carnival Cruise Lines has been bailed out but not to what degree. If it was to keep people on payroll, it might be appropriate, unlike the Kennedy Center which got $25 million and promptly laid off the orchestra.

    2. Assistant Village Idiot Says:

      Government can’t be bothered with those details. They are all about the show. You are supposed to figure out for yourself whether your opponents can make you look bad for accepting it, you selfish bastards.

    3. Grurray Says:

      Here is the section of the bill concerning the payments to businesses. The parts is bold type are relevant

      (D) ASSISTANCE FOR MID-SIZED BUSINESSES.—

      (i) IN GENERAL.—Without limiting the terms and conditions of the programs and facilities that the Secretary may otherwise provide financial assistance to under subsection (b)(4), the Secretary shall endeavor to seek the implementation of a program or facility described in subsection (b)(4) that provides financing to banks and other lenders that make direct loans to eligible businesses including, to the extent practicable, nonprofit organizations, with between 500 and 10,000 employees, with such direct loans being subject to an annualized interest rate that is not higher than 2 percent per annum. For the first 6 months after any such direct loan is made, or for such longer period as the Secretary may determine in his discretion, no principal or interest shall be due and payable. Any eligible borrower applying for a direct loan under this program shall make a good-faith certification that—

      (I) the uncertainty of economic conditions as of the date of the application makes necessary the loan request to support the ongoing operations of the recipient;

      (II) the funds it receives will be used to retain at least 90 percent of the recipient’s workforce, at full compensation and benefits, until September 30, 2020;

      (III) the recipient intends to restore not less than 90 percent of the workforce of the recipient that existed as of February 1, 2020, and to restore all compensation and benefits to the workers of the recipient no later than 4 months after the termination date of the public health emergency declared by the Secretary of Health and Human Services on January 31, 2020, under section 319 of the Public Health Services Act (42 U.S.C. 247d) in response to COVID–19;

      (IV) the recipient is an entity or business that is domiciled in the United States with significant operations and employees located in the United States;

      (V) the recipient is not a debtor in a bankruptcy proceeding;

      (VI) the recipient is created or organized in the United States or under the laws of the United States and has significant operations in and a majority of its employees based in the United States;

      (VII) the recipient will not pay dividends with respect to the common stock of the eligible business, or repurchase an equity security that is listed on a national securities exchange of the recipient or any parent company of the recipient while the direct loan is outstanding, except to the extent required under a contractual obligation that is in effect as of the date of enactment of this Act;

      (VIII) the recipient will not outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan;

      (IX) the recipient will not abrogate existing collective bargaining agreements for the term of the loan and 2 years after completing repayment of the loan; and

      (X) that the recipient will remain neutral in any union organizing effort for the term of the loan.

      The Treasury Department handed the money over to banks, but the banks did not have any responsibility to determine if a borrower was eligible or not.

      The bill was sold as a program for community banks, but the big banks like JP Morgan got most of the money. They in turn gave most of that to their largest customers, allegedly to collect the higher fees.

      The bank is among four lenders now facing accusations in a lawsuit that they prioritized the biggest loans in order to earn higher fees. Banks earned origination fees of 5% on loans of up to $350,000; 3% on loans between $350,000 and $2 million; and 1% on loans between $2 million and $10 million. That means they earned $17,500 for processing a $350,000 loan, compared with $100,000 for a $10 million loan.

      So this is the result of the Too Big To Fail financial system that was constructed after 2009. It picked winners and losers, and unfortunately most of America is now in the latter category.

      Small community banks would presumably more be responsive to local customers or at least more accountable to the local community. However, even if all the money went to small banks, I’m not sure there are enough around anymore to make an impact.

    4. David Foster Says:

      “(VIII) the recipient will not outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan;”

      Well, that’s a provision that could lead to all kinds of issues…presumably, they mean any *additional* jobs beyond ones already outsourced/offshored, though poor drafting makes that ambiguous. But “outsource” in general usage would include contracting work to another US corporation (or individual), not only to a foreign entity.

      And, as far as strict offshoring goes, would this apply only to jobs in the corporation or nonprofit itself?…Or could it replace a US supplier with a non-US supplier if they thought they needed to? What if US supplier stops making a necessary component…can it be obtained from a non-US source?

      I foresee a lot of $$$ opportunities for lawyers.

    5. David Foster Says:

      I’m not sure exactly how “eligible business” is defined, but assuming that it’s pretty broad, no one should have been surprised to see Harvard and Shake Shack as being eligible.

    6. Alaska Paul Says:

      Whenever one delivers a product or legislation, this basic principle still applies:

      *Delivered FAST

      *LOW COST

      *QUALITY

      Pick two out of three.

    7. MCS Says:

      I read an article that I can’t find anymore that said that Carnival wasn’t bailed out directly, that the money the fed pumped into the bond market made them able to raise money at acceptably low interest. Only about 15,000 of their employees are American as anyone that has sailed on one will have noticed.

    8. MCS Says:

      Found it:
      https://www.wsj.com/articles/how-fed-intervention-saved-carnival-11587920400