I don't think you realize just how perilous the economic situation was in mid-late march. Money had to reach Businesses very quickly, regardless if some of the money would end up wasted. Only banks have the manpower, infrastructure and knowledge already in place to reach even small businesses across the entire country. There was absolutely no way for any governmental agency to be able to manage such a huge program in such a small timeframe.

Again, I can't stress how important time was. I study and work in financial engineering, and from what I've seen and directly experienced in the depth of the crisis, we were days from total seizure in the financial system. The only part that was still doing ok was banking (due to what happened after 2008). Adding to that, since it's much harder to just give millions of dollars of loans to anyone who demands than it is to give 2000$ per person through the IRS, you had to have a system to vet, check and analyse claims. That's exactly what banks were able to do almost immediately with minimal adjustments.

I agree that it is far from ideal for the private sector to such a big influence on a public program. But perfect is the enemy of good, especially considering the incredible human misery that failing could've led to.

Great response. I wish all of the people criticizing these efforts would actually try to design a better program. Even the thought exercise would show how difficult it would be. Easier to crap on the work of others than actually do it yourself.

I also wish they would think about the consequences of no action. They probably don’t realize that cascade bank failures and supply chain disruptions happen fast and become permanent. In March there was a realistic possibility of systematic seizure of finance and the supply chain grinding to a total halt due to lack of financing. How do you stock groceries when they can’t buy inventory?

I remain unconvinced that so many companies were on "thin ice" that a do nothing approach would have caused a collapse. Any evidence of this?

I would've been okay-ish with the arrangement if there was some narrow qualification criteria like being in the grocery business or medical supply chain, etc.

Fine dining restaurants: not essential Summer camps: not essential Non-profits: not essential Law firms: not essential either!

And yet we paid them millions... _why?_

I picked a random company from the 150k list. A pizza place, around the corner. Been in business since 2007. They received $150,000-350,000. So a place deemed essential by the governor and that's permitted to operate curbside and takeout delivery after being open for 13 years is eligible for 150k? What kind of drugs are we on?

Yes, but the vast majority of the money is going to salaries. I'd even argue that there is absolutely no problem in funding even most of the "non essential" businesses. And to say that businesses were on thin ice by april is an understatement by the way: revenue disappeared overnight, lending froze almost overnight, liquidity became almost impossible to access. Even by early april half small businesses could not afford to pay rent, much less salaries. The financial system has never seen anything like what happened to march, I can't stress enough that almost every single "pipe" that make up systems we all depend on was collapsing. Programs like these took aways tons of uncertainty and deep fears of a recovery that would take a very, very long time. Things got much better when government support boosted confidence and guaranteed that people will still have money to spend.

Now I've heard people argue that compensation for lost salaries should've been paid directly to the employees if they lost their jobs. But to put it mildly, recovery and return back to normal would have been extraordinarily harder if most of the non essential parts of the economy don't exist anymore.

The price of letting everything go bankrupt only to reopen from scratch later is enormous and would amount to incredible waste not only of money but also years of work. The 150k may have been way too much for a local pizzeria, but it's better to overshoot than to aim for much better money allocation and risk losing precious time. You have to keep in mind that not only do businesses have to pay back the loans (if the money didn't go to salaries) but also that we will have ample time to take a closer look at each individual claim and punish fraud retroactively. The process is already starting as we can see with the linked website.

At the end of the day, we just couldn't afford to have a better PPP program because no matter how much money we lose on fraud and waste, the alternative would have always been more expensive.

Do you know any restaurant owners or managers? Ask them about the drop in revenue and how long it can be sustained. Ask them how many employees they had and how many they need for curbside take out. Ask if they would have fired people absent PPP. Ask if they kept people employed because of PPP.

Do you have a better suggestion? I doubt it. There are to many edge cases in business to create a program that will be perfect. So your alternative is to take the risk of mass bankruptcies. If PPP designers and law makers are wrong billions are wasted. If your approach tested and is wrong, the economy is wrecked. Decision is easy when framed that way.

When unemployment shoots to 25% it’s a sign of a lot of sever stress for businesses. Left uncheck the drop in demand will create further contraction. What more evidence do you want that urgent action system wide is needed? By the time the bankruptcy filings start its too late.

>and yet the stream of cash continues to flow to those too stupid to save a few months of operating expenses/payroll.

That's a bit of a harsh take. Lots of businesses took out these loans preemptively because they knew the money would dry up soon. Both the company I work for and our family business had applications ready to go the minute they could be filed because it was clear that the application process was going to be a mess.

I agree with you that the forgiveness should be tied to an ownership stake in the business, and that dispersal of funds should have only happened with demonstrable need of funds. But the people involved knew this was going to be a handout and acted accordingly. Taking these funds is an indicator of good business sense, not poor.

No business with a 5-10% net margin can save 2 months operating expenses just in the off chance that there is a black swan event because doing so would put them at a competitive disadvantage over competition that doesn’t save and instead uses the money to lower prices, pay higher wages or invest in new products.

Meanwhile the government can borrow money at almost negative rates, based on long term tax collections, and arbitrage short term financial harm and need against long term repayment. Seems like a rational thing to do.

> Of all types of institutions, why should we be giving the banks the right to decide which businesses should be recession proof or not?

Your underlying point is well made, but it's important to understand the process: The banks issued the loans, but the federal Small Business Association reviewed and approved them.

> yet the stream of cash continues to flow to those too stupid to save a few months of operating expenses/payroll.

You can disagree with the program, but the comment is overly hash, IMHO. As a business owner, I see the program as a lifeline to handle cashflow issues and retain workers. I'm not sure that is a "trash society."

I think an angle missed here is that the government is trying to fend off deflation through fiscal stimulus. Individuals and small businesses have a propensity to spend, which gives forward pressure to what was then a rapidly declining velocity of money. The Fed's ability to act unilaterally is more limited, being executed through bond buying programs.

This money needed to be added to the economy, and really still does. I think PPP was one such reasonable approach (though much more is needed to save small/medium businesses).

I would guess the logic was somewhere around KYC. Businesses have relationships with their banks, and the easiest way to be guided through the process was going to your local rep. Banks would be much better at determining "do we already have an established business relationship with this legit business" vs the federal government trying to determine "which businesses are fake or frauds." It was a way to distribute the verification workload.

The worst part of the PPP is that the approval of the "loans" was not the responsibility of the banks involved, they just "assisted" the loan seekers with collating their documents and the banks still charged the same fees they would normally for full loan servicing. So the banks got paid billions for doing very little, just a nice haircut off the top.

> yet the stream of cash continues to flow to those too stupid to save a few months of operating expenses/payroll

If I was running a business and the government told me it was illegal for me to make money for the forseeable future, I would damn well want them to compensate me for that.

> why should we be giving the banks the right to decide which businesses should be recession proof or not?

Would you rather have our politicians deciding this?