RESERVE CHAIRMAN JEROME POWELL
WARNED THAT THE U.S. ECONOMY WAS
FACING A DOWNTURN WITHOUT MODERN
PRECEDENCE.
HE WAS RIGHT, OF COURSE.
YESTERDAY, ANOTHER 1.3 MILLION
PEOPLE FILED FOR UNEMPLOYMENT
INSURANCE, FAR AND AWAY THE
WORST WEEK ON RECORD.
EXCEPT FOR THE 16 WEEKS BEFORE
IT, EACH WITH MORE THAN A
MILLION PEOPLE FILING FOR
BENEFITS.
BUT THIS WEEK, WE ALSO LEARNED
THAT A DOWNTURN WITHOUT MODERN
PRECEDENT DOESN’T MEAN EVERYONE
IS FEELING SO DOWN.
THE FIVE BIGGEST INVESTMENT
BANKS ON WALL STREET ARE ALL
PROFITABLE.
MORGAN STANLEY JUST HAD THE MOST
PROFITABLE QUARTER IN ITS
HISTORY.
AND GOLDMAN SACHS IS ON SUCH A
TEAR THAT ONE ANALYST DESCRED
ITS EARNINGS AS ALMOST INDECENT.
BUT HERE’S WHAT’S REALLY
UNBELIEVABLE.
THE DISCONNECT BETWEEN WALL
STREET AND MAIN STREET, THIS
GOLD RUSH ON ONE WHILE THERE ARE
LITERAL BREAD LINES ON THE
OTHER, IS NOT A BUG IN THE
SYSTEM.
IT IS A FEATURE OF THE SYSTEM.
TO SOFTEN THE ECONOMIC BLOW OF
THE PANDEMIC, THE FED FLOODED
THE ECONOMY WITH CHEAP CASH AND
VERY FEW STRINGS ATTACHED.
AND IT’S CLEARLY WORKING, FOR
THE BANKS.
BUT IT MAY BE ABOUT TO GET A
WHOLE LOT WORSE FOR EVERYONE
ELSE.
AT THE END OF THIS MONTH,
MILLIONS OF AMERICANS ARE SLATED
TO LOSE THE EXTRA $600 A WEEK
THEY HAVE BEEN RECEIVING AS PART
OF THE C.A.R.E.S. ACT, MONEY
THAT HAS BEEN A CRUCIAL
LIFELINE.
TO HIS CREDIT, CHAIRMAN POWELL
HAS CALLED ON CONGRESS TO DO
MORE TO PROVIDE RELIEF FOR OUT
OF WORK AMERICANS IN APRIL, AND
AGAIN IN MAY, AND AGAIN IN JUNE.
IF THAT MONEY RUNS OUT WHILE THE
VIRUS KEEPS SURGING, EVENTUALLY,
EVERYONE HURTS.
AND MAYBE EVEN THAT WILL TURN TO
THE BANKS.
WITH ME NOW IS SHEILA COLE
HATCAR, STAFF WRITER AT "THE NEW
YORKER."
THANK YOUS FOR JOINING US.
I WANT TO TALK ABOUT THIS
DISCONNECT BETWEEN WALL STREET
AND MAIN STREET.
HOW IS IT THAT YOU CAN HAVE
MORGAN STANLEY POSTING ITS MOST
PROFITABLE QUARTER ON RECORD AND
AS ONE ANALYST PUT IT, GOLDMAN
SACHS COULD HAVE INDECENT
EARNINGS WHILE ON THE OTHER SIDE
OF THINGS YOU COULD HAVE
MILLIONS OF AMERICANS GOING TO
FOOD PANTRIES?
>> ONE THING THAT’S IMPORTANT TO
REMEMBER IS THAT THE STOCK
MARKET, MUCH AS PRESIDENT TRUMP
LIKES TO BRAG ABOUT IT, THE
STOCK MARKET IS NOT AN ACCURATE
REFLECTION OF THE ECONOMIC
HEALTH OF MAIN STREET AMERICA.
AND THE PEOPLE WHO TEND TO
BENEFIT THE MOST FROM A RISING
STOCK MARKET ARE CORPORATE
EXECUTIVES, INVESTORS IN BIG
INVESTMENT FUNDS LIKE HEDGE
FUNDS, AND WHILE THERE ARE MANY
AMERICANS WITH MONEY INVESTED IN
RETIREMENT ACCOUNTS, YOU KNOW,
USUALLY THAT DOES NOT TRANSLATE
INTO FOOD ON THE TABLE.
SO THEY’RE REALLY NOT REFLECTING
THE SAME WORLD.
>> THERE ARE THE UNEMPLOYMENT
BENEFITS, THE EXTRA $600 RUNS
OUTS AT THE END OF THE MONTH.
THERE’S MORE URGENCY AROUND
POTENTIALLY EXTENDING THAT.
STEVE MNUCHIN WAS TALKING ABOUT
HOW THERE NEEDS TO BE ANOTHER
STIMULUS.
THE PRESIDENT IS TALKING ABOUT
HOW HE WANTS A PAY ROLL TAX CUT
INCLUDED.
WOULD A PAY ROLL TAX CUT HELP
AVERAGE AMERICANS?
>> PAY ROLL TAX CUT, WHICH THE
PRESIDENT HAS BEEN TALKING ABOUT
SINCE THE BEGINNING OF THIS,
IT’S A LITTLE CONTROVERSIAL
BECAUSE IT ONLY HELPS PEOPLE WHO
ARE EMPLOYED.
AND A LOT OF ECONOMISTS BELIEVE
THAT IN A SITUATION LIKE THIS,
AN UNPRECEDENTED SORT OF ACROSS
THE BOARD ECONOMIC COLLAPSE, YOU
NEED TO GET CASH INTO PEOPLE’S
HANDS.
AND THE C.A.R.E.S. ACT DID DO A
PRETTY EFFECTIVE JOB OF THAT
INITIALLY, SENDING THIS EXTRA
$600 A WEEK THAT PUT MONEY IN
PEOPLE’S POCKETS.
IT GAVE PEOPLE SPENDING POWER,
WHICH IS GOING TO HELP THE
ECONOMIC RECOVERY.
BUT OF COURSE, WE’RE FACING A
CLIFF.
WHEN THAT ENDS, AND IF IT’S NOT
EXTENDED, THERE ARE GOING TO BE
A LOT OF PEOPLE IN SERIOUS
FINANCIAL DISTRESS, AND OF
COURSE, YOU KNOW, MAKING THIS
DISCONNECT WITH THE RISING STOCK
MARKET ALL THE MORE GLARING.
THAT’S SOMETHING THEY’RE REALLY
GOING TO HAVE TO ADDRESS IN
WASHINGTON.
>> HOW MUCH OF THAT TAX CUT THAT
THE PRESIDENT AND CONGRESS
PASSED A COUPLE YEARS AGO HAD TO
DO WITH THIS WIDENING GAP
BETWEEN THE VERY RICH AND MIDDLE
AMERICA?
>> WELL, I INTERVIEWED THE
TREASURY SECRETARY RECENTLY FOR
A NEW YORKER PIECE, AND HE WAS
ADAMANT THAT THAT 2017 TAX CUT
HELPED WORKING AMERICANS, BUT OF
COURSE, THERE HAVE BEEN MANY
ECONOMIC ANALYSES THAT IN
INCONCLUDED A MAJORITY WENT TO
LARGE CORPORATIONS.
THEY DROPPED THE CORPORATE TAX
RATE DRASTICALLY, AND THE
EXPECTATION AND ARGUMENT WOULD
BE THAT THE COMPANIES WOULD HAVE
MORE PROFITS AND USE THAT TO
INVEST IN THEIR WORKERS AND
BUILT PLANTS AND FACILITIES AND
GIVE RAISES AND WAGES TO THEIR
WORKERS.
AND OF COURSE, WHAT ENDED UP
HAPPENING IS A LOT OF THAT MONEY
ENDED UP BEING SPENT ON STOCK
BUYBACKS, WHICH AGAIN, TENDS TO
BENEFIT COMPANY EXECUTIVES WHO
OWN A LOT OF STOCK, AND THERE
WERE SOME WAGE INCREASES BUT
THEY WERE RELATIVELY SMALL, AND
OF COURSE, MIDDLE AMERICAN WAGES
HAVE NOT GONE UP IN 30 OR 40
YEARS WHEN YOU ADJUST FOR THE
COST OF LIVING.
SO ALTHOUGH THEY HAD PROMISED
THERE WOULD BE THIS TRICKLE-DOWN
EFFECT OF THE BIG CORPORATE TAX
CUT, IT DID NOT REALLY TRANSLATE
INTO BENEFITS FOR AVERAGE
FAMILIES.
>> AND QUICKLY, IF YOU CAN, IF
THAT $600 EXTRA UNEMPLOYMENT
BENEFIT RUNS OUT AND IS NOT
REUPPED, WHAT IS THAT GOING TO
MEAN?
>> IT’S GOING TO MEAN A LOT OF
ECONOMIC PAIN FOR INDIVIDUALS
ACROSS THE COUNTRY.
AND OF COURSE, INDIVIDUAL STATE
UNEMPLOYMENT BENEFITS MAY STILL
BE AVAILABLE, BUT IN MANY CASES,
IT’S NOT ENOUGH.
AND THAT IS GOING TO MAKE THIS
ECONOMIC CRISIS WORSE, NOT
BETTER.
>> INTERESTINGLY, A LOT OF MONEY
IS GOING FOR PEOPLE TO PAY RENT,
TO PAY MORTGAGES, THEIR LOANS,