Consider This from NPR - Money Is Flowing For Big Banks. For Unemployed Americans, It's About To Be Cut Off

Episode Date: July 17, 2020

The United States had 71,000 new cases of COVID-19 on Thursday. Back in June, Dr. Anthony Fauci said he wouldn't be surprised to see 100,00 cases per day. That grim prediction is getting closer to reality. While the economy is in a recession and tens of millions of people have lost jobs, some big banks are enjoying huge profits. Three unemployed workers from different parts of the country share what options they have once the federal CARES Act benefits expire at the end of July. Indivar Dutta-Gupta, co-executive director of Georgetown University's Center on Poverty and Inequality, told NPR that the expiration of CARES Act benefits will not only hurt those workers relying on them — but the economy as a whole. Find and support your local public radio station.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

71,000 new cases of the virus. That was Thursday, which was a new record high for the U.S. Suddenly, Dr. Anthony Fauci's ominous warning back in June? I would not be surprised if we go up to 100,000 a day. Seems more of a forecast now. And so I am very concerned. More people getting sick means more bad news for American workers. The unemployment rate is hovering around 11 percent, down from the peak of the pandemic,

but way up since the coronavirus landed here. More than 30 million people are currently collecting unemployment benefits, and added relief for many of those Americans is about to get cut off. Meanwhile, for big banks, money just keeps rolling in. You're listening to Consider This from NPR. Kelly McEvers is off this week. I'm Elsa Chang. It is Friday, July 17th. Support for this podcast and the following message come from Integrative Therapeutics, creator of Physician's Elemental Diet, a medical food developed by clinicians for the dietary management of IBS, IBD, and SIBO under the supervision of a physician.

So months ago, Emily Guil lost her job at a hotel in Portland, Oregon. And while she waited and waited for her unemployment application to go through, she ate through most of her savings. And now she's been relying on federal unemployment benefits, $600 a week, on top of state unemployment. I don't really have much of a plan B at this point. Those $600 a week were part of the CARES Act passed by Congress in March. The benefit expires at the end of July, meaning state unemployment will be the only money Emily has coming in. I'm concerned about going into deep debt and ruining my credit. I'm worried

about not being able to pay my rent and having maybe facing eviction or breaking my lease. She could sell her car, she thought. But then I'm worried that if I get rid of my car, what am I going to do if I can't live in my apartment anymore? So it's a lot of pretty terrible options. In New Orleans, Kim Robinson has also been relying on those $600, plus $247 in state unemployment. She worked at a staffing agency and did support services for companies like Shell. She also has no plan for how to survive on $247 a week.

And with the 600 engine, we still have bills, light, water, gas. Rent has to be paid. Meanwhile, in Arizona... We're, you know, just debating on what we're going to pay and what we can afford to owe later.

Alicia Gonzalez lives with her grandma and four kids. She worked at a Chick-fil-A on a college campus in Tempe. And in terms of cases per capita, the county that Tempe is in is one of the worst places in the world right now for the virus. It's like, is it worth going back out there? But Alicia knows she'll have to find work again soon. So it's kind of scary to even, you know, think about going back, but it's like, I know I need to because, like, I have no other choice. People are facing income losses of

50, 60, 70 plus percent. Indy Dutta Gupta is co-executive director of Georgetown University's Center on Poverty and Inequality. He told NPR today that without more financial aid, which would have to be passed by Congress and signed by the president, the entire economy is going to feel the pain. Families are going to face high rates of eviction, homelessness, food insecurity, hunger, going into debt. And the economy overall is going to see much slower progress in recovery than otherwise. Dutta Gupta spoke to my colleague Sarah McCammon about what could happen to the economy as a whole when those $600 go away, and why state unemployment benefits alone are not enough to get by. That state benefit can vary a lot depending on where you live.

In Arizona, the maximum is $240 a week. How well is the typical household able to live off that much? Families really need well over $600 a week. And there's just no way to afford the cost of housing, potentially the cost of caregiving, the cost of food, which is one of the areas that families have seen costs actually rise during this pandemic and recession. So really, the $600 is just helping families stay afloat. And who will be hit the hardest if this $600 a week goes away? When you think about who's going to be hit the hardest, you see that it's disproportionately

going to be black and brown workers for a couple of reasons. One is that they are disproportionately accessing these benefits now, partly because the job losses in this recession have been heavily concentrated among those very groups of workers. So you combine that with an extraordinary racial wealth gap where Latinx and Black families have about a tenth of the wealth of white families. And you can see that very quickly, you're going to start exacerbating virtually every inequity in this country if we allow the $600 benefit increase to expire. What would the impacts be on the economy more broadly if this funding goes away? Are there ripple effects we might see?

Absolutely. Economists have suggested by the end of 2020 2020 that we should expect nearly 2 million fewer jobs. And I don't see how in a pandemic where we have voluntarily decided to shrink economic activity to save lives, we wouldn't want to just keep money flowing by and large. There is lots of research looking into what happens to workers and families when they receive this benefit. And everything suggests that they're not particularly discouraged from seeking work any more than others. In anything, people who receive unemployment benefits engage in more intense work search. There's lots of evidence that the spending they're doing might actually increase employment in their local economy.

So the $600 is really the most critical ongoing support that Congress has enacted to date to stabilize the entire economy. So to tease that out just a little bit further, you're saying that the ripple effects could include really just sort of a vicious cycle, right, where the unemployment rate gets worse. No, I think there's absolutely a vicious cycle where if families have to cut back, the entire economy will suffer. It will shrink. And if we stay the course with the $600 increase and we're able to control the virus, we will see a vicious cycle turn into a virtuous one in the coming months. Indy Dutta Gupta speaking to my colleague Sarah McCammon. He's a professor at Georgetown University, and he's been advising the Biden campaign on economics. All right, so who is not quite so worried about money right now? I can tell you the answer to that. Big banks. Even with millions of people unemployed and large swaths of the economy struggling, some Wall Street investment banks are enjoying huge profits.

The reason why has to do with the stock market. Here's NPR's Jim Zeroli. This was one of the worst springs in recent memory for the American economy. So when Goldman Sachs reported its second best quarter ever, a lot of people were surprised. Amanda Fisher is policy director at the Washington Center for Equitable Growth. So it's really been kind of a boon quarter for the big investment banks. Goldman is the bluest of blue-chip investment banks. Its clients are among the richest in the world. Big banks like Goldman make a lot of their money

arranging deals for their clients and trading stocks, stocks they either own themselves or trade on their clients' behalf. And stocks have staged a dramatic rebound recently, especially big technology shares like Amazon and Facebook. Karen Shaw Petru is managing partner of Federal Financial Analytics. Anybody with money in the markets has done very, very well. Anyone running a small business or having a job, particularly a lower income job, has struggled. Some big banks like JPMorgan Chase and Citigroup are struggling with a surge of bad loans.

But those losses are being offset by money they're making on their trading desks. One big reason the markets have done so well is the Federal Reserve. It's unleashed a stunning array of lending programs. It's buying up corporate and municipal bonds. It's unleashed a stunning array of lending programs. It's buying up corporate and municipal bonds. It's flooding the economy with money. This has had an impact on investors, says Amanda Fisher. It just instills confidence among investors in the equity markets that the value of their investments will not go down, no matter how hard hit the companies are by the pandemic. The Fed's promises have had their desired effects.

Investors are pouring money into stocks, but the benefits have been pretty uneven. The Fed has also created lending facilities for small businesses, but Karen Petru says they haven't worked so well. For now, the economy remains bifurcated with a sliver of wealthy investors doing much better than anyone else. Petrie says if the economy remains weak in the long run and huge numbers of people are unemployed, then banks will eventually suffer too. There's just no escaping that. But it's a very unequal situation right now because the Fed is supporting markets and banks make money in the markets. That's just the way it is. And Petrie says there's another worry. The more the Fed is supporting markets and banks make money in the markets. That's just the way it is.

And Petru says there's another worry. The more the Fed props up stock and bond prices, the more investors come to depend on the Fed's largesse. And once the Fed stops its bailouts, the markets could quickly lose ground and even the rich will be affected. That was NPR's Jim Zeroli. Additional reporting on this episode from our colleagues at All Things Considered. For more news, download the NPR One app or tune in to your local public radio station. Supporting that station makes this podcast possible. This show is produced by Gabriela Saldivia, Lee Hale, and Brent Bachman. It's edited by Sammy Yenigan and Beth Donovan, with fact-checking from Anne Lee, our executive producers, Cara Tallo. Thanks for listening. I'm Elsa Chang. A Minneapolis business owner's

daughter is called out publicly for racist, anti-Black tweets. Fighting to save his business and trying to make amends, he calls on a prominent Black Muslim leader for help. He's an Arab Muslim. I'm here to learn. Tell me what to do. To hear what happens next, listen to Code Switch from NPR.