Monthly Archives: March 2020

Letter to my daughters 3/20/30

If we get a vaccine or a cure we could have a quick recovery. But that’s unlikely in the next 3 months. I wrote an article in my blog about changing the bankruptcy laws to provide for forgiveness of many small business monthly expenses other than payroll
for 120 days. We must also get money to people
who have lost their income. Even though some companies are not being hurt or are prospering there is a real possibility of a depression. Congress may act too slowly or provide grossly inadequate relief. The stock market could collapse. I don’t know the number of jerks who are subject to margin liquidations if the market declines further. Good stocks are sold to raise cash. Short selling should have been banned. Even if restaurants reopen until we have a cure for the virus only people who are virus survivors will be safe. We must test millions of people before that will be a significant number. How much business will they do and how many of the laid off employees will be rehired? How many people will fly or ride the subway? How many planes will be needed?

I have some thoughts to consider. If there is a depression capitalism as we know it is not likely to survive. Many strong companies will survive but the government may wind up owning numerous businesses. Some strong restaurants will survive, but customers of small restaurants may have to put up funding to reopen their favorite bar or restaurant. I believe that americans are imaginative and will find ways to get the economy going. We will need a huge make work program . My idea for an interstate fresh water pipeline would be perfect. Workers can be kept apart until we have a vaccine. They would be working instead of getting welfare. The problem is that people in the cities are losing their jobs and would have to relocate to where the jobs are. Other make work projects will be needed to reverse the decline in many major industries.

THE COVID-19 DISASTER AMENDMENT TO THE BANKRUPTCY ACT

President Trump is urging Congress as part of his fiscal stimulus proposal to take immediate action to provide funding for businesses to enable them to survive the disruption of operations resulting from the Covid-19 virus. Time is of the essence. Such funding is being discussed, but Congressional quibbling will delay it and without adequate revenues the funding when given will be quickly dissipated to pay for rent, mortgage payments, real estate and payroll taxes, loan interest payments and utilities. Unless we find a way to improve their cash flow large numbers of businesses will close and not reopen or will quickly fail and millions of jobs will be lost.

Creating a new form of bankruptcy relief which eliminates selected business obligations offers a better way to resolve their short term cash flow problem.

Congress should amend the federal bankruptcy laws by adopting The Covid-19 Disaster Amendment To The Bankruptcy Act (the “Act”) to permit small businesses, regardless of whether they are operated as corporations, partnerships or as individual proprietorships to file a simple petition to a federal bankruptcy court to obtain forgiveness of the operating expenses described above for a 120 day period beginning retroactively to March 10, 2020. The relief should be immediately available to a business upon the filing of a petition with the clerk of the local federal bankruptcy court listing the name and address of the business and the name and address of the owner of the business seeking relief under the Act. The relief shall become available immediately upon the filing. The clerk shall issue a receipted copy of such filing and at a nominal cost additional copies which the business owner can use to prove its immediate entitlement to such relief.

The relief should apply to all obligations which accrued during the protected period whether or not paid. Unpaid obligations during the period shall be forgiven. Payments made on account of such protected period obligations should be recoverable by subtracting the amounts paid from payments due to the person who received such payments. in the period immediately following the end of the protected period.

Certain large employers or businesses which have remained profitable or have not been seriously disrupted by Covid-19 such as businesses which receive payments from insurance reimbursements or governments and restaurants which regularly derive 50% or more of their revenues from take out orders should not be eligible for the relief.

The recipients of the forgiven payments will in almost all cases be able to absorb the reduction in their revenues.. We can offer protection to landlords and banks if required.

Layoffs and reduced individual income are separate and equally important problems. We must find a way to adequately compensate individuals have lost their job or whose income has been reduced. Providing loans to businesses as they reopen when the virus is under control will not solve the problem. Modifying unemployment insurance to compensate everyone who is laid off or whose income has been reduced should be considered with the same urgency. It might be the best way to get cash to workers. We must not forget service income employees, particularly those who rely on tips.