Episode 31- Sizing up three weeks of Covid-19

Rich takes a look at where we are now compared to three weeks ago, from an economic and policy standpoint, and tries to sift through the growing heap of rubble, to look for solutions.

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Brian Kruger:   0:05
Welcome to the podcast,  "The Common Bridge with Richard Helppie."  Rich is a successful entrepreneur in the technology, health and finance space.  He and his wife, Leslie, are also philanthropists with interests in civic and artistic endeavors, but with a primary focus on medically and educationally underserved children. My name is Brian Kruger, and from time to time, I'll be the moderator and host of this podcast. 

Brian Kruger:   0:29
All right, everyone, welcome to The Common Bridge. Rich. Good to have you back. And, let's just get right into it.  Look,  what are some of the policy responses to Cover 19, that you see that we might have done right or wrong.   And I know the book will be written later.   But what are your thoughts going into what is essentially week three of this?

Rich Helppie:   0:49
Well, Brian, when you look at the situation, it was just three weeks ago, maybe a little bit more, that we had robust employment in the United States. We had record high employment.  Every company on the side of their trucks would have ah number to call for jobs. People couldn't find enough workers. Wages were rising. The stock market was reflecting that on a steady climb up.

Brian Kruger:   1:17
...Record house and home sales. 

Rich Helppie:   1:22
Record home sales, and prosperity.  And in just a few weeks that has reversed itself. The stock markets of major indexes air off over 35%. People are being literally ordered not to go to work, and they're being forced into unemployment.  We still have the medical crisis that we are are dealing with today,  and we don't really know when the end point is for this.  So it is going to take some very good government at this time...

Brian Kruger:   2:00
It's what you've been asking for all along.  You've been asking for good government since we started this podcast. You said that's where we're lacking.

Rich Helppie:   2:07
Yeah, and Brian,  here's the issue... Politics and policy are not binary. And that's the fascinating thing that even in this existential crisis, if we can say that, that's not sure too extreme of a position.

Brian Kruger:   2:26
Sure, I think it's not.

Rich Helppie:   2:28
People still seem to think they can win the pandemic or that there partisan view is now going to prevail. They're gonna get everything that they wanted, and they think their  political party or their candidate now is going to look better against the other. And  so we've got bad behavior by the people that we put in office from the two major political parties. And we have worse behavior from a whole media complex that takes a bad situation, sensationalizes it and makes it much worse and is, I don't know, it's malpractice that they don't even do basic fact checking.

Brian Kruger:   3:16
Rich, You were beating this drum in September, long before all this, when everything looked very rosy. So it's it's interesting that, you know, nobody wants to be that right. But Holy smokes, you called this back in September that something was going to come up then we weren't gonna be able to handle it correctly because of how flawed we were because of systematic flaws.

Rich Helppie:   3:37
Exactly.  A couple of months ago.  a friend of mine, whose politics are very much left of center,  He posed this question to me, and he's a thoughtful guy.  He said, do think we could ever be as united as we were on September 12,  2001?  And frankly, the question has stuck with me and you know, even today, I don't have a clear view. I mean, I'd like to believe we could set aside our political differences, but look what we're seeing right now. What's on full display is a partisan divide, and we have an economy that is in great peril. We have households and individuals that are very concerned.  We've seen behavior of disruptions and supply chain and spending patterns to basic necessities of life.  And folks are looking to government to say, Look, we have an issue,  can we structure a solution,  and I think some of the initial policy responses of let's lower interest rates... that doesn't make a difference.

Brian Kruger:   4:54
Well, why don't you educate us a little bit on that? Because that those kind of things were in your wheelhouse and with some of our listeners, it's not, um, so tell us why you might be against that and just dropping it to what the Feds did today. And you can explain that because there's a difference in what they did today from what they did after 9/11 and then tell us about you know and  what you feel about that.  What you feel about just handing out checks.  If that's a good thing or a bad thing to everyone,

Rich Helppie:   5:18
Okay, let me take both of those... about just lowering interest rates,  and then, secondly, about, "just handing out checks." So lowering the interest rates, it's the wrong solution at the time.  Now I don't think it does any damage, but I don't think it's going to do any good. Let me bring this to a, consumer level.   If you had just lost your job because you were not allowed to go to work because you were not in an essential industry and you don't know how long this is going to last and you're thinking,  can you get enough food from the grocery stores and the other essentials of life?  And you've been thinking about buying a new car.  Do you think you're going to say, "Hey, you know what, it was a 2.9% auto loan on a new car, and now it's gonna go down to 0.9%?"  I think I'll run out, buy a new car....I don't think so.   The problem is not the cost of money.   The problem is that people aren't working, which actually goes to your second question, quote, handing out money.   We have to give spending power to the citizens of the United States. We have people who want to work that have been going to work that have been paying their taxes and doing everything as they should. And now our government saying  you can't do that. We need to provide them unemployment insurance on an expanded basis.

Brian Kruger:   7:05
and not just for a portion of their salary, right? I mean, if the government saying you can't go toe work, shouldn't there be some some fiduciary responsibility of the government's part to make sure that they're compensated for not physically being able to get out of the house to go?

Rich Helppie:   7:17
I agree with that. The other part of that argument would be maybe you need 80 or 90% because there are costs associated with going to work.

Brian Kruger:   7:29
I understand. Sure,

Rich Helppie:   7:30
You've got transportation cost to get there and and the like, but it's to me, that's the easiest mechanism, is to continue that  unemployment insurance.   And then if we get on the other side of this pandemic, then as people get called back to work, they come off the unemployment insurance system.

Brian Kruger:   7:56
Sure, I can understand.

Rich Helppie:   7:57
There also has to be protections in there for small businesses that wouldn't be eligible for unemployment insurance.  People that might have small car services. people who might have small cleaning services,  people that might be running hair salons.  And so, supplementing their ability to meet their rent payments to meet their obligations within their community, they need to be supported. Otherwise, when we're on the other side of this pandemic, they won't be around. They won't be in business to serve you, and in the meantime, they're going to suffer horrible human consequences, we just we just can't have.    So any economy has to provide spending power to the people that make the economy work.  And when the social contract of,  'give me your labor, I will give you spending power' is broken because your labor is being refused, there has to be a mechanism in place so that that spending power could be in the hands of those good people who are prevented from going to work.

Brian Kruger:   9:07
You're one of the guys that sometimes folks go to at higher levels. They ask you, how would you go about doing it?  So I'm gonna ask you from the in the podcast here, is Congress going about this the wrong way?  Or if you could wave the magic wand, what would you think would be the best way to go about that?  Is it you know, a direct deposit check in the bank accounts? Is it a debit card?

Rich Helppie:   9:30
The most fair way to do this would be to open up the unemployment insurance system.  Mechanisms are there to have people apply, become eligible to have their benefits quantified and to receive money. And most of it is all done electronically. So if a person says I've been a bartender and I've been making $850 a week, you take them at their word that they've been making $850.   And if it's for 100% of their take home pay or or their gross pay grade or it's of some percentage, they get that until they're called back to work.   And, you know,  is this open to fraud?   People saying that they are earning more than they are reporting?  It is,  but we can't let that disrupt doing the right thing.  And there's plenty of opportunity for audit after the fact and prosecution of people that make false claims like that.  So that's the problem of the virus.  It's not that it has  infected the financial markets and said,  "Wow, I'm a virus and I'm going to attack high interest rates!"  "And, gosh, I won't be able to operate If you lower them."  It's that the virus is stopping people from going to work and going about their daily lives. That's where we need to fix the problem,

Brian Kruger:   11:06
Okay, So my next natural question is, then, do you think that we went about this incorrectly?  Do you think we hit this thing with a sledgehammer and in taking the moral question out of it, just for a moment? And not not to be harsh, but do you think we hit this too hard?   We're bringing the global economy to a complete halt, and do you think the bang is worth the buck?  I guess that's the simplest way I can put it.

Rich Helppie:   11:29
If it means saving lives, it's saving a lot of lives. I don't think you could hit it hard enough.

Brian Kruger:   11:36
...because that drum is starting to get beaten.  As you know, we talked about it offline, That drum is starting to get pounded a little bit.   I think I'm in your camp on this one, that it's saving lives.

Rich Helppie:   11:47
Well, I try to look at it like this. If you are a mayor of the city, you are a governor of a state, you're president of the United States, or  you're any other elected official or you're a person running a health department at a local level, or you're the surgeon general of the United States, or you are running the Centers for Disease Control. The weight of this decision is enormous.  So consider what would happen if there was under response.  "Oh, this virus went a lot further, a lot faster and a lot broader, and was more deadly than we ever thought."  And now it's too late to get more aggressive about it.

Brian Kruger:   12:32
So it's a mistake of a biblical proportion.

Rich Helppie:   12:37
Exactly.  Versus, we might be overreacting, but we're gonna kill this thing or contain this thing or flatten the curve.  And I've seen no evidence to the contrary that this is not the right approach.   And then if it looks like things are coming under control or we found vaccines or we found medication or we're getting an actual statistical view on on how pervasive it is and how to manage it at that point, you can start backing off some of these extreme protective measures.  And by the way, all those people that we've elected and all those people serving in those very important roles in public health, we have another big set of questions coming up, hopefully... that as this looks like it's going to be on the wane,  how do you start saying, hey, you know what, It's okay to go to your local restaurant again.  You can to go back to work.  So there's going to be good decisions made, and there's gonna be errors in judgment that they're going to be made, and it's going to be debatable,  was the right thing done, or some things that that will never, ever be resolved.  But at this point, I think we have to hope that the people we've elected do the right thing.

Brian Kruger:   14:02
These are unprecedented times, though I mean, it's like you say we're gonna make mistakes along the way.  Volumes will be written later on that will analyze this, but we're in the middle of it and it's unprecedented.  So I think there's gonna be mistakes. We're gonna do some things right. Something's wrong. And is that sort of what you're getting at....

Rich Helppie:   14:18
Exactly.  And I don't think there's any dispute that we have a virus of a type that we have not dealt with in the past.  We don't have a virus that reveals itself until it's done a lot of damage.  And it's a virus that makes carriers out of a lot of people who look perfectly healthy.  We have a United States senator who is carrying the virus, and my understanding is absent any symptoms.   We had young men and women come back from their spring break, not showing any symptoms but having infection shared amongst them.  So our policy response, I think, is the right one.  Yes, it's very costly. Now the question is how do we mitigate the cost?  And this is where our political system and the people in it and our media have to behave better, and we see various legislation going through and we see opportunistic types of behavior.  "Gosh, I've always wanted to get a particular thing through."  The had tack it onto the Corona virus relief bill proposal.

Brian Kruger:   15:29
And now is not the time for pork.  And they're doing it like crazy.

Rich Helppie:   15:33
It is insane. It needs to be scaled down. If it doesn't have to do with protecting the people that are affected economically, which I have talked about, or it doesn't have to do with protecting the businesses that we're going to need, then it's not a thing that needs to go into this bill.  So and that is something I want to talk about,  the airline industry, which is a vital part of our economy, for a lot of reasons.  It has been just decimated by this.  They can't get out of this on their own.  So behind door number one, Delta Airlines, American, United, Southwest,  can all declare bankruptcy, mothball all those airplanes, lay off all the employees, closed down the airports and all the attendant business.  And then, at some later point, someone tries to restart those businesses out of bankruptcy, which is a very, long process.   That's behind door number one.   Behind door number two is there's money injected into these businesses now.  One of the things that I find interesting that people seem to object, is that there are conditions put on money being invested and, frankly, as a person that's invested a lot of money and had money invested in things that I was working on, I'm wondering what the problem is.   Every time you invest money, there's conditions. You know by way of example, if you are a person that wants to build apartment homes and you go and get a loan through Fannie Mae or Freddie Mac, you can't take the money that was loan to you and go build a casino.  They said,  "No, we we lent you that money to go build apartments, that's what you need to do."  There's things that are not really controversial, like, what about executive pay?   I can tell you this Brian, in every investment that I've been involved in when there's money going into the company, there's always a question. Well, how much is going out to pay management? That's a legitimate investment question. The other thing that you see coming around is these companies should not be able to use the money for stock buybacks.  And I've seen people on social media who don't know anything about this going, "Yeah, buy backs are bad!"

Brian Kruger:   18:01
School us on that.

Rich Helppie:   18:03
A buy back is simple.  Take five friends and they want to start a dog grooming business.  And it costs $1000 in money to get it going, and each of them put up $200. Okay, so each owns 20% of the business.  They have $200 into it.  The business does great, and it makes a lot of sales, and it becomes three locations, four locations, five locations.  So that $1000 investment is now worth $100,000.  Okay, well, one of the partner says, You know what? I think I've had enough of this dog grooming business.  I want to go do something else, and I want to sell you my 20%.  Okay, well, the remaining owners are going to have the company buy back that 20% and they're gonna buy back at $20,000. That's a stock buyback. That's what these companies do. It's just done on a bigger scale. They look at what the return they can get on that capital in terms of investing it in equipment and in plants and in personnel, or is there a greater return if they buy back their own stock?

Brian Kruger:   19:19
So why the heck is this a log jam in Congress?  Why is this a stopping point and an arguing point?

Rich Helppie:   19:25
Because, legitimately, I first of all, I agree with it that they shouldn't be able to use the money for stock buybacks. Just like low interest rates don't change anything. If Delta Airline gets, you know, a $1,000,000,000 they turn around used to buy their stock back, all that does is raise the price of the stock for the people that are holding it.  It doesn't do anything about sustaining the business.  It doesn't pay to keep the doors open.  Now  Senator Warren, a person who's distinguishing herself with policy ideas, she said, "Look, they should be barred permanently from doing stock buybacks."  I don't think that's the right answer, because there's just too many ways to get around that, like  you start up another company inside, build a tracking stock,  and that becomes the stock you could buy back.  So what?  I would think the effective way to do it would be to say, no stock buy backs for 10 years because it wouldn't be time to get cute or get clever with it, so I don't have a problem with that.  It's, you know, you're going to take money from somebody.  There was going to be conditions put on that money.  Now,  some of the other stuff she's got in there, which is about providing one seat to workers on the board of directors, now, you get into well, who represents, you know, the workers or the unions.

Brian Kruger:   21:04
And when you say, "she" are you talking about Pelosi?

Rich Helppie:   21:07
No, no, no, this is this is Warren, Elizabeth Warren.  I know that some things could be negotiated by a collective bargaining unit.   And again, it doesn't fix the problem. It's an overreach by Senator Warren. Whether she's right about this all wrong about this, it has no place in Corona virus recovery.  It just doesn't need to be there,

Brian Kruger:   21:29
And this is coming from somebody whom you've supported all along, in Warren.  You're you're just saying that this is this is something that's ill advised. 

Rich Helppie:   21:39
Exactly.  Some other things that she's got in there, like getting shareholder and board approval for all political spending.  You know, if that could be managed, that would be one thing..  and if you apply it to unions, that would be, at least quality and equivalents.  And I get her point about trying to keep money out of politics.  But how you could get that to a shareholder vote?   I just can't even imagine what the mechanics would be, given the nature of how that works its way through.   She's got some other things in there about executive comp during the time that federal funds were there, and I think again, that's a legitimate investment decision about whether dividends get paid out.  That's also something that an investor would control. There was also the noise made by this administration that if money was going to go into a business that there was going to be an expectation of a return back to the federal government.  So if again, I'll use Delta Airlines again.... If taxpayer money goes into Delta and it recovers, Delta would pay that back with some measure of return.

Brian Kruger:   23:02
And we have some precedent with that with TARP during the 2008 debacle, right?  I mean, the government got involved with the automotive industry, and then they were paid back with dividends.  Am I not correct on that?

Rich Helppie:   23:15
Yeah, that's exactly right.  And there were a lot more controls put around tarp and programs of that era, and that is something that does need to be put in place.  And that is something that I think, frankly, that from what I can tell, that the administration is being a little fast and loose with.   There's another area I haven't had time to dig into it in depth, and that is that there would be direct payments to hospitals.  And there's lots of mechanisms for doing this, which Brian, time won't permit me to go into how to do that.

Brian Kruger:   23:49
We can hit that another time.

Rich Helppie:   23:52
Right, there are things that are in there about,  'Let's change the child earned income tax credit' that's coming over from the house.  It doesn't belong here, doesn't fix the problem.  Injecting 40 billion into schools and universities. That doesn't solve the problem, because there they still got their constituencies.  They're still teaching classes.   And then also billions into grant funding for states to carry out this year's election.  How that make it here?  I don't know.  Again. The problem is we have a severe health matter of great importance that requires drastic measures.  Those drastic measures damaged people's ability to earn a living.  We need to go shore that up yesterday.  And we also need to preserve the industries that we will want once this economy starts jelling again.  And it will.

Brian Kruger:   24:51
Okay, Rich, I know you've had a long travel day,  so I really appreciate your time for this.  Let's meet up again mid week and I'm gonna hit you with some quick takes because I have a feeling you have some opinions out here that really don't belong with the Common Bridge.  But I'd still like to hear it.   Is that all right?

Rich Helppie:   25:07
Sounds like a good plan to me, Brian and again, Look,  our work at the Common Bridge is real simple.  Politics are not binary.  The polar political extremes are not getting us where we need to go. The political parties have gotten very adept at attacking each other and have not gotten equally competent at dealing with the issues of the day or seizing on the opportunities.  And this is a great country filled with compassionate and generous people.   We need to have a government that reflects the quality of our people.  And we need to have a media environment that is sober and factual and unslanted and treats people like adults who could make a decision, and and we and we will get there.  If we demand those things.

Brian Kruger:   26:01
I agree.

Rich Helppie:   26:02
And we will keep getting what we're getting, if we keep accepting it.

Brian Kruger:   26:06
And it's great you've been on that point since we started this, I really appreciate it. And this was a really good talk. and  I'm gonna ring your bell midweek and we're going to talk about some other things and get your opinion.

Rich Helppie:   26:17
Sounds great Brian.   Always a good chat.

Brian Kruger:   26:19
All right, Take care, Rich.   So, what you have been listening to Richard. Help ease. Common bridge podcast recording and postproduction provided by stunt three. Multimedia. All rights are reserved by Richard Helppie.   For more information, visit RichardHelppie.com