The Federal Reserve Has Pumped Money Into the Capital Markets. Guess Who’s Gotten It.

None of this would have been possible without the Fed’s moves in March and April. And Boeing is not unique. In April, almost $32 billion in junk bonds were sold, that is by companies that are in worse financial shape than Boeing. A monthlong draught of new high-yield bond issuance ended on March 30 when Yum Brands—the owner of KFC, Taco Bell, and Pizza Hut—raised $600 million in the financial markets. Then came Carnival Corp., the stricken cruise ship operator, and then Ford, Netflix, MGM Grand, AMC Entertainment, the Gap, and US Foods Holding Corp., among others. These companies and more were able to raise money from investors, thanks to the Fed’s decision to effectively backstop the markets.

On the surface, of course, this must be a good thing, right? As Warren Buffett has famously said, “Only when the tide goes out do you discover who’s been swimming naked.” But, thanks to the Fed, the prurient opportunities have been few and far between this cycle. Companies that might have had to go bankrupt or might have had to get government bailouts, or high-priced equity injections from cash-rich opportunistic investors, were able to tap the public markets at far cheaper rates. That was probably the Fed’s plan. But each new Fed intervention—this is the second round of rescue financing from the Fed in 12 years—raises important questions about just how free our markets really are, and whether once again, America’s rich and powerful and the corporations they control get the windfalls while regular Americans are left to suffer—a fact underscored by the news that some 33.5 million workers have filed for unemployment benefits since mid-March. In a world-historic crisis, the Fed’s efforts have arguably given the most help to those least in need of it.

Despite the success of Boeing and the rest, the capital markets are hardly open to everyone. Companies such as Neiman Marcus, J. Crew, Gold’s Gym, Cosi, Frontier Communications, and OneWeb, a satellite operator in which SoftBank invested (and lost) $2 billion, have all filed for bankruptcy in recent weeks. Others—such as Hertz and JCPenney—may not be far behind. Obviously, the capital markets have been slammed shut for these companies. And then there are the hundreds of thousands of smaller companies, most of which aren’t traded publicly and that few have heard of, for which the capital markets—either with or without the Fed—offer no hope.

That’s why, in theory anyway, Congress passed the Paycheck Protection Program, or PPP, two bailout funds—totally nearly $660 billion —to help those companies struggling to survive. Unfortunately, that process has been a mess. Some companies—one that makes lasers for cosmetic surgery; another that makes in vitro diagnostics with $100 million in cash—successfully tapped the bailout money, while other devastated companies, such as Ruth’s Chris Steak House, which once employed 5,700 people, was shamed into returning the $20 million it received. According to a new study by the Federal Reserve Bank of New York small businesses in some of the states hardest hit by COVID-19—New York, New Jersey, Michigan, and Pennsylvania—received fewer PPP loans per small business than a variety of Midwestern states. According to the study, more than 55% of the small businesses in Nebraska, for instance, are getting PPP loans, while fewer than 20% of small businesses in New York, “the epicenter of the coronavirus in the United States,” according to the New York Fed, have been approved to receive funding from the PPP.

As a result, many small businesses and 20% of the workforce are left reeling for yet another day in Donald Trump’s divided America.

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