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Unsanitized: The COVID-19 Report for Oct. 1, 2020

The Pandemic Prop-Up of Fossil Fuel Companies

Plus, 60,000 jobs at the whim of a lobbying effort

 

An oil well near the Interstate 5 freeway in Mettler, California.
(Stanton Sharpe/Sipa via AP Images)

First Response

**** This space has been saying for months that the
nature of the CARES Act has created a deeply unequal economic recovery,
with expired relief for the vast majority of the public and enduring
benefits for those at the top. The Washington Post put numbers to that
,
showing the stark impact of the pandemic on inequality. More of the job
loss has affected Black and Latino workers, young people, women, and the
working poor. The rich and Caucasian have barely felt the effects.

The economic impact mirrors the mortality impact, which has also been
concentrated in low-income communities. But the nature of the relief,
and the impact of putting so much on the plate of a Federal Reserve
whose channels inherently funnel money upward, has an impact.

The unwillingness of the Fed to use creative tools to spread its relief
out

to sectors beyond the financial industry plays a role. So does
careerism. A remarkable study

out this week shows that central bank researchers write papers that
adopt and boost the strategies of their organization because that's
highly correlated with promotions and visibility. More on that here

and, in more general form, here
.

But part of it is just old-fashioned capture, and in one important case,
the kind of capture that destroys a planet. One reason why you might
want to spread economic relief outside the central bank's sphere is so
you don't induce fossil fuel pollution. At least that's one possible
takeaway from this report
from
Public Citizen, Friends of the Earth, and Bailout Watch.

Read all of our Unsanitized reports here

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**** The report tallies up how much in corporate bonds
the fossil fuel industry has managed to sell since the corporate bailout
began in March. This was a sector that was defaulting at higher rates on
such loans even before the crisis began, and had significant credit
risk. During the pandemic, major fossil fuel companies have been trading
at record lows, and bankruptcies have rolled in, on the heels of over
240 since 2015
.
But $99.3 billion in bonds have been sold in six months, an unusually
high number, at lower prices and better terms
than before the crisis.

I've written before

about how the Fed has coddled the oil and gas sector during the crisis.
It changed terms on the Main Street Lending Program after direct
requests from the industry and its allies, and it has disproportionately
purchased energy bonds

as part of its secondary market bond-buying program. It's even
purchased ETFs that have mostly junk-rated energy debt embedded within
them. At a time when the opportunity could be taken to green the energy
mix, the supports for fossil fuels is particularly galling.

Some of the 56 companies who have issued new bonds since March have said
they would fail without the lifeline. That would have been pretty good
news for the planet. More than half of the energy companies the Fed has
purchased bonds from on the secondary market have seen debt downgrades
in the past six months. There was more spending on electricity than
gasoline this summer for the first time since 1960
.

These companies are in trouble, in other words. At least 30 percent of
the shale sector alone is "technically insolvent
."
And the normal function of the market has been suspended to keep them
alive. Maybe in a recession that's fine, but the by-product of that is
the continued burning of resources that cannot be burned if we are to
live sustainably on Earth. "The Fed's actions have exacerbated the
already dire threats of climate change," the report concludes, and I
think that's inarguable.

If the Fed were taking the risk to the climate seriously in other areas
of its work, like with respect to bank supervision, this would still be
intolerable but at least a little mitigated. That's not happening
either. The U.S. has still not joined the coalition of central banks
seeking to green the financial system, and isn't measuring the climate
risk of financial firms. The combination of laxity on financial
stability and climate change and significant financial support to the
industry should end every so-called liberal's cheerleading for U.S.
monetary policy actions during the crisis. The world is too fragile for
it to be in the hands of the Fed.

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Corporate Hostage Taking

I've been tracking these layoffs at major companies for the past few
days, and the picture now emerging is that they have taken the form of a
threat. Let's look at Disney, for example. When they made their
announcement of 28,000 layoffs
,
they pointedly placed some of the blame on the state of California's
rules for reopening large gathering sites like Disneyland. You'll
recall that premature reopening hobbled California

with a spike in cases in the summer, so the state is being more cautious
this time. And Disney doesn't like the impact of that on the bottom
line.

A similar, more direct move has been made by the airlines. It's
October 1, and under CARES Act rules airlines that took bailout funds
can begin to lay off employees today. United and American will begin to
relieve 32,000 employees

of their duties. But they said they would reverse course if Congress
passes a relief bill that includes another $25 billion in funding for
them. This is pretty unlikely, as talks failed to reach agreement

yesterday, though they are ongoing. But now, 32,000 jobs are directly at
stake. (Airline aid has been mutually agreed to if a deal is reached.)

Lobbying is lobbying, and you expect corporate monopolies to make power
plays to get what they want. Pfizer hinting

that yes, they can deliver a vaccine this month in order to tamp down
actions that reduce prescription drug profitability is an example of
this behavior. But there's something different about putting the
livelihoods of 60,000 Americans in limbo as part of the lobbying
process. That's a darker and more dangerous trend.

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Today I Learned

* Another 837,000 jobless claims
,
without Disney and the airlines. Continuing claims only down because
people are exhausting unemployment. (Calculated Risk)

* Cases are rising throughout the northern tier
,
and New Mexico is finally getting blasted. (Axios)

* Meanwhile Trump is going to hold a rally in Wisconsin
,
as the virus spikes. (ABC News)

* Massachusetts changed up its statistical analysis

of cases from a bad stat to a good one. (Boston Globe)

* When your COVID symptoms outlast your insurance
.
(The New Republic)

* Amazon employees have no idea

how many of their colleagues have the virus. (NBC News)

* Justice Department opens an antitrust case

focused on the merger (with a company that's now part of Medtronic)
that spiked production of a cheap ventilator. (Wall Street Journal)

* NFL game postponed after an outbreak

among the Tennessee Titans. (ESPN)

* The embarrassing, aborted celebrity ad campaign

from HHS. (Politico)

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