Part of this repayment would go toward satisfying a $465 million debt obligation to JPMorgan Chase, one of the nation’s biggest and most profitable banks. In its most recent earnings report, JPMorgan posted an $11.9 billion profit, up 155 percent from a year earlier. The bank also made billions last year on overdraft fees, largely from the same vulnerable communities that would benefit from ARPA relief.
OK.
Banks make money by lending money out and charging for doing so.
The poster child of this effort is Chicago, where Mayor Lori Lightfoot’s office proposed in April to use more than half of its funding allocation of $1.89 billion to pay down city debt. This would specifically pay off certain so-called “scoop and toss” borrowing deals that use new issuance of long-term debt to pay off debt coming due.
Paying off debt would reduce banking profits by removing their ability to charge for lending money they’re not lending.
When Joe Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) in March, he framed it as an effort to “giv[e] people in this nation—working people and middle-class folks, the people who built the country—a fighting chance.” That presumably does not include enriching Wall Street banks, though several cities have proposed doing just that.
Among other things, ARPA provided $350 billion in state and local fiscal recovery funds, enabling communities to reverse some of the economic hardships of the pandemic as well as rebuild for the future. But according to Bloomberg, “at least two dozen local governments and lobbying groups” have urged the executive branch to give them the authority to use those recovery funds to pay down debt built up in previous years. This would have the effect of directing ARPA dollars to financiers, in most cases big banks, rather than to meeting the immediate needs of community residents.
Paying off debt enriches bankers.
Eh?
Perhaps the writer think cities like Chicago ought to be allowed to cancel their debts, like the third world nations they increasingly resemble?
Since cities like Chicago will eventually default on their debts, then … what? They are putting off the evil hour?
I know that States can’t formally become bankrupt, but I take it that cities can?
dearieme,
Yes
https://en.wikipedia.org/wiki/Detroit_bankruptcy
Our town was offered a £25m funding package and we were asked for suggestions for what to spend it on. I asked if we could bank it and live off the interest. “Don’t be silly, you’ve got to spend it”.
£250K per annum would be a lot more useful than the £5m that the £25m will eventually become after it’s passed through all the right hands.
When Joe Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) in March
Lol. Mrs Yellen is asking those mean old Republicans to raise their $28.5 Trillion (!) debt ceiling, as if that’ll solve anything. Pretty soon they’ll be talking big money.
It’s the Weimar Republic with smartphones (ht Mark Steyn), only real questions are when does the financial doomsday comet arrive, and whether The Warriors (1979) or Mad Max (also 1979) will prove more prophetic.
At what point do the other world currencies start trying to position themselves for the inevitable collapse of the US dollar? They are all fiat currencies as well of course, and most of them are printing like mad too, but at what point does someone start thinking ‘You know what we only need to be the least bad game in town to clean up when the dollar goes down the tubes’? The one eyed man is king in the kingdom of the blind etc etc. And try to wean themselves off the money printing, even at the risk of recession etc, because when the balloon goes up any half stable currency will be in high demand, while any currency that looks like it could be the next domino to fall will be toast.
@Jim Krugerrand. Swiss Frank is a possibility. With them sitting on a ton of oil, gas, and having no problems putting up nukes to preserve their reserves, the Russian Ruble might make a comeback, as long as Putin + successor keep things in line.
Anything “second world” that isn’t eco-crazy and relatively stable has a chance, really.
@Jim
Renminbi for sure.
@Grikath
The Swiss franc has been massively overvalued since at least the 2008 Eurocrisis, to the point the SNB made the money printer go brrrrr to buy Euros to keep it down to 1.20 CHF:EUR for quite a while. We’ve been sitting even more overvalued than that for ages now, and have adapted to the new normal of 1.05-1.10. Plus we have negative interest rates… So it’s already a refuge currency…
When I was in Basle/Basel 6 years ago, the shops were happily accepting € notes on a 1:1 basis.