Life During The Pandemic Is Like Playing ‘Whac-a-Mole’: Senator Elizabeth Warren May Get A Big Hammer To Smash Wall Street If Joe Biden Wins

Life During The Pandemic Is Like Playing ‘Whac-a-Mole’: Senator Elizabeth Warren May Get A Big Hammer To Smash Wall Street If Joe Biden Wins


By Jack Kelly

Life during the pandemic is like playing “whac-a-mole.” As soon as you poke your head out, hoping that things have improved, you get hit over the head with a hammer of bad news. 

Today, it was reported that the Federal Reserve Bank is concerned about America’s large banks, including Goldman Sachs, JPMorgan Chase, Citi and Wells Fargo. After conducting stress tests, the Fed decided that the banks have to restrict dividend payouts and stock buybacks. This decision was made to “ensure large banks remain resilient despite the economic uncertainty from the coronavirus event.” 

 In plain English, the overload of the banking system is freaked the F@#$ out. They just realized  what everyone else has already known—if 46 million people lost their jobs in only four month’s time, thousands of businesses closed down never to reopen, iconic long-standing companies (such as Hertz, J.C. Penny, Pier 1, Neiman Marcus, J. Crew, GNC, Chuck E. Cheese and others filed for bankruptcy), then we’re in deep sh*t. Many people don’t have an emergency fund nor do they have the money to pay their rent, car leases, loans, college tuition bills and mortgages. 

The Fed woke up to the fact that if people don’t pay their loans, the banks will be in big trouble. This also shook the stock market that has been screaming higher, while the country literally burns. The market was down 500 points as I was writing this.

The banks may have something else to worry about. This may even be worse than borrowers not paying loans back and executives not making bank by engaging in self-enriching buybacks. Wall Street CEOs should sit down for this—Senator Elizabeth Warren is rumored to be Joe Biden’s pick for the Treasury Secretary.  

If you don’t recall, Warren is not a fan of Wall Street. She kind of despises the bankers, brokers and traders. Senator Warren can’t wait to regulate the hell out of them. Warren will undue President Trump’s anything-goes, hands-off policy toward large corporations. 

When running for the presidency, Trump openly bragged that he doesn’t want too much regulation, as it’s an anathema to business. He contends that rules and regulations hamper the ability of companies to conduct business. If Elizabeth takes over Steve Mnuchin’s spot, after four years of deregulation, she’ll change everything and become a nightmare for Wall Street.  

Warren advocates breaking up the big banks, ramping up regulation, forcing lenders to suspend their dividends and placing a wealth tax on trading. She calls for limiting executive compensation, strengthening capital requirements and stress testing banks’ preparedness for climate change risks.

It’s not just Wall Street that she’s after. Senator Elizabeth Warren also says, “It’s time to break up Amazon, Google And Facebook.” Warren asserts, “Today’s big tech companies have too much power—too much power over our economy, our society and our democracy. They’ve bulldozed competition, used our private information for profit and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.” She added, “And I want to make sure that the next generation of great American tech companies can flourish. To do that, we need to stop this generation of big tech companies from throwing around their political power to shape the rules in their favor and throwing around their economic power to snuff out or buy up every potential competitor.”

Speaking of banks, last week, it was reported that HSBC, the behemoth international bank, announced it will reignite its prior plan for a massive 35,000 job cut. The layoffs were originally slated to start back in February, but HSBC placed the layoffs on hold during the Covid-19 pandemic. 

The bank’s decision was in line with a laudable movement initiated by CEOs of top-tier firms, including Morgan Stanley, Citigroup and the Bank Of America, pledging to halt any plans of layoffs in 2020. However, In light of the current challenging business climate, coupled with falling profits, HSBC claimed that it has to act now to rein in costs. The bank will also enact a firm-wide hiring freeze. Unfortunately, in our current rotting economy, HSBC’s job cuts are a  harbinger of what’s to come next for banks.

On Wednesday, it was reported by a top compensation consulting firm, Johnson Associates, that Wall Street is likely to cut bonuses this year by 15 to 20%. These numbers were revised downward from a dire 30 to 40% reduction made earlier in the year. At that time, Alan Johnson’s views were pretty bleak, calling for 2020 bonuses to decline by as much as 40%, as the coronavirus outbreak hit markets hard and put millions of people out of work.

He considers the tough climate and predicts Wall Street firms will likely cut pay for almost everyone to save cash. Johnson figures “subpar” employees will see bonuses drop over 50%  and possibly be fired. Johnson said, “Now is the time to get rid of the people you probably should have gotten rid of before.” He added, “The industry has been carrying some extra weight for a while.”

Enough with the banks. GNC, the ubiquitous 85-year-old retailer of vitamins and dietary supplements, and the kids-friendly arcade and pizza place, Chuck E. Cheese, filed for bankruptcy protection this week. 

The two household-name companies joined an illustrious list of iconic American companies, including Hertz, J.C. Penney, Neiman Marcus, J. Crew and Pier 1 that have also sought bankruptcy protection in the wake of the Covid-19 pandemic.

They’ve shared something else too—laying blame squarely on the virus outbreak and the subsequent orders for businesses to close down and citizens to stay indoors as the main reason for their dire financial situations. However, when you dig deeper, you notice a similar pattern emerge. Many of the companies that have sought post-pandemic bankruptcy protection took on too much debt, lavished generous compensation on their CEOs and top executives, arrogantly stuck with failing business models that didn’t necessarily jive with consumers’ demands (including their desire to purchase products online instead of in-person), spent large sums of money on stock buybacks that left them short of cash when it was desperately needed and failed to innovate.

The CEOs and executives made out just fine, thank you. They got nice fat checks for failing at their jobs. Their rewards at GNC—officially called “retention bonuses”—for failing included $2.2 million for CEO Kenneth Martindale, who joined the company in September 2017. He was paid $7.1 million in 2019. The chief financial officer received $795,000 and three other C-level executives were awarded a total $918,000. There’s one small caveat—executives will have to return 25% of their after-tax bonuses if the company does not emerge from Chapter 11 protection within a year.

Chuck E. Cheese’s CEO David McKillips lamented that the pandemic period has “been the most challenging event in our company’s history.” However, he’s “confident” about its future. He should be, as McKillips is personally being taken care of. Despite the bankruptcy and difficult time ahead, the company delivered around $3 million in retention bonuses to its top three executives before the bankruptcy was announced. McKillips received $1.3 million, President Roger Cardinale got $900,000 and CFO Jay Howell was awarded $675,000.

Here’s some more bad news for you before you head out for the weekend. There’s a disconcerting confluence of events, including a resurgence of Covid-19 cases, corporate bankruptcies, companies continuing to lay off workers and an overheated stock market that looks like it’s due for a correction, that indicates a tough road ahead. 

CNN reported Thursday that there may be “apocalyptic” surges of Covid-19 in Texas and record-setting new cases in some states. According to reports, the coronavirus death toll has climbed to 121,979 and has infected roughly 2.4 million Americans across the nation. Florida and Texas recorded more than 5,000 new Covid-19 cases—a new daily record. California reported over 7,000 cases, also setting a new record high. Houston looks like it could be the worst outbreak hotspot if the trend continues. New York City suffered the largest blow from the outbreak and has now initiated a 14-day quarantine for people coming into the city from a number of other states that have seen increasing cases. 

The new wave of outbreaks has an impact on the economy and job market. Ian Shepherdson, chief economist at Pantheon Macroeconomic, said, “The danger now is that claims rebound in other states where infections are rising rapidly, and people are starting again to stay away from restaurants and malls.” 

The resurgence of Covid-19 cases has dashed cold water on a stock market that’s been on fire lately. In response to the alarming increase in cases, the stock market had a big sell off Wednesday with the Dow Jones plummeting over 700 points and other major indices down about 2.5%. 

There’s now an underlying fear that if this surge continues, states will consider reinstating  stay-at-home orders and possibly reordering businesses to close down again. This action, if warranted, may help stem the tide, but would be disastrous for the economy, job market and mental health of people.

Have a great weekend, everyone!


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