The Wall Street Journal - 07.04.2020

A18| Tuesday, April 7, 2020 THE WALL STREET JOURNAL.

We Are Paying the High Cost of Low Interest

James Grant’s timely “The High

Cost of Low Interest Rates” (op-ed,

April 2) brings to mind a seemingly

innocuous prediction made 18 years

ago by then-Fed Governor Ben Ber-

nanke. “The Fed,” he told his audi-

ence, “might consider attempting to

influence directly the yields on pri-

vately issued securities.” Inasmuch as

Mr. Bernanke was proposing a theory

on a nonexistent deflation, we paid

little attention. Big mistake.

When I retired 11 years ago at age

69, the fed-funds rates had averaged

6% for the previous 30 years. Like

most retirees, I was risk-averse and

chose to commit most of my nest egg

to insured municipal bonds and FDIC-

insured CDs, not realizing at the time

that a group of unelected bankers and

academics had been given the power

to reduce rates to 0% for the next

seven years via what Mr. Bernanke

called “quantitative easing.” Those

savers (myself included) who took

what Mr. Grant calls “imprudent

risks” to achieve positive returns in

the past 11 years are now paying the

price of those risks in the form of

large equity losses and reduced or

eliminated dividends.

Notwithstanding the idiocy of

modern monetary theory, I long for

the day when any present or former

Federal Reserve official not only ex-

plains the conditions under which we

might return to a market economy,

but also apologizes for the collateral

damage inflicted on those in society

who chose a lifetime of frugality over

today’s free credit.

MIKESMITH

Sugar Land, Texas

While a dramatic response to the

2007-09 recession was justified, the

need for that extraordinary interven-

tion was over long ago. The artifi-

cially low interest rates have unneces-

sarily punished savers—especially

senior citizens. Fed Chairman Jerome

Powell’s flippant response to a ques-

tion asked at his press conference fol-

lowing the January meeting said it

all. The question was whether the Fed

was concerned about these adverse

effects of the low rate policy on sav-

ers. His response was, essentially

“no” because that wasn’t part of the

Fed’s mandate. That is particularly of-

fensive in light of the Fed’s recent

penchant to hop to it and cut rates

whenever the stock market experi-

enced a precipitous drop in response

to a rate increase by the Fed—usually

in response to a contemporaneous de-

mand by the president. Someone

needs to remind Chairman Powell

that the Fed’s mandate doesn’t in-

clude hand-holding the stock market.

Once this crisis passes, let’s hope that

those of us who have worked and

saved all our lives quit being the sac-

rificial lambs for a damaging free-

money regime. The economy will be

much stronger for it.

ALKROEMER

Lantana, Texas

I wish Mr. Grant had addressed the

impact of financial regulation on mar-

ket liquidity. Mr. Grant’s comments

regarding the investment-grade bond

market and the rapid price moves in

these high-grade instruments merit

attention. Market participants have

continually highlighted the less liquid

fixed-income markets post the

2008-09 financial crisis. Once the

dust settles, and the intense humani-

tarian risks have abated, this is an

area policy makers should revisit.

GRAYSCHWEITZER

Brooklyn, N.Y.

Low interest-rate monetary policy

results in a proliferation of assets

(new debt) and asset-price bubbles

(stocks and real estate). Our firms

were already crippled by debt, and

household debt levels of every possi-

ble type are at historic highs as a per-

centage of GDP. Inflation has been

kept artificially low because the mon-

etary actions primarily affect asset

prices, and growing trade deficits

keep consumer prices low. There is a

crisis: The value of financial assets is

currently less than the value of finan-

cial liabilities.

The new powers apparently

granted to the Fed now extend to pur-

chasing U.S. bonds from foreigners.

This will fuel more debt and higher

asset prices as those foreigners re-

lend dollars. The real economy is

what matters, but when the payments

system is distorted or expensive, and

we cannot value assets properly, we

have the tail wagging the dog.

MILLICENTTAYLOR

Oak Ridge, Tenn.

LETTERS TO THE EDITOR

Letters intended for publication should

be addressed to: The Editor, 1211 Avenue

of the Americas, New York, NY 10036,

or emailed to [email protected]. Please

include your city and state. All letters

are subject to editing, and unpublished

letters can be neither acknowledged nor

returned.

“These unintended consequences

are exactly what I’d hoped for.”

THE WALL STREET JOURNAL

Virus Crisis Brings Telemedicine to the Fore

Regarding “Telemedicine: A Good

but Incomplete Answer” (Letters,

April 1): I have practiced board-certi-

fied primary-care internal medicine,

for 40 years in all primary-care prac-

tice settings: intensive care, office

based, emergency room and urgent

care. For the last three years I have

been practicing telemedicine with one

of the largest most successful compa-

nies in Oregon, Utah and Arizona. I

have licenses for all 50 states and

Guam. I can handle 85% of the medi-

cal problems that I saw in my office-

based practice. I can see the patients’

medical records. I do this from my

home, any time of the day, providing

immediate access to hundreds of pa-

tients a month who would otherwise

wait for weeks to be seen by their

primary-care doctor and. I have much

more experience than any of the pro-

viders in an urgent-care setting. The

overwhelming majority of the calls I

handle such as work releases, medica-

tion refills and the assessment of

straightforward medical problems

would be lost or far too expensive in

other practice settings. Much of med-

icine involves reassuring the worried

well. Telemedicine requires learning

certain principles and techniques that

patients greatly appreciate. Being a

telemedicine provider has renewed

my enthusiasm for primary-care prac-

tice. I provide medical care to pa-

tients in very remote areas of the U.S.

Telemedicine is in many ways often

better than office-based or urgent-

care practice.

PHILLIPTAGGART,M.D.

Scottsdale, Ariz.

Pepper ...

And Salt

There Must Be a Safe, Better Birthing Policy

Policies forcing pregnant women to

endure labor and delivery alone are

inhumane and flout scientific evi-

dence linking continuous labor sup-

port with improved maternal and fe-

tal outcomes (“Hospitals Keep

Partners From Rooms During Births

for Safety,” U.S. News, March 31). As

Donna Sauls reported in a 2002 arti-

cle in the Journal of Obstetric, Gyne-

cologic & Neonatal Nursing, research

suggests that continuous labor sup-

port is linked to shorter duration of

labor, an increase in the likelihood of

a vaginal birth, a reduction in the use

of anesthesia, a reduction in oxytocin

augmentation and a decrease in the

need for analgesia, forceps and cae-

sarean births. Further, as Dr. Sauls

writes, “all outcomes, for births, in-

fants, and mothers, seem to be af-

fected more positively by support

provided by a lay person or doula

than by intrapartum nurses.” I deeply

appreciate the health-care services

that brave doctors and nurses are

providing to all of us during this dan-

gerous time, but there has to be a

better way to protect the health of

doctors and nurses than prohibiting

pregnant women from having one

healthy partner present for labor and

delivery.

JENNIFERC.SCARBOROUGH,PH.D.

Miami

Virus Commission: Monday

Morning QBs at Halftime

Regarding your editorial “Corona-

virus Recriminations Come First”

(April 3): I question the timing of

Rep. Adam Schiff’s call for a commis-

sion to investigate the Trump admin-

istration’s pandemic response just be-

fore the general election. I find it to

be so conspicuously politically moti-

vated. And I can’t think of anything

more disunifying for our nation, at a

time like this, than to call for another

congressional investigation.

Eventually, there will most likely

be an examination of the govern-

ment’s response to Covid-19 and

many books and articles will be writ-

ten. But you can’t do any Monday

morning quarterbacking until it’s

Monday morning. And we aren’t even

at halftime yet.

BARBARAFOTINEATKINS

North Las Vegas, Nev.

Congress’s Small-Business Ventilator

C

ongress created a $350 billion lending
facility in last month’s $2.2 trillion re-
lief bill for small businesses gasping
for liquidity amid coronavi-
rus shutdowns. But its rushed
relief has unsurprisingly re-
sulted in confusion, leaving
the Trump Administration to
mop up the mess.
In a normal year the Small
Business Administration makes about 60,
loans totalling $30 billion. Congress last month
vastly increased its workload by making the
agency responsible for shovelling out $350 bil-
lion in loans to millions of small businesses in
days or weeks. But the law provides precious
few details on how the agency is supposed to
administer the loans. Democrats who distrust
the Trump Administration and Republicans
who oppose administrative deference both left
the executive to figure it out.
Hence last Thursday night Treasury rode
to the rescue of the SBA with 31 pages of guid-
ance as well as bank and borrower application
forms. Businesses with 500 or fewer employ-
ees can borrow up to 2.5 times their monthly
payroll minus compensation for workers earn-
ing more than $100,000. Congress said that
the loans could be good for as many as 10
years, but Treasury rightly decided this was
too long and reduced the maturity period to
two years. It also allowed repayments to be
deferred for six months.
Congress said the SBA could charge an in-
terest rate of up to 4%. But Treasury decided
1% would suffice to provide low-cost funds to
borrowers while covering the cost of funding
the loans for banks. Treasury also says loans
can be sold back to the SBA after seven weeks
at the cost of the expected loan forgiveness
so banks shouldn’t lose money.
But small businesses are complaining about
Treasury’s terms of loan forgiveness—namely
that 75% of the loan must cover their payroll
costs. Employers in some places like New York
City or San Francisco in normal circumstances
spend more each month on rent, mortgages
and utilities than labor, so this could preclude
them from obtaining loan forgiveness.
Congress also made it harder for busi-
nesses to retain workers by providing en-
hanced unemployment benefits that in many
cases pay more than wages. Workers who quit
aren’t eligible for jobless benefits, but state
unemployment offices probably won’t check.
If Congress wanted to help businesses retain
workers, it shouldn’t also provide workers an
incentive not to work.

Then there’s the question of whether start-

ups backed by venture capital or private equity

qualify. The SBA’s “affiliation” rules exclude

small companies with com-

mon ownership that have

more than 500 employees

combined. The law waives this

rule for the hospitality indus-

try and franchises, but not

venture or private equity-

backed companies. Powerful California Reps.

Nancy Pelosi and Kevin McCarthy say these

rules should be waived for venture-backed

startups. No doubt their donors in San Fran-

cisco are grateful. But why should startups

backed by Kleiner Perkins benefit from govern-

ment liquidity and not those by KKR?

Inevitably, there will be political recrimina-

tions that businesses that don’t need the loans

are borrowing to finance their payroll. Who’s

going to reject free government cash? The

Small Business Administration Inspector Gen-

eral estimated a 2.77% improper payment rate

for loans made in the 2018 fiscal year, but the

rate was 13.65% for 2017 disaster-relief loans.

At that rate, $50 billion of the $350 billion

could end up going to ineligible borrowers.

But then Congress essentially ordered Trea-

sury and banks to push money out the door

as fast as possible.

Treasury in its guidance writes that lenders

“will be held harmless for borrowers’ failure

to comply with program criteria.” But Con-

gress didn’t repeal the Bank Secrecy Act or

the False Claims Act, and many banks simply

don’t trust that they won’t later be sued for

making loans to borrowers who fudge their

qualifications.

That’s what happened after the 2008-

financial panic when the Obama Justice De-

partment used the False Claims Act to shake

down lenders for poor underwriting on failed

loans securitized by Fannie Mae or insured by

the Federal Housing Administration.

Worries about legal liability have caused

banks to delay loan approvals and prioritize

existing customers. Senator Marco Rubio took

to Twitter Friday to bash Bank of America:

“The requirement that a #SmallBusiness not

just have a business account but also a loan

or credit card is NOT in the law we wrote &

passed or in the regulations.”

Ok. But then Mr. Rubio and his colleagues

in the peanut gallery should provide explicit

legal protection to banks and fix the other

problems they created in their attempt to res-

cue small businesses from the government de-

cision to deny them customers.

Trying to pass out $

billion in days or weeks

is harder than it sounds.

The Teachers Union Ate My Homework

T

he coronavirus has shut down schools
across America, and desperate parents
are scrambling to ensure their children’s
education doesn’t suffer. The
U.S. Department of Education
could help with some guidance
about how schools can move
forward on remote teaching. If
the feds don’t take the lead,
the teachers unions will—to
the detriment of students.
Not every student has a laptop and Wi-Fi to
study online during the shutdowns. In some dis-
tricts, this inevitably has an adverse effect on
poor students or children who don’t speak Eng-
lish as their first language. Schools fear that if
they produce online lessons that not all students
can access, they could lose federal funding or
face litigation under the Civil Rights Act or the
Equal Educational Opportunities Act.
The teachers unions loathe assessments in
the best of times, and now they’re claiming that
the only fair recourse is to stop tracking the
progress of all students until schools reopen. For
students “who have no online access to teacher
tutoring with visual aids, mandatory grading is
essentially a guarantee that they will be left be-
hind,” says Chicago Teachers Union spokes-
woman Chris Geovanis.
School administrators are accepting this ar-
gument. But their determination to sidestep lia-
bility has made the switch to remote education
even more sluggish. The University of Washing-
ton’s Center on Reinventing Public Education
looked at 82 public-school districts and reported
Friday that 27 aren’t offering any customized
curriculum or remote instruction. Only 13 dis-
tricts require teachers to grade some of the re-
mote work done by students.
The majority of school districts are treating

remote offerings as optional “supplemental,”

“enrichment” or “review” material instead of

for-credit class work. Among the few schools

that do grade, some have

moved to pass/fail. Chicago

Public Schools, in new guid-

ance for parents, says it will let

teachers review assignments,

but “grades will be counted

only if they improve a stu-

dent’s grade. Grades will not negatively impact

any student’s academic standing.” Chicago is not

alone in this approach.

This is equitable only in its disservice to stu-

dents. Administrators are forcing all children at-

tending public schools to put their education on

hold, depriving them of its structure in a chaotic

time. Kids who are equipped to study remotely

will lack incentive if their work counts for noth-

ing. Schools won’t have the metrics to identify

which children are falling behind during the

shutdowns and will need remediation later. Bad

teachers will escape accountability for their fail-

ures. In Chicago the data will make their perfor-

mance look better than it really was.

The Education Department could help by giv-

ing school districts some clarity about the path

forward. It has already offered helpful guidance

on how to ensure schools don’t run afoul of dis-

ability law, and it should provide similar guid-

ance to schools worried about exacerbating ra-

cial and economic inequities.

Some school boards and nonprofits are al-

ready working hard to provide laptops and Wi-Fi

access to the neediest students. State and fed-

eral lawmakers could set aside funding for extra

help for the kids who struggle most during the

shutdowns. It’s not a perfect fix, but it’s better

than bluntly concluding that fairness requires

canceling everyone’s education.

School districts fear

lawsuits if they grade

remote assignments.

Yanks for Boris Johnson

T

here’s no better example of the wide-
spread danger the coronavirus poses
than that it has now reached the top of
one of the world’s most impor-
tant governments. U.K. Prime
Minister Boris Johnson on
Monday evening was moved
into a London hospital’s inten-
sive-care unit as he battles
Covid-19.
Media reports suggest the 55-year-old leader
is conscious and not currently on ventilation, but
his condition took a turn for the worse after he
was admitted Sunday evening. The Prime Minis-
ter first announced he had tested positive March
27 and self-isolated in an apartment in Downing
Street but failed to recover. His partner, Carrie
Symonds, who is pregnant, also developed
symptoms. So has Charles, the Prince of Wales,
who has now recovered.

We tend to forget during crises that our politi-

cal leaders are also human beings. That’s no argu-

ment against vigorous policy disagreements—they

sign up for the job expecting to

duck those slings and arrows—

but instead a reminder that they

too can be physically vulnerable.

Especially so when the enemy

the world is fighting is an invisi-

ble killer.

Covid-19 has penetrated the family lives of

other leaders, such as Canadian Prime Minister

Justin Trudeau’s wife, and there will probably

be more. They can be stricken as Mr. Johnson

has been when their countries need them most.

The British government will continue for now

under the stewardship of Foreign Secretary

Dominic Raab. Britons, and Americans, will wish

Mr. Raab well, and especially wish for Mr. John-

son to beat this insidious disease.

Americans are praying

for the British PM as

he battles Covid-19.

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