Unsanitized: Social Unrest When There’s Nothing to Lose

Plus, the Fed helps out Carl Icahn. This is The COVID-19 Daily Report for May 29, 2020.

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First Response

There’s a reason that Spike Lee set Do the Right Thing on the hottest day of the year in Brooklyn. The pressure from the heat simmered through the community and created sparks that ignited existing tensions. There was a triggering event, which led to a police chokehold and the death of Radio Raheem, and the destruction of Sal’s Pizzeria. The weather was the backdrop as events played out. That was 1989 and it couldn’t be more relevant right now.

The death of George Floyd is obviously unforgivable on its own terms. There doesn’t need to be any context. Unreformed police murder in communities of color has been part of America since well before I was born. I have nothing to comment on about looters—at least eight people sent me this Onion headline, “Protestors Criticized For Looting Businesses Without Forming Private Equity Firm First.” (I guess my reputation precedes me.) I can’t say anything about the burning of the 3rd police precinct. And I have a lot to say about the great misfortune of having Donald J. Trump in a leadership position during this moment, but most of it would be curse words.

Decades of disinvestment and routinized brutality and structural racism created these conditions. The officer who killed George Floyd had enough history of violence alone to contribute mightily to this rage. (And yes, Amy Klobuchar declined to prosecute him and many others for these crimes.)

But you cannot separate this outpouring of anger from two months of death, economic collapse, and the disproportionate pain raining down right now on communities of color.

Read all of our Unsanitized reports

Decades of environmental racism have created toxic vectors for spreading the virus; that’s the same brutality. Minority small business owners have had a harder time securing federal aid, owing to more distant relationships with local banks; that’s the same brutality. African Americans are more likely to be in “essential” jobs and unable to work from home and protect themselves; that’s the same brutality. They’re more likely to be in prisons under perhaps the worst conditions of this crisis; that’s definitely the same brutality. “Black Americans are 80 percent more likely than white people to have diabetes,” which puts them at higher risk from COVID-19; that’s the same brutality. Lack of decent food in communities of color, and access to healthcare, and the ability to rent enough space in shelter to physically distance—this is all brutality against a people, manifested today but going back 400 years.

When you are either out of work or on a hair trigger because you know you’re risking your life by going to work; when your business can’t get a bridge loan and you know everything you worked for is about to be extinguished; when you’re cut off from your friends and neighbors; when your source of sustenance is the food bank; when you have nothing to lose, and then on television you see a black man with his neck wedged between a police officer’s knee and the pavement until he chokes, and you hear he died in police custody after pleading “I can’t breathe,” and you remember how those words were spoken by Eric Garner, and you hear that the man was in custody for using counterfeit money and you don’t think that’s a sufficient reason to kill somebody, and you recall that the Minneapolis Police Department has had a really ugly history with the black community for a long time, and when you exhale a little because the cops involved were fired but then the local prosecutor says this murder of a black man doesn’t merit prosecution… what results from this injustice should meet your expectations.

Social unrest can happen for the most unpredictable of reasons. But this context is very predictable. In a time of despair and hopelessness, people are quick to anger, especially when provoked. Riots are terrible and destruction of people’s own living spaces and communities are likewise terrible. But if you say you can’t understand it, you aren’t paying attention to what’s happened in the last two months, in the last twenty years, and since the first ships of Europeans and Africans arrived in America.

Odds and Sods

I was on with Brad Friedman on the BradCast yesterday talking about bailouts. Listen here.

A reminder that next Tuesday, June 2, at 3pm ET, I am moderating a panel discussion on building a pro-worker, anti-monopoly movement, an event the Prospect is co-sponsoring with the Open Markets Institute, United for Respect, and Change to Win. You can RSVP for that here.

Today at the Prospect I wrote about Spotify’s attempt to monopolize podcasting. Also Alex Sammon on the crisis for public education as state budget cuts loom. And Gershom Gorenberg has a personal essay about escaping New York and returning to Jerusalem, where it’s democracy on the deathbed.

All of our coronavirus coverage can be found at prospect.org/coronavirus. And email me with tips, comments, and experiences.

The Icahn Lifeline

For some reason I thought Herbalife was disbanded and all its executives put in jail for running a multilevel marketing scam, but that was wishful thinking, as this is America. (They paid some fines.) In fact, it became an attractive target for Carl Icahn, the legendary trader and one-time Trump special advisor (really) who was forced out of that position for using his power to try to push through an obscure change to ethanol policy that would net a company he owned $200 million a year. (just to grouse for a minute, I was writing about that in March 2017, although a New Yorker article that came out in August gets credit for “exposing” him. Sigh.) Icahn controls 25.6 percent of Herbalife stock, mainly because of a pissing match with hedge fund rival Bill Ackman, who once had a short position and is now out of it, it’s a long story.

The scene is set: a Wall Street predator with no ethical compass, at best a company that should be sued out of existence, and a Federal Reserve that’s just trying to restart capital markets. Here’s the rest. Herbalife sold $600 million in junk bonds that it would never, ever have been able to do before the Fed’s action. And it said explicitly in its press release: “The Company expects to use the net proceeds from this offering for general corporate purposes, which may include repurchases of its common shares and other capital investment projects.” Repurchases of its common shares means buybacks. Herbalife borrowed money in a Fed-guaranteed market to reward investors. We, the taxpayers, subsidized that.

We in turn subsidized Carl Icahn, who will get to sell shares for close to double what he paid for them. (Herbalife’s stock went from $23 a share on March 23—remember that date?—to over $43 today. Was there an important reason junk bond markets had to be rescued so Carl Icahn could sell out of a socially unproductive company at a profit?

Icahn “lost” money on the Hertz bankruptcy, of course, except he probably didn’t, because Hertz was an accounting gimmick masquerading as a rental car company, and Icahn-related vendors were extracting cash from it for years. And now, thanks to the Fed, he turned Herbalife into a profitable play. Thank God, I was worried about him, what with not being eligible for that $1,200 stimulus payment and all.

Congress didn’t have to enable this but they did.

On a related note, here’s former Fed governor Sarah Bloom Raskin explains why the Fed’s policy choice to bail out fossil fuels was so misguided.

Today I Learned

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