When and how to reopen the American economy is not only plaguing Donald Trump, who tweeted all-caps in March that, “We cannot let the cure be worse than the problem itself.”
Seven weeks later, with an unemployment rate at 14.7%, and counting, with manufacturing output down a record 13.7% in April, and retail spending collapsing a record 16.4%, Trump likely has concluded that his only chance for reelection is if the economy—somehow—starts to improve.
As more than 86,000 people in the U.S. have died from COVID-19, the question of opening or not is also preoccupying governors of the 50 states; of the states, four are closed for the foreseeable future, while the other 46 are either open or in the process of reopening.
The question is also preoccupying Wall Street bankers, whose livelihoods, like hundreds of millions of other Americans, depend upon an economy that at least has a pulse. Since no one seems to be consulting Wall Street bankers and traders about when and how to reopen the economy, I convened an impromptu circle of Wall Streeters I know well to get their views.
The consensus among them is: We can’t continue any longer in lockdown mode. Something has to give, because more than 36 million newly unemployed Americans are not going to be able to pay their monthly bills, feed their families, or maintain their mental health if the economy remains shut.
And the problems are only going to get worse the longer so many Americans are out of work. They reference United Nations’ projections that 250 million people could be on the brink of starvation by the end of the year. They also cite a report by the Stop TB Partnership that if the COVID-19 lockdowns continue that an additional 1.4 million people will die from tuberculosis because they will be unable to get treatment. They note that roughly 37,000 Americans die every year in car accidents. But we haven’t outlawed cars; we have learned to live with the deaths.
Furthermore, the consensus among them also seems to be, there is a false equivalency in the debate being made—by politicians and in the media—between saving lives by keeping the economy closed and sacrificing lives by opening it up in order for people to once again make a living. “Saving lives versus saving jobs is the wrong debate,” says one senior Wall Street banker. “Isn’t there a middle ground?… How many lives are you willing to spend to bring the economy back to maintain people’s standard of living? How many lives are we willing to risk?
How do you put a price on a life? Many lives were lost preserving American Democracy in the fight against Nazi Germany. There was no moral high ground then. And now they are remembered as the Greatest Generation.” He wonders, “How do you compromise between the pragmatic and the moral. There are shades of gray.”
(Some hedge fund managers, according to my colleague Gabriel Sherman, aren’t waiting for the reopening of New York City, or of the Connecticut coastline; they are picking up stakes and moving to one of Texas, Colorado, or Florida.)
Kim Fennebresque, a longtime Wall Street investment banker, has had successful stints at First Boston, Lazard (where I met him), UBS, and as the former CEO of Cowen & Co., a small, independent investment bank. He’s had enough health issues lately to make him especially vulnerable to COVID-19, if he were to contract it.
Nevertheless, Fennebresque believes the time has come to open up the economy, especially in those regions of the country where, so far anyway, it has had less of a devastating impact. He agrees the debate has been poorly framed.
“In terms of money versus lives, it really reduces it to a silly trade-off, because that’s not what it is,” he says “People will die. People do die. People my age die. It happens, right? It can happen with a flu epidemic. People can die. People have to take care of themselves and wash their hands.
People have to stay in and do lots of things, and 5,000 people can’t go running to a beach the day it opens. You do that and it has consequences. People have to take responsibility for their own lives. And people do die. That is kind of what happens.”
He makes the analogy, too, to fighting World War II. “When Eisenhower and Churchill sat and talked about D-Day they said, You know, how many people did we lose? 150,000? 200,000? What? 50,000? 100,000? But you know what? The country is on the precipice, I think, of a really dire, dire circumstance. I am highly at risk if I catch it. Highly. I was a smoker. I’ve had double pneumonia three times, and I’m 70.
My doctor told me if I get it, I’m fighting for my life. But you know what? Just like I agreed with repealing the SALT deduction”—the cap the new tax law put on deducting state and local taxes—“even though it hurt me, I thought it was the right thing to do. This thing, I know my life’s at risk. But I think opening up is the right thing to do. And I think you know what? I have to take care of myself. It’s my problem. It’s a real responsibility to take care of myself.”
He thinks the toll on people’s psyches of being cooped up week after week is enormous and getting worse. “We have a chance for social unrest at some point,” Fennebresque continues. “I think people will get depressed. I think there will be suicides and massive depression. We’ve all read about the domestic-abuse victims who are trapped in their homes with their abusers…. It’s kind of scary.”
He worries, too, that “people with no stake in the economy” are talking about keeping it closed, to prevent deaths from the virus, while ignoring the severe plight facing many Americans suddenly thrown out of work. “The politicians have no stake in the economy because they’re going to get paid,” he says. “The journalists on TV, their jobs aren’t at risk. [Anthony] Fauci’s job, not at risk.”
There need to be “clear rules,” he continues, for what people need to do as the economy reopens. When do you wear a face mask? How do people go to the beach, or to a restaurant or to a theater? There have to be fines levied for noncompliance. Health inspectors should not only rate a restaurant’s sanitary condition but also how compliant it is with the new rules regarding physical distancing and food preparation.
He also thinks simple technical innovations should be implemented. For instance, he went out to dinner the other night near his home in Florida and he and the people he was with wiped down the table, chairs, and silverware. “
Then they bring me a leather-bound menu,” he says. “Well, you know what? The menus should all be on my phone. Every restaurant should have their menu on the phone so I can look at it. What do you do with the bill? They bring the bill in one of those little leather containers that closes the bill and I put the credit card in it.
They shouldn’t be touching my credit card. They should have a way to do it. This is not genius…I think we should open up. I think we can’t do a lives-versus-dollars analysis. It’s just faulty reasoning. But I think we really do have to have enforcement of whatever the rules are.”
Another longtime Wall Street banker agrees the economy needs to get back up and running. The implications of not opening, he says, are “dire,” especially since the “amount of debt” the country is taking on will be the responsibility of his children and grandchildren to pay off.
In his view, the impact from the virus has “predominantly” been in two states—New York and New Jersey—and it’s been focused largely on older Americans and people in nursing homes.
The policy response for opening back up should reflect that reality. “The right thing is to reopen geographically,” he says, “and then I think it becomes somewhat a thing of a voluntary nature as to who decides to, come back and work or not. I don’t think you can hold it against employees who don’t.”
He also thinks there has to be a broad legal indemnification for employers against claims related to the virus. “The legalities that are coming out of this are just absolutely astronomical,” he says. “Everyone’s going to sue everyone for every little thing. There’s got to be some kind of blanket indemnity.”
He doesn’t understand the math. “We’re saving a few for the sake of millions and millions,” he says. “The penetration of this disease is fractions of a percent. You’re going to have people starving and many suicides and doing all sorts of bad things.”
Fennebresque, who has never been shy, has some thoughts about what he would say if he were in the Oval Office today, instead of Donald Trump, at the moment when the COVID-19 death toll is increasing and the economy is in shambles. He would give “very, very clear instructions” about “messaging and educating people,” he says.
Many people understand about washing their hands and about wearing masks. But many haven’t and are “defiant.” He’s not sure what to do about those people, other than fine them for noncompliance. But to those people willing to listen, he would say, “We can’t shut down the country for some minuscule number of people. This is not a 100% death rate. It’s a number of basis points.”
He says he would tell the American people that Trump’s decision to shut down the entire economy was a “disproportionate reaction” and then explain, “We needed to flatten the curve in certain places—in New York, probably in Boston, maybe in New Jersey, maybe two or three other places—otherwise the system would’ve blown up.
But we did not need to do it for 45 out of 50 states. I’m sorry about that. Terrible mistake.” He would then share a message of hope: “You have to control your behavior. You have to control your behavior, and we can get out of this thing now.”