OP-ED: A ‘catastrophic’ future looms. Can we stop COVID-19’s economic devastation?
Two words, above all others, stuck with me after I spoke by phone with Brian Gleason from his temporary home office in Malvern, Pa., recently.
“Catastrophic” and “bankruptcy.”
Gleason was referring to what seems like an inevitable looming reality for Main Street store proprietors, restaurants, and other small-retail-sector businesses whose rent came due April 1 amid little-to-zero revenue due to COVID-19 shutdowns of the economy.
The devastation of what the coronavirus has swiftly wrought, of course, is even broader than that. While Gleason and I were speaking Thursday, news was breaking that nearly 10 million Americans had filed unemployment claims over just the prior two weeks.
For many of those millions, the difference between ruin and survival could depend largely on whether the $2 trillion rescue package promised by the Trump administration and Congress delivers.
Early signs were not comforting: We learned Thursday that it could take five months for the IRS to mail out paper checks to workers who lack direct deposit. And information about promised federal rescue loans for small businesses appeared snarled in red tape a day before their planned availability on Friday.
“The companies are very fearful they’ll run out of money before they get the loan,” said James R. Haefele, a partner with the Maple Shade, N.J.-based accounting firm Haefele, Flagan & Co., in an Inquirer news story. “They’re also worried the $350 billion fund will run out before their applications are processed.”
I had called Gleason because he is a man who swims in economic carnage. Even in good times, this is his raison d’etre.
Phoenix Management Services, for which he is senior managing director, has spent decades helping small midsize companies in financial distress. Phoenix, based in Chadds Ford, Pa., either helps them keep afloat — or assists in guiding them through bankruptcy.
In conversations over more than a decade, starting with our first talk during the Great Recession 14 years ago, Gleason has come across as a straight shooter but with a sense of perspective beyond just the bubble of corporate-speak. He’s a hard-nosed numbers guy who often prescribes brutal remedies like layoffs. But he has enough of a social justice bent to still appreciate the value of the humans who show up as line items on an ugly balance sheet.
So I was curious: What does the economic attack in which we find ourselves look like to a guy who’s used to being up to his neck in red ink?
His answer: This is unprecedented. It is broad, cutting across virtually all industries. And it is anyone’s guess when it will end — and what work and business life will look like once it’s over. You can safely bet, though, that unemployment will be higher than it was.
“I believe,” Gleason said, “there’s going to be catastrophic levels of bankruptcy. Especially for the small service-sector businesses.”
What he’s seen happen as employers have shed millions of jobs alongside a stock market that has lost a quarter of its value in just a few weeks — it doesn’t compare to anything: not the 9/11 terror attacks, not the Great Recession and global financial markets meltdown in 2008.
None of this has happened because banks and other financial institutions played fast and loose with credit. It’s all, quite immediately, because of a deadly new virus with no vaccine but the potential to kill into the hundreds of thousands or more. We are in a sudden shutdown of much of the U.S. economy as people are ordered to stay home to keep from getting one another sick and overloading hospitals.
“It’s unprecedented,” Gleason said, “in the 35 years that Phoenix has been in business.”
He used that word a bunch of times. Almost as though he needed to say it to grasp the enormity of what has unfolded like a financial wildfire. Many of us are doing the same — struggling with the frightening and surreal reality of three weeks of government-ordered home confinement (and counting) in Pennsylvania and New Jersey.
He and the 30 financial experts who work at Phoenix do work that requires steely nerves. They stand alongside or in the place of struggling company leaders as the businesses bleed money.
But as we talked over several days this week, I sensed in Gleason’s voice what sounded like equal parts control and disbelief.
As recently as two months ago, clients were calling and asking Phoenix to help them poach workers from competitor companies. That’s how tight the labor market was. Their biggest complaint was not being able to make more money because employees were so hard to find.
They’ve since laid off up to 90% of their workforce and spent the last few days asking lenders for breaks on at least a month’s worth of loan payments.
To leaders of strained businesses, his advice is unvarnished: Don’t waffle. Communicate. Your legacy will be judged starting now.
For everyone else, beyond calling landlords and banks and utility companies for forbearance, the priority is to save whatever cash you have.
And to hope that somehow, sooner than later, this devastating time becomes a thing of the past.
— Maria Panaritis is a columnist at the Philadelphia Inquirer.