Chamath Palihapitiya, founder and CEO of investment firm Social Capital, told CNBC on Thursday that the economic implications of COVID-19 will hit the middle class the hardest.
“The people that get decimated are the 80% in the middle,” Palihapitiya, an early Facebook executive, said in a “Fast Money Halftime Report” interview. Palihapitiya added that the U.S. government needs to learn from the past mistakes of financial crises and help the people who actually need it most.
“We have a responsibility this time around to learn from what we did wrong the last time,” he said. “You can’t just bail folks out financially for being financially greedy. It’s unfair. What we did in 2008 was incomplete, all we did was shift risk off the balance sheet.”
He added, “Hedge fund guys are the ones buying quarter-of-a-billion-dollar apartments, buying sports teams, hedge fund guys are the ones buying art. And now all of a sudden if we have to go and step into the capital markets with United States dollars that everybody has a right to as citizens of this country, to shore up the financial operations of the capital markets, somebody has to pay a price for that as well.”
Several companies have laid off or furloughed workers due to the new coronavirus. Jobless claims in the U.S. rose to 281,000 last week, a significant rise from last week’s 211,000.
Marriott International said it will be laying off tens of thousands of employees. Compass Coffee, which is based in Washington, D.C. and competes with Starbuck’s, has laid off 150 workers, or 80% of its staff. Danny Meyer’s Union Square Hospitality Group said it would furlough 3,000 workers, also 80% of its workforce.
The Trump administration said it has a plan to send Americans relief money as part of a massive stimulus package to blunt the impact of COVID-19. Treasury Secretary Steven Mnuchin said Thursday that the plan, which is being discussed with congressional leaders across the aisle, would send payments totaling $500 billion directly to Americans.
Mnuchin added that the White House’s plan would also allocate $300 billion for small businesses. He said “there will be loan forgiveness” for employees who keep their workers on the payroll. $200 billion would also be used for “more facilities” with the Federal Reserve, as well as secured lending to airlines and other critical industries being strangled by the crisis.
Palihapitiya, who was a Facebook executive in the early days of the company, told CNBC last week that the broad market sell-off over coronavirus fears is like the 2008 financial crisis and 2000 dot-com bubble bust combined. He added that he thinks the markets still have the worst to come, especially if federal measures don’t come through. “I suspect we’re not near the lows.
-CNBC’s Kevin Breuninger and Jeff Cox contributed to this report.