Fed Should Pay Every American More, Let Hedge Funds and Billionaires 'Get Wiped Out', Says Social Capital CEO

Is the Fed's massive coronavirus stimulus package helping the ultra-rich at the expense of ordinary American workers? That's what Chamath Palihapitiya, chief executive of venture-capital firm Social Capital LP, argued Thursday. From a story: Appearing Thursday on CNBC, Palihapitiya said the U.S. shouldn't be bailing out billionaires and hedge funds when it's the people on Main Street who are the ones actually getting hurt. Jobless claims hit nearly 17 million on Thursday, and are likely even higher as businesses across the country close in an effort to slow the spread of COVID-19. Economists say the unemployment rate has likely surged above 10% and will only get worse. Palihapitiya's argument, basically, is: Let those businesses fail, but without layoffs, and let the rich stakeholders absorb the pain. When a business typically fails, Palihapitiya said, "it does not fire their employees," instead going though a bankruptcy process that often preserves pensions, and employees end up owning more of the company in the end. "The people who get wiped out are the speculators" who own debt, and the equity holders. "These are the people that purport to be the most sophisticated investors in the world. They deserve to get wiped out," Palihapitiya said. "But he employees don't get wiped out. The pensions typically don't get wiped out." A baffled Scott Wapner, the show's host, asked why anyone "deserves" to get wiped out. "Just to be clear on who we are talking about. We're talking about a hedge fund that serves a bunch of billionaire family offices. They don't get the summer in the Hamptons?" Palihapitiya said. "Who cares? Let them get wiped out. What we've done is disproportionately prop up poor-performing CEOs and boards, and you have to wash these people out," he said.

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