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Slow money is killing the American economy – fast

April 8, 2020, 1:57 PM UTC

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Given the undeniable dysfunction that has marked American politics for the past decade-plus, the coronavirus has accomplished the unimaginable: Congress and the President worked together to pass the CARES act, a $2.2 trillion relief package which includes provisions for small business bridge loans, individual stimulus checks, expanded unemployment benefits, and other targeted forms of aid.

But there’s one unsolved problem: Actually getting all that money to Americans.

The failure of organizations, technologies, and legal frameworks for distributing relief funds is by now obvious at every level of the American system. Small business loans are already lagging, with banks complaining of a lack of clarity and overloaded systems; states are weeks behind on distributing unemployment insurance benefits; and individual relief checks are little more than notions hovering on the far horizon.

These slowdowns may prove just as devastating as the executive branch’s slow and muddled response to the virus itself. In both cases, every second counts. In fact, it may be useful to think of the economy as a sick patient, thrown into a dangerous coma by the stay-at-home orders that have begun to succeed in controlling the virus.

Financial relief measures are intended, essentially, to keep the patient’s heart beating until it’s safe to be up and about again. But every day money doesn’t get where it’s supposed to go, parts of the economy will seize up and fall into decay, like failing organs. Suppliers dependent on delivery payments from shuttered restaurants, flower shops, and factories are stumbling along with their customers. Laid-off workers, waiting for overdue unemployment benefits, may not be able to pay their rent or mortgages, setting in motion a chain of devastating defaults.

It will already be difficult to restart the delicately interrelated moving parts that make up our economy. The longer relief is delayed, the more things will unwind and disconnect, and the more irreparable the damage will be, turning what could be a three-month shock into a potentially years-long depression.

Are you a small business struggling with the SBA loan program; a laid-off worker fighting the unemployment insurance system; or a fintech or banking leader with ideas for a fix? Share your story: ledger@fortune.com. Some submissions may be published in the newsletter, so please let us know if we can use your name.

I have a painful piece of evidence right in front of me: My wife was among the millions laid off in the past three weeks. Since losing her job in mid-March, despite constant effort, she has been unable to penetrate New York’s overloaded, antiquated unemployment insurance system to claim the benefits her former employer paid into. Luckily, we’re fine, and trust that the money will come, eventually.

But for many others, delay is not an option. Millions of Americans are sole breadwinners with little or no savings, putting day-to-day survival itself in question.

There are alternatives to this catastrophe – or, perhaps, were.

Authorities in Berlin, for instance, were able to airdrop emergency funds directly into the bank accounts of 150,000 independent workers within a matter of days. Examples of such swift results from governments seem rare globally, though, and a number of fintechs are working to create faster pipelines for government cash. Chime and TurboTax are working to improve delivery of direct relief. Small-business loan originator Kabbage typifies the promise of the sector, with rich data feeds letting it automate the lending process, including for businesses smaller than many banks want to bother with.

Some of these innovations may go into effect fast enough to keep the economy’s heart pumping. But after three weeks of lockdown, we’ve already missed the window to really get ahead of the situation. Now the question becomes, once we’ve dug our way out of the rubble, what do we want our financial system to look like during the next crisis?

David Z. Morris

@davidzmorris

david.morris@fortune.com

DECENTRALIZED NEWS

Credits

Jack Dorsey pledges $1 billion of Square stock to coronavirus relief ... Wuhan ends its lockdown ... Chris Larsen, cofounder of Ripple, has recovered from COVID-19 ... Chime pilots direct federal stimulus deposits ... Bitcoin recovers 70% from the COVID-crash ... Paper-based banknotes may be less likely to transmit coronavirus than plastic varieties ... Top bankers, too, are working from home.

Debits

European finance ministers struggle to meet the coronavirus challenge ... Nurses turn to GoFundMe to buy protective gear ... Class action lawsuits filed against 11 major cryptocurrency firms ... Dark web vendors sell face masks and fake vaccines for bitcoin ... New Jersey begs for COBOL programmers to help fix its unemployment system ... Bitcoin fork Bitcoin Cash completes its mining reward 'halving', which may threaten its security ... White House removes independent inspector who was to oversee stimulus fund management.

FOMO NO MO'

"I think that the European challengers have completely underestimated the complexity of the U.S. market."

Colin Walsh, CEO of U.S. neobank Varo, speaking to Protocol about the stateside arrival of European competitors like Monzo, N26, and Revolut, which have much larger market shares at home than their U.S. counterparts. According to Walsh and others interviewed for the deep dive, they shouldn't expect to repeat their success in America, thanks to both tougher competition and tighter, pro-consumer banking regulations.

BUBBLE-O-METER

$166.6 billion

The volume of cryptocurrency traded on major exchanges in March. According to analysts at crypto publication The Block, that's the second-highest monthly level since January of 2018. Of course, circumstances are much different now, with various cryptocurrencies taking huge losses amid the coronavirus downturn. But exchanges still profited from all the volatility: As the saying goes, the house always wins.

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SoFi acquires banking tech firm Galileo for $1.2 billion - Jeff John Roberts

Why the U.S. shouldn't let China dominate the digital currency race - Michael Casey

Hackers fight back against coronavirus scammers - Robert Hackett

TurboTax launches tool to get stimulus checks to people who don't pay taxes - Chris Morris

These are the banks and lenders currently offering SBA emergency loan applications - Anne Sraders

What to know about the no-penalty 401k withdrawals in the CARES act - Lee Clifford

MEMES AND MUMBLES

It's not too late to choose your house!

This edition of The Ledger was curated by David Z. Morris. Contact him at david.morris@fortune.com.