CNBC's Andrew Ross Sorkin reports on comments from venture capitalist Chamath Palihapitiya last week on letting companies go bankrupt during the coroanvirus pandemic.
Chamath Palihapitiya, founder and CEO of investment firm Social Capital, told CNBC on Thursday that the U.S. shouldn’t be bailing out billionaires and hedge funds during the coronavirus pandemic.
“On Main Street today, people are getting wiped out. Right now, rich CEOs are not, boards that have horrible governance are not. People are,” Palihapitiya, an early Facebook executive, said on CNBC’s “Fast Money Halftime Report.”
“What we’ve done is disproportionately prop up poor-performing CEOs and boards, and you have to wash these people 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, who cares? They don’t get the summer in the Hamptons?” he said. “These are the people that purport to be the most sophisticated investors in the world.”
Palihapitiya also said he was concerned that the Federal Reserve’s plans to support to economy during the COVID-19 crisis are going to have consequences.
The Fed earlier in the day announced a slew of new moves aimed at getting another $2.3 trillion of financing into businesses and governments, including its Main Street business lending program and market interventions. The central bank said its loans will be geared toward businesses with up to 10,000 employees and less than $2.5 billion in revenues for 2019. Programs would total up to $2.3 trillion and include the Payroll Protection Program and other measures aimed at getting money to small businesses and bolstering municipal finances with a $500 billion lending program, it added.
But Palihapitiya said it would have been better to just give more money to Americans.
“I’m not disagreeing with what the Fed has to do. What I’m saying is it’s creating a land mine, and it’s creating a bill that will have to come due,” he said. “It would be better for the Fed to have given half a million to every man, woman and child in the United States,” he added.
The new measures add to an already aggressive strategy by the Fed to keep markets functioning and support the economy, which has been hit by public health measures aimed at slowing the coronavirus spread.
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