Slate Money – “Dear Jay” Letter

Air date: November 21, 2020
Hosts: Felix Salmon (Axios), Emily Peck (HuffPost), Anna Szymanski (Breakingviews)

Overview

This episode of Slate Money unpacks the “breakup” between Treasury Secretary Steve Mnuchin and Federal Reserve Chair Jay Powell, instigated by Mnuchin’s letter pulling key pandemic-era emergency lending programs. The hosts also analyze a wave of high-profile IPO filings (Affirm, Peloton, Airbnb, DoorDash), and discuss the growing consumer subscription model. The “numbers round” highlights unforgettable stories illustrating the intersection of business, politics, and the pandemic.

Main Segments & Insights

1. Mnuchin’s “Dear Jay” Letter: The Treasury-Fed Split

(00:00–13:00)

• Conflict Sparked: Mnuchin unilaterally notified Powell that several emergency lending facilities, enacted to stabilize the economy during the COVID-19 crisis, would be shut down early.

• Breaking Precedent: The hosts note the rare, public rift this letter created between the Treasury and the Fed:

  “For the first time that I can remember since the crisis started… [the Fed] came out with a public statement saying, what in ever loving fuck do you think you're doing?” – Felix (03:23)

• Possible Motives (Political or Practical?):

  • To hamstring the incoming Biden administration’s economic options (as reported by NYT and debated by the hosts).
  • To repurpose the “unused” money for direct stimulus—though this rationale is questioned.
  • Anna summarizes:

    “These programs are designed to provide confidence to the market... If these programs had been completely tapped, that actually would be a sign that they weren’t working.” (06:37)

• Emergency Programs as a “Bazooka”:

  • The mere presence of Fed lending backstops instilled confidence and prevented runs or credit crises, even though actual uptake was modest.
  • Analogies: Emily and Felix share personal stories about financial safety nets to illustrate the psychological impact of Fed support.

    Emily: “We just parked the money in the bank account, and we were able to spend money… just with the psychological knowledge that there was this backstop…” (09:11)

• Potential Upsides, Political Realities:

  • If pulling these funds makes further Congressional stimulus more likely, the move could be worthwhile—but hosts doubt that’s likely.

    Felix: “I have seen nothing from Congress… suggesting that [this] is really a part of the calculus.” (11:27)

2. The IPO Wave: Affirm, Peloton, Airbnb, DoorDash

(13:00–35:00)

Affirm & The Changing Face of Consumer Credit

• Business Model: Affirm aims to replace credit cards (as borrowing devices) for larger, specific purchases with transparent installment loans, often with 0% interest subsidized by merchants (e.g., Peloton).

  “A kindly, gentler form of credit installment plan… much more connection... between the money that you're spending and the good you bought…” – Felix (14:22)

• Consumer Benefits & Concerns:

  • More predictable, transparent, and sometimes 0% financing.
  • Emily: “They tell you how much your payments are going to be... actually a little bit different sometimes than credit cards.” (15:21)
  • Anna raises concerns about over-extending the loan model or obscuring real costs.
  • The conversation turns to the “subscription economy,” with concern over consumers losing track of proliferating monthly fees.

    “We're heading into this world where… you don't know where your money's going anymore because every month little fees are getting sucked out…” – Emily (20:02)

• Peloton’s Outsize Role: 30% of Affirm’s revenue in Q3 is from financing Peloton purchases, a function of pandemic consumption patterns.

  “Peloton alone accounts for 30% of a firm's revenue, which is enormous.” – Felix (22:57)

  • This raises questions about Affirm’s customer base and future growth if pan(23:15)demic trends fade.

Airbnb: Resilience in the Pandemic

• Pandemic Pivot: After a brutal initial crash, Airbnb benefited from localized, rural travel demand and slashed costs, even posting a small profit.

  “Their business fell off a cliff… they did layoffs, slashed costs… What started happening in the summer is people still wanted to take vacations… Airbnb's business actually picked back up.” – Emily (27:22)

• Geographic Diversity:
  • Airbnb’s revenue is widely distributed; even cities like Toronto (not a traditional tourist magnet) are top markets.

    “Toronto... is the 8th biggest city in the Airbnb universe… none of these cities… account for more than like two and a half percent of Airbnb's revenues…” – Felix (36:39)

• Corporate Culture: Praised for handling layoffs with empathy and transparency during COVID-19.

DoorDash: Pandemic Winner, but for How Long?

• Pandemic Demand Spike: DoorDash profits as consumers avoid restaurants, but the business relies heavily on classifying workers as independent contractors (buoyed by Prop 22 in California).
• Long-term Viability? Hosts are skeptical:

  “Once we can get back to normal, no one really wants delivered McDonald's or Taco Bell... I think the demand will evaporate a little bit.” – Emily (33:32) “There are reasons why historically delivery has been concentrated in Chinese food and pizza… other foods, not so much.” – Felix (34:14)

• Memorable aside: Anna praises “Bear Burger” for delivering perfectly crispy fries against all odds (34:46).

3. Numbers Round: Journalist’s Snapshots of 2020

(35:13–end)

• Emily:
  • Number: 5
    • “That is the number of workers at a Waterloo, Iowa pork processing plant owned by Tyson that died of COVID-19… the headline… managers at the plant were actually betting money on how many workers would get sick.” (35:26)
• Felix:
  • Number: 8
    • “Toronto… is the 8th biggest city in the Airbnb universe. It does show that there's a lot of demand from people who need a place to stay…” (36:39)
• Anna:
  • Number: 300+
    • Number of people who joined a Wayne County, MI Zoom call, “basically all screamed at these [election] officials… so then they reversed themselves and said they would certify [the election results].” (38:33)

Notable Quotes

• On the Treasury-Fed split:

  “I've never seen this much distance between Treasury and the Fed literally in decades.” – Felix, (03:10)

• On psychological backstops:

  “It was just like we needed the psychological reassurance.” – Emily, (09:11)
  “That money was still incredibly useful.” – Felix, (09:59)

• On Affirm’s business model:

  “A firm is not trying to replace a credit card as a payment device. A firm is trying to replace a credit card as a borrowing device.” – Felix, (18:43)

• On the subscription explosion:

  “Absolutely everything is becoming a subscription… the subscription economy is great for businesses. I do agree with Emily that it does tend to lead to consumers spending more money overall.” – Felix, (22:49)

• On DoorDash’s viability:

  “I'm very skeptical that these three sided markets are particularly easy to navigate… that just raises costs for everyone.” – Felix, (32:53)

• On Tyson plant scandal:

  “Managers at the plant were actually betting money on how many workers would get sick.” – Emily, (35:44)

Timeline of Major Segments

• 00:00–13:00: Mnuchin’s “Dear Jay” letter and the politics/economics of ending Fed lending backstops
• 13:00–26:50: Affirm’s IPO, business model, and the pitfalls/appeal of installment lending and subscriptions
• 26:51–31:45: Airbnb’s bounceback, layoffs, and rural/local travel surge during the pandemic
• 31:46–35:13: DoorDash’s IPO, labor models, and questions about post-pandemic demand
• 35:13–39:36: Numbers round—journalistic snapshots of pandemic, politics, and market shifts

Tone & Style

The hosts maintain a conversational, irreverent, and (at times) witty style, blending economic analysis with personal anecdotes and journalistic skepticism. They balance insider finance knowledge with accessible analogies, making the episode engaging for both business-savvy listeners and general audiences.

Listen if you want to understand:

• The behind-the-scenes drama and policy implications of Mnuchin’s snap decision to end Fed pandemic programs
• How fintech is challenging traditional consumer credit—and what’s at stake as installment plans go mainstream
• Why Airbnb and DoorDash’s pandemic-era success might not signify post-pandemic permanence for their industries
• The social, labor, and public health crises at the intersection of business and politics in 2020