They also used this easy credit, made available to them (but not the local diner), to buy back their own shares. Last year, CAKE spent $51 million buying back its shares, a strategy designed to boost stock prices and, as a result, executive compensation. Cheesecake Factory has spent $425 million over the past four years buying back shares and paid investors $210 million in dividends while adding $1.6 billion to their debt load. This is a great game for investors so long as the market goes up.

When Cheesecake Factory doesn’t pay their rent, the owner of the building takes that financial hit (more on that in a future column), but when that building is ready to reopen, there isn’t going to be a Cheesecake Factory left to reopen. Much of that $2.3 billion in liabilities is debt owed in the corporate bond market. When they default on that debt – and without massive, ongoing bailouts, they will default – The Cheesecake Factory Incorporated is going to be forced into bankruptcy (and your pension is going to take a whack too). It doesn’t matter if the local franchisee/investor wants to reopen. It doesn’t matter if the landlord wants them back. As a failed investment, they will be sold off for scraps to repay (to the extent possible) thousands of different bondholders. As. They. Should. Be.

When we watch politicians in Washington DC scramble to save the economy, understand that they are not trying to save the family diner. Or the local equivalent in any other industry. Sure, they will wrap their rhetoric in the idea of small businesses, but local businesses are resilient. I’m not suggesting it won’t be messy or pain free, but they’ll pick up the pieces and bounce back. They are strong and everyone in their simple financial chain has huge incentives to make it work.

No, “saving the economy” right now means saving the financialized economy, the debt machines used by investors to accelerate financial returns. You don’t have a Cheesecake Factory in your town because the people in your community are in love with Cheesecake Factory. It’s there because one set of bond investors can get favorable returns loaning another set of equity investors large sums of money to replicate Cheesecake Factory establishments in cities across North America. That people like the food is necessary, of course, but that’s not why it’s there.

So, when the financialized part of the economy slows down or seizes up, the whole thing implodes. Kaboom! If this quarantine goes on in one form or another for even four months, there will be no suburban commercial development left. Much of the new, affluent places in the flashy parts of major cities and pop-up urbanism will be gone too. It’s financially tied to credit markets, which is the master they serve, not local demand.

Short of a quick resolution to this pandemic or ongoing and successful bailouts beyond any imaginable scale, the places that will recover the quickest and most completely from this crisis will be the ones dominated by local entrepreneurs, not investors.

This insight provides some guidance on how we rebuild. If we want a Strong Town, we must stop tilting the playing field against the small businesses, against the local entrepreneur. We need to lower the bar to entry for small business startup, make their path easier, and even show them preference over their investor competitors.

There are any number of ways this plays out, but here are a few that are top of mind for me right now:

Don’t require parking, a costly and unnecessary burden on small businesses but a competitive advantage for their investment rivals.

Lower the bar of entry for people wanting to use existing buildings. Allow them to be successful before throwing the code book at them.

Don’t subject the modest reuse and transformation of an existing building to the same standards, or even the same review process, as the new structure out on the edge of town.

Prioritize walking and biking, which generally advantages local enterprises, over auto throughput capacity, which plays to the strengths of investor-led enterprises.

Advantage your local enterprises by sizing streets for truck delivery, not long-haul tractor trailers.

Stop giving tax subsidies to investor businesses (even locally owned franchises), especially those that directly compete with existing entrepreneur-led enterprises.

Make local community development financing available only to enterprises with local owners using local financing.

The leadership of every municipality today should be going around to its locally owned and operated businesses providing assistance in filling out SBA loan applications (which have a provision for loan forgiveness, making the loan a grant). Don’t bother with the Cheesecake Factory or the like; there are legions of national lobbyists, politicians, and pundits already working on their behalf.

The coronavirus has revealed to everyone just how fragile the underlying economy is. Less than two weeks of shutdown and it all blows up. That’s a byproduct of financialization, the desperate bargain we made with Wall Street over the last couple of decades to keep our top-down, centralized Suburban Experiment going. Our local communities need to get out of this debtor’s prison.

We can build strong and resilient places, communities that will be there for you in hard times, that have the capacity to bounce back stronger than ever. Let’s take this time of transition and dedicate ourselves to making ours a Strong Town.

Top image from Wikimedia.