COVID still rages, CARES Act provisions have expired, and Congress is on another vacation. In this episode, by piecing together information discovered in six CARES Act oversight hearings, find out what problems weren’t solved by the CARES Act, what happened to the CARES Act money, and get an idea of what is possible in the next COVID relief bill… If there is one.
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Signed April 24, 2020.
Doubled the Paycheck Protection Program
- Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream By Aaron Glantz, October 15, 2019
- Article: Unsanitized: The Fed Can Still Save State and Local Governments By David Dayen, The American Prospect, August 13, 2020
- Article: Commercial Properties’ Ability to Repay Mortgages Was Overstated, Study Finds By Cezary Podkul, The Wall Street Journal, August 11, 2020
- Article: Unsanitized: Trump Orders Up a Poor Substitute for COVID Relief By David Dayen, The American Prospect, August 10, 2020
- Article: California vows to fix coronavirus reporting system amid huge backlog of unreported tests By Taryn Luna, Los Angeles Times, August 7, 2020
- Article: Tax Reform Act of 1986 By Julia Kagan, Investopedia, July 31, 2020
- Article: COVID-19 Hospital Data System That Bypasses CDC Plagued By Delays, Inaccuracies By Pien Huang and Selena Simmons-Duffin, npr, July 31, 2020
- Article: PPP was intended to keep employees on the payroll. Workers at some big companies have yet to be rehired. By Peter Whoriskey, The Washington Post, July 27, 2020
- Article: Nancy Pelosi’s election challenger says she’s not progressive enough. She’s ignoring him By Joe Garofoli, San Francisco Chronicle, July 14, 2020
- Article: The PPP worked how it was supposed to. That’s the problem. By Emily Stewart, recode, July 13, 2020
- Article: States need money. The Fed has it. Politics may be an obstacle By Jim Saksa, Roll Call, June 26, 2020
- Article: “The Fed Is the Huge Babysitter in the Room”: How the Federal Reserve Enabled a Coronavirus Junk Bond Boom By Jessica Camille Aguirre, Vanity Fair, June 26, 2020
- Article: USA: Ex-employee sues Amazon for alleged wrongful termination related to protesting lack of coronavirus safety measures By Monica Nickelsburg, Geek Wire, Business & Human Rights Resource Centre, May 20, 2020
- Article: Amazon reportedly says California’s expanded coronavirus sick leave policy doesn’t cover its warehouse workers By Isaac Scher, Business Insider, May 20, 2020
- Article: Fed Makes Initial Purchases in Its First Corporate Debt Buying Program By Jeanna Smialek, The New York Times, May 12, 2020
- Article: Walmart workers will call out of work, use tracker to protect themselves from COVID-19 By Charisse Jones, USA Today, April 29, 2020
- Article: Sen. Loeffler, CEO husband reportedly made options trades often used as hedges against volatility By Thomas Franck, CNBC, April 3, 2020
- Article: NANCY PELOSI TO RECEIVE FIRST GENUINE LEFT-WING CHALLENGE IN 30 YEARS By Lee Fang, The Intercept, March 4, 2020
- Article: Voices CECL standard expected to make a major impact By Jonathan Jacobs, Jennifer Press, John Schrader, Accounting Today, November 12, 2019
- Article: Everything’s Fine Until Suddenly it Isn’t: How a “Leveraged Loan” Blows Up by Yves Smith, naked capitalism, July 18, 2019
- Article: Dianne Feinstein’s Billionaire Husband and His Love Affair With Israel by Judy Maltz, Haaretz, June 19, 2019
- Article: DID STEVEN MNUCHIN HELP HIS COLLEGE ROOMMATE STEAL $2 BILLION? by Bess Levin, Vanity Fair, May 23, 2019
- Article: Sears sues Mnuchin alongside former CEO for alleged multibillion-dollar theft by Victoria Guida, Politico, April 18, 2019
- Article: Private Equity Takes Fire as Some Retailers Struggle by Lillian Rizzo, The Wall Street Journal, July 30, 2017
- Article: Blum and Doom by Peter Byrne, Bohemian, February 8, 2017
- Article: TREASURY PICK STEVE MNUCHIN DENIES IT, BUT VICTIMS DESCRIBE HIS BANK AS A FORECLOSURE MACHINE by David Dayen, The Intercept, January 19, 2017
- Article: “FORECLOSURE KING” STEVEN MNUCHIN DOESN’T APPRECIATE HIS TOTALLY ACCURATE NICKNAME by Bess Levin, Vanity Fair, January 18, 2017
- Article: TREASURY NOMINEE STEVE MNUCHIN’S BANK ACCUSED OF “WIDESPREAD MISCONDUCT” IN LEAKED MEMO by David Dayen, The Intercept, January 3, 2017
- Article: The Greatest Threat to Campus Free Speech is Coming From Dianne Feinstein and her Military-Contractor Husband by Glenn Greenwald, The Intercept, September 25, 2015
- Article: GOVERNMENT SAYS COMPANY PART-OWNED BY FEINSTEIN’S HUSBAND ABUSES POST OFFICE CONTRACT by David Dayen, The Intercept, May 5, 2015
- Article: Judge Cancels $525K in Mortgage Debt, Blasts Bank’s ‘Shocking and Repulsive’ Acts by DEBRA CASSENS WEISS, ABA Journal, November 30, 2009
- Report: Paycheck Protection Program (PPP) Report, Small Business Administration, 2020
- Homepage: Shahid Buttar for Congress CA-12, 2020
Sound Clip Sources
Hearing: Main Street Lending Program, CONGRESSIONAL OVERSIGHT COMMISSION, August 7, 2020
- Eric Rosengren – President and Chief Executive Officer of the Federal Reserve Bank of Boston
- Gwen Mills – Secretary Treasurer of Unite Here
- Lauren Anderson – Senior Vice President & Associate General Counsel of the Bank Policy Institute
03:20 Bharat Ramamurti: Four months ago, Congress gave the Treasury Department half a trillion dollars to stabilize the economy. The Treasury quickly pledged 75 billion of those dollars to the Federal Reserve’s Main Street lending program for small and mid sized companies. After taking three months to set up the program, the Fed has now been operating it for about a month. In that time, it has supported only 18 loans for a total of $104 million. That is 0.017% of the $600 billion lending capacity that the Fed touted for the program in April.
10:20 Eric Rosengren: Main Street program is designed to facilitate lending to small and medium sized businesses and nonprofits that have suffered disruptions and provides credit support for entities that have temporary cash flow problems due to the pandemic, and that given the uncertain outlook may have difficulty obtaining credit. It can provide a bridge as loans have no interest or principal payments in the first year and no principal payments until year three.
11:15 Eric Rosengren: Mainstreet relies on lenders to underwrite loans and keep skin in the game by banks retaining 5% of the loan.
16:07 Eric Rosengren: This facility is very different than some of the other traditional kinds of facilities that central banks operate during a time of crisis. So most of our facilities operate through markets, market securities, you can purchase them very easily through the market. They clear usually in a couple days depending on the security. So it’s relatively easy to quickly purchase a large number of securities and hold those securities over time. This facility is a facility we didn’t have during the financial crisis, and really tries to get to a different segment of the population, which is those businesses that are bigger than the PPP program was designed for and smaller than what the corporate facilities are designed for.
22:05 Bharat Ramamurti: This program has been a failure, and the basic reason for that is that the Fed can only offer loans. The data show that companies, even distressed companies aren’t looking for loans.
24:17 Bharat Ramamurti: By law, the Fed can only support loans and more loans are not the answer here for most companies. And this is a giant hole in our economic response to the crisis. Congress helps small businesses through the PPP, Congress help large companies that are big enough to issue bonds by empowering the Fed to purchase corporate bonds and reduce the cost of borrowing. But the only thing that the government has offered all these companies in between is the Main Street program and it’s just not working. And these mid sized companies employ 45 million people and represent a third of private sector GDP. So look, I don’t think continuing to tweak this program is going to work. I think Congress needs to act to provide direct support to mid sized firms and for that money to come with real strings attached to the money that benefits working people. Thank you, Mr. Chairman.
45:45 Bharat Ramamurti: The first version of the Mainstreet program required companies to say in writing that they needed the loan quote, due to the exigent circumstances presented by the covid 19 pandemic. Advocates for the oil and gas industry pushed to eliminate that requirement, presumably because many oil and gas firms were struggling before COVID and couldn’t satisfy the requirement. And again in the final version, the Fed eliminated that requirement. President Rosengren again, out of the more than 2000 public comments that the Fed received, are you aware of a single one outside the oil and gas industry that requested that the Fed remove this important requirement? Eric Rosengren: In the discussions I’ve been involved in, we do not discuss specific industries, we discuss how we can provide a broad based financing scheme. Bharat Ramamurti: Okay. Again, I appreciate that. But again, I reviewed the public comments and there wasn’t a single one that requested this change, only the oil and gas lobby had requested.
47:25 Bharat Ramamurti: It’s not supposed to be changing the rules of these programs so that the President’s favorite companies can get access to billions of dollars in public money. In fact, it is illegal for the Fed to structure these lending programs to help specific companies avoid bankruptcy. I urge this commission to further investigate this issue, including by requesting all communications on this topic between the Fed and the Energy Secretary, the Treasury Secretary and any representatives of the oil and gas industry.
1:13:40 Gwen Mills: My name is Gwen Mills. I’m Secretary Treasurer of the hospitality union, Unite Here. Well, I will focus on our members experiences. The recommendations I make are supported by the AFLCIO representing 55 National unions and 12 million workers. Our 300,000 members work primarily in hotel, casino, food service and airline catering industries, all sectors that are heavily dependent upon travel and tourism, before the cares act became law 90% of our members were laid off. Today, 85% remain unemployed.
1:14:40 Gwen Mills: At the heart is the question of requiring employers to maintain employment as a condition of federal assistance. The Main Street lending program requires only commercially reasonable efforts to maintain employees in spite of clear congressional intent. Treasury and the Federal Reserve said they will not enforce even that.
1:15:03 Gwen Mills: We’ve seen how powerful lobbyists transform the paycheck protection and payroll support programs into subsidies for real estate investors. We’ve identified 200 outlets where we have members that received PPP loans, and they haven’t protected paychecks or healthcare. One company, Omni hotels, received 34 PPP loans worth at least $53 million. Meanwhile, Omni hotels in Boston, Providence and New Haven were shut down in March and is unclear when they will reopen. In Providence, the company then cut off medical benefits in violation of their union agreement. There are many similar stories, what they reveal is how a powerful industry turned to program designed to keep workers on payroll into one that could keep hotel owners current on their mortgages.
1:16:45 Gwen Mills: Lobbyists claim if the Fed doesn’t rescue CMBS borrowers hotels will default and workers won’t have jobs to come back to. But that is not our experience. And this isn’t the first time hotel owners got themselves in trouble using these inflexible loans. After the financial crisis, there were scores of defaults across the country. But defaults and foreclosures didn’t lead to closed hotels. Hotel workers who were used to seeing absentee owners come and go understand that jobs are driven by occupancy and only ending the pandemic can fix that.
1:18:05 Gwen Mills: Program designers at the Fed take the CARES Act mandate to heart. What if credit terms were loosened, so long as, and here’s the important part, so long as there were airtight requirements, not incentives, not recommendations, but requirements that recipients keep workers on payroll, and is what the PPP could have done if it hadn’t been hijacked by the real estate industry.
1:26:10 Bharat Ramamurti: In your experience and the experience of your members, does providing financial support to businesses help workers without express and enforceable requirements, that businesses actually use that aid to support workers. Gwen Mills: No. Time and again, in many different programs, without enforceable requirements, support to businesses doesn’t help workers. Bharat Ramamurti: So of the $500 billion that Congress gave to the Treasury, in the CARES Act in March, there’s currently more than $200 billion sitting unused and uncommitted. If you were to use that money to develop a program that would be most helpful to your members, what would you do with it? Gwen Mills: The two things that matter are healthcare and wages. So we would fund Cobra payments so that we could continue health care and then give direct support to workers. Bharat Ramamurti: And thank you. And one final question about this. Did the Treasury Department ever reach out to your union as it was designing this lending program that was ostensibly about helping workers? Gwen Mills: No.
1:28:45 Gwen Mills: Our great concern about the Main Street lending program is that the hotel industry is seeking changes so that they can use the program to pay their CMBS mortgages.
1:30:30 Rep. Donna Shalala (FL): The main street lending program, banks employ their own underwriting standards to loan applications. Does that mean that banks are making loans under the program that they would have made any way absent the Fed program? And if so, is the mainstream lending program providing any benefit to borrowers at all? Lauren Anderson: Thank you for your question. In terms of the loans that are being made, I think they’re quite specific in terms of the circumstances because you’re absolutely right, a borrower who can meet a bank’s basic underwriting standards is typically finding out that there is a product that is more suited to them, given their credit needs, so for example, maybe a term loan really is not what they need, and they really need something more like a flexible working capital facility. So our banks are actually, many times finding better solutions for these borrowers when they inquire about the program.
1:44:15 Rep. French Hill (AR): Owners of CMBS securities are mostly pension funds and people’s retirement accounts. And so they’re all benefited by trying to get capital into the industry and get people hired back and reopened.
1:48:40 Bharat Ramamurti: I think just to sum up quickly, I think we’ve actually seen a remarkable consensus emerge at this hearing, which is that the main street program as is currently designed is failing. And the representative of the banking industry told us that we aren’t seeing meaningful demand for loans right now from their clients. The representative of small and mid sized businesses told us that the program wouldn’t help his members as is currently designed, and Miss Mills representing hundreds of thousands of workers told us that the main street program hasn’t helped a single worker and isn’t likely to. I don’t question the hard work of President Rosengren and the Fed staff, but more loans are not going to solve this crisis. Struggling small and mid sized companies can’t take on more debt right now. So the only tool in the Feds belt is the wrong one. This program was given $75 billion and months to succeed. It didn’t and it can’t. It’s time to stop tinkering around the edges with adjustments to loan eligibility and loan terms when the fundamental problem is with the nature of the loans themselves. It’s time for Congress to step back in so that we can actually save small and mid sized businesses and when it does needs to tie the assistance to meaningful enforceable protections for workers and not just hand money to executives and trust them to take care of workers interests. Thank you Mr. Chair.
1:50:45 Gwen Mills: The extension of the the wages that the congressman mentioned has been appreciated, although it is now ending. That is problematic. But there has not been an extension of healthcare, so and even in a case where we have some healthcare negotiated companies like the fountain blue gun, are not abiding by that.
Interview: Trump: Coronavirus is “under control”, Axios, HBO, August 4, 2020
Hearing: Oversight of the Small Business Administration and Department of Treasury Pandemic Programs, House Committee on Small Business, July 17, 2020
- Steven Mnuchin – Treasury Secretary
41:25 Steven Mnuchin: I think this time we need to have a revenue test and make sure that money is going to businesses that have significant revenue declines.
1:07:35 Steven Mnuchin: If there were financial conditions that states had coming into this, it’s not the federal government’s role to bail them out of that. Now we have through Main Street, excuse me through the Fed facilities, we have provided lending facilities to the states and municipalities. But the issue of taxing authority… The federal government has taxing authority and the states have taxing authority. So where there are lost revenues, I think there is a fairness issue of how those get allocated across the country.
Hearing: Protecting Homeowners During the Pandemic: Oversight of Mortgage Servicers’ Implementation of the CARES Act, House Committee on Financial Services: Subcommittee on Oversight and Investigations, July 16, 2020
- Marcia Griffin – Founder and President of Homefree-USA
- Donnell Williams – President, National Association of Real Estate Brokers
- Alys Cohen – Staff Attorney, National Consumer Law Center
25:55 Marcia Griffin: Tons of counselors assist homeowners who are improperly denied a forbearance. We have. We have seen a troubling concentration of this issue with veteran loans. We’re also seeing homeowners who may have recently completed a loan application they’ve also been denied a borrowers who have just missed a payment in March or February, they’ve also been denied.
26:35 Marcia Griffin: There is a frustratingly large number of homeowners who are unemployed but are still being told that lump sum payments are due at the end of the forbearance.
43:45 Donnell Williams: You also need to have data collection. Services need to supply this information, this data to the CFPB and to Congress. I just had a borrower in Irvington, New Jersey, another one in Orange Township, New Jersey, tell me that their servicemen, like Congressman Green, say that they only gave them three months and that the whole balance will be due in 90 days. Marcia Griffin: Well, let me stop you, do you think we should have penalties for some servicers who violate the law that we have in the Heroes Act and would require a lump sum payments like that? Donnell Williams: I do believe so. Because they’re roadblocking, they’re stopping, clogging it up so that we can have progress.
51:30 Alys Cohen: Well, in terms of the complaints that you’re hearing, we do have some good protections in the cares Act and the federal regulators really need to step up their game and do much greater oversight of the servicers. In terms of the CFPB, they appear to spend most of their time relaxing regulations for servicers and providing advice for homeowners. So homeowners need our protection.
1:04:35 Alys Cohen: What we’ve saw in the last crisis and what we continue to see is that as you said, Mr. Lynch, servicers on private mortgages are beholden to the guidelines from the investors. And so what we’d like to see is a safe harbor for mortgage servicers from investor liability, so that they can provide loan modifications along the lines that the GSCs and FHA and the other government agencies can provide.
Hearing: Promoting Economic Recovery: Examining Capital Markets and Worker Protections in the COVID-19 Era, House Committee on Financial Services, Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, July 14, 2020
- Dr. William Spriggs – Chief Economist at the AFL-CIO and Professor of Economics at Howard University
- Neil Bradley – Executive Vice President and Chief of Policy Officer at the US Chamber of Commerce
38:45 Dr. William Spriggs: Workers do not have the sense that they have sick leave or the assurance that their employers will support them if they are sick. We see a very frightening share of women who show up to work and report that they have symptoms because they fear losing their job.
40:10 Dr. William Spriggs: It is vital for Congress to monitor money given to corporations under COVID, to make sure that workers are safe, that they will not face retaliation if they complain about safety, that they have sick leave so that they can report illness and stay home and not infect other workers. This is vital for the economy. It’s vital to be prudent about the money that we are sending to these companies. We’re not going to win this economic war until we win the war against the disease.
46:40 Rep. Brad Sherman (CA): I do want to comment about the importance of sick leave. We should be providing sick leave so people can stay home if they’re sick, kids are sick. That’s critical to getting this disease under control. We cannot limit that requirement only to those employers who feel generous. We can’t limit it to only to those employers who are between 50 employees and 500 employees, as presently as now. And while we should require it of those who get money pursuant to these facilities, it auto glide all employers even those that are not borrowing from the federal government.
54:55 Neil Bradley: With respect to individuals, the $600 was implemented because of the need for speed. We know as a general principle, you should not pay more for someone to not work and you pay them to work that creates distortions in the labor market. President Obama’s head of the Council of Economic Advisers is former NSC director has joined on a bipartisan basis with officials from the Bush administration suggesting a much better approach, one we endorse it the US Chamber to target unemployment benefits much more closely to what an individual earned when they were working. It shouldn’t be true that you earn more but you also shouldn’t earn substantially less.
2:11:25 Rep. Alexandria Ocasio-Cortez: As an investor when you invest in a riskier venture, would it be fair to say that an investor investing in that risky venture would be compensated with a higher return of risk? Because of the risk associated with that financial instrument correctly? Dr. Camille Bussett: Generally, that is that is correct. Rep. Alexandria Ocasio-Cortez: And now, is that same kind of compensation true for workers, in that are workers that are risking their lives, in meatpacking grocery stores, are there are they being paid? What is their compensation look like? Or do you see hazard pay, which is supposed to be a form of compensation for risk, a norm in your view. Dr. Camille Bussett: So low wage workers particularly they said work in the US industries that you mentioned and thank you for the question. Congress, woman Ocasio-Cortez are consistently paid very low wages for these kinds of essential jobs that put meat, poultry and vegetables on our table. That has not changed during the pandemic Rep. Alexandria Ocasio-Cortez: And so in your assessment, hazard pay is not the norm. Dr. Camille Bussett: Hazard pay is not the norm. There have been some corporations which have added some hazard pay and then have since the economy has started to reopen, and various states have rescinded that. Rep. Alexandria Ocasio-Cortez: So, really compensation for risk. It’s not that all people in our economy are compensated for risk just that a certain narrow class is compensated for risk of capital but not necessarily risk of life.
Hearing: Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response, House Committee on Financial Services, June 30, 2020
- Steven Mnuchin, Treasury Secretary
- Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System
21:20 Steven Mnuchin: The cares act also granted Treasury the authority to provide 454 billion to support Federal Reserve lending facilities under Section 13-3. Since March 17, using funds available, I have approved a number of Federal Reserve programs. The commercial paper program, primary dealer program, the money market mutual program, the primary market corporate credit facility, the secondary facility, the main street facility, municipal facility and the PPP lending facility. We’ve committed approximately 200 billion and to support these the announcements of these programs have helped unlock markets and promote much needed access to liquidity. We have over 250 billion remaining to create or expand programs as needed.
25:40 Jerome Powell: After lowering the federal funds rate to essentially zero. Our actions so far fall into four categories, stabilizing Treasury and agency MBS markets, money market and liquidity, liquidity and funding measures, direct efforts to support the flow of credit in the economy and targeted regulatory measures to support those efforts.
26:10 Jerome Powell: Without access to credit, families could be forced to cut back on necessities or even lose their homes. Businesses could be forced to downsize or close resulting in further losses of jobs and incomes and worsening the downturn.
37:35 Rep. Carolyn B. Maloney (NY): Secretary Mnuchin, I’d like to ask you about a very troubling oversight issue. As you know, I’m the Chair now of the Oversight Committee and I take these matters very seriously, and I hope that you do too. In the CARES Act, we created the Pandemic Response Accountability Committee, or PRAC, which is a committee of independent inspectors general that is charged with overseeing all of the money spent in the CARES Act, and identifying waste, fraud and abuse. Last month, the General Counsel’s Office in Treasury issued a legal opinion that questioned PRAC’s authority to oversee trillions of dollars of CARES Act spending. To put it bluntly, this legal analysis is so bad that it borders on bad faith. The opinion claimed that no evidence that Congress did not intend for the PRAC to have oversight authority over anything and the first half of the CARES Act, including the PPP program, and any of the fed’s lending facilities are the 150 billion in funding for state and local governments. So I would say Secretary Mnuchin, that this interpretation is wrong, that it is just plain wrong. Senator Gary Peters and I proposed and authored this section of the law, the PRAC Act, and I was heavily involved in negotiating those provisions in the CARES Act. And I’m telling you that Congress’s intent was for the PRAC to oversee all of the spending in the CARES Act, not just one half of the CARES Act, but all of it. That was our intent. And that was what the bill said explicitly. The interpretation from your general counsel’s office is already causing problems, because it’s hindering the practability to monitor how the states are spending their cares act money. So now Secretary Mnuchin, I would say that we have worked very productively together and in good faith negotiations on the Beneficial Ownership bill and, and other bills before Congress. So I hope that you’ll take my concerns about this erroneous legal opinion seriously. And so this is what I would like to ask today. I’d like you to commit to interpreting this section of the CARES Act as Congress intended, with the PRAC’s oversight authorities applying to all of the cares act spending. I think this is a small step, but a very important one that you can take to show that you’re serious about the oversight of the trillions of dollars in the CARES Act. Steven Mnuchin: Well, thank you. And I appreciate your comments. And I assure you, we are very much committed to working with the Oversight Committees on transparency. Now, as it relates to this, I can assure you it was not in bad faith. I’m happy to have our office follow up with you. It has to do with a technical issue of recipients reporting as it relates to the issue of monitoring state spending, I’m more than happy to put the PRAC in touch with our Inspector General, who has primary oversight and make sure that whatever information specifically the PRAC wants on the states that we accommodate. Rep. Carolyn B. Maloney (NY): Well, I would say that that’s not what I’m asking. What I’m asking is will you commit to interpreting the PRAC’s oversight authorities as applying to all of the Cares Act spending? That was our intent, I wrote that section of the law, that was what Congress wanted. There’s no problem with the interpretation it’s very clear and explicit, will you commit to allowing the oversight that was in the bill. Steven Mnuchin: I appreciate you wrote that portion. I would also say I appreciate I had very direct discussions with people in the Senate about various different oversight. That’s why we agreed to a new Oversight Committee. With full transparency, we agreed to provide information that was not required under 13-3. So we have full transparency. And again, I’m happy to follow up with you on the specific concerns as to which different entities should receive what information. I think it’s important that there is not bureaucratic overlap. But again, let me emphasize if the PRAC needs certain information, we will try to do what we can to accommodate it. Rep. Carolyn B. Maloney (NY): Well, I’m very disappointed with that answer, and I guess we’ll have to pursue a legislative solution. It was very clear the intent of Congress is that PRAC would have oversight of all of the cares spending. I yield back.
56:55 Rep. Brad Sherman (CA): Chairman Powell, back on March 12, I sent you a letter urging that you prohibit stock buybacks by the banks you have done so. Thank you very much.
58:00 Rep. Brad Sherman (CA): One issue, Chairman Powell, for the main street lending program that is particularly relevant to commercial real estate, is that if they get a loan from you, they violate the loan covenants that they have in their existing mortgage. I look forward to working with you on that. One possible solution is the bill that I submitted. And we’ve had hearings on in this committee, the Business Borrowers Protection Act. Certainly getting a loan on a program that we’ve offered authorized because of the COVID crisis should not trigger the and make it a pre-existing mortgage immediately due and payable.
1:03:30 Jerome Powell: We are not looking for additional authority under 13-3. Our authority is of course to lend to solvent institutions and in programs of broad applicability and any company in any sector that meets those tests can can borrow one of our facilities.
1:04:10 Rep. Bill Posey (FL): Some of our businesses, including again the hotels, are warning that their inability to make payments is threatening the servicing of commercial backed securities. And I just wonder if you can bring us up to date on the status of the CMBS market? Steven Mnuchin: Well, as I just mentioned, one of the problems of the CMBS market is that there are very strict contractual obligations. And that’s why one of the things I do think we need to look at in the next CARES Act is additional funding for these industries that are the hardest hit.
1:07:00 Steven Mnuchin: We have had inquiries about the issue of garnishment. And we agree from a policy standpoint that there should have been no garnishment. Unfortunately, that’s something we need to address in the next CARES Act if we do additional direct payments, because there are certain state laws that were not overridden in the existing CARES Act. My understanding that’s a state issue and not a federal issue. Rep. Wm. Lacy Clay (MO): But think about, think about the cruelty of the policy. Wouldn’t you want to? Steven Mnuchin: As I said, I agree with you on the level. Rep. Wm. Lacy Clay (MO): Couldn’t you all issue a blanket… Steven Mnuchin: We’ve asked our legal department to unfortunately we can’t and that’s one of the things we would want to fix in the next CARES Act. So we agree with you from the policy standpoint.
1:09:00 Rep. Wm. Lacy Clay (MO): Now under the main street lending program, you reduced the minimum loan threshold from 1 million to 250,000. And then by expanding the program to nonprofits with more than 50 employees, however many small businesses may not need 250,000. Mr. Chairman, has the Fed considered eliminating the minimum loan threshold all together? Jerome Powell: We have not considered eliminating it yet. Of course, we’re just now getting rolling with loans, as you know, so we can once we get up and running, look at lowering it again, but you get into a very different kind of lending when you’re down, lower. These are really personal loans rather than business loans. They’re generally guaranteed by the business operator, and we could look at that but that would be something we’d look at once we get up and running.
1:11:40 Jerome Powell: The objective of everything we’re doing everything. Every single thing we’re doing is to take the 25 million people whose working lives have been disrupted and create a situation in which they have the best chance to go back to their old job or to get a new job. That includes all the facilities that we’re doing. That’s the overriding goal of what we’re doing.
25:55 Rep. Blaine Luetkemeyer (MO): As you know, it’s hard for me to let a hearing go without talking about CECL, so we’re gonna try it one more time. In March of this year, the Federal Reserve and the FDIC and LCC issued an interim rule to delay for two years the estimated impact on regulatory capital CECL, followed by a three year phase in. In addition, the CARES Act included an option delay in CECL implementation until end 2020, or the end of the pandemic, which 25% of typical entities actually opted for. Part of the Treasury is also conducting study – What’s the impact of CECL I hope? We were directed to do that. And most recently, my colleagues and I sent a bipartisan letter F stock urging for delay in CECL implementation for all entities until 2022. So that every entity, both banks and non banks, which were not included through the cares act on the same footing and Treasury can conduct this study with the input of a real life scenario that we have ongoing today. Given the actions by Congress and the potential regulators should we delay CECL as I and my colleagues have called for and should the Treasury examine the real life scenario we’ve gone through when conducting their study? Mr. Mnuchin? Steven Mnuchin: I think that should be seriously considered. And yes, we are working on the study. Rep. Blaine Luetkemeyer (MO): The President issued an executive order with regards to each agency going through and looking at all the rules, regulations, that were either waive declined, change, whatever, if they don’t work now, should we continue them down the road when we get out of this mess. And so I assume everybody is doing that. And this would, this particular accounting principle would seem to fall in that area of we need to be looking at this as something down the road we need to get rid of in it’s entirety, Mr. Chairman Powell, would you like to comment on this as well? Jerome Powell: I would agree. Okay. Thank you. Appreciate that. Because I think there’s a time and place for rules, regulations or time in place that if nonfunctioning, we need to get rid of them and start over.
1:22:30 Rep. Bill Huizenga (MI): But what we do know is from looking at history, is we need to get the economy moving again. Now the question is, is how, whether it’s getting kids back to school, as some have suggested, because if you can’t get kids into school, that’s not going to then free up those parents to be available to work. Anecdotally in my area, I know that manufacturers and service companies are having a very difficult time getting enough workers to come in to complete a full contingent, a line workers for example, or to get a full shift filled. There’s various reasons some have debated about the $600 additional per week kicker as being a bit of a disincentive. But nonetheless, we know that we have to address those folks who really truly are not able to get a job and how do we distinguish from those that are just deciding not to take that job? One of the things that I have proposed is something called the Patriot bonus patriot bonus would be a 50% tax credit to any company that would give a per hour bump to their employees or a weekly bonus to their employees or even a one time bonus to their employees to incentivize them to come off of that unemployment insurance system and get back engaged in the workforce. And I think it’s critical that we that we do that.
1:25:50 Rep. Bill Huizenga (MI): What do you want to tell them and the rest of Joe and Jane 401k that have their small investments in the markets that are there, frankly, to help them as they approach retirement? What assurances can we give them about the economy? Steven Mnuchin: Well, I want to tell them and all the other people that we are going to work with Congress to make sure we can do whatever we can do to get everybody back to work, who lost their job to COVID. And I’m also extremely optimistic about the research that is being done on vaccines and virals. And us combating this terrible disease. Thank you.
1:45:25 Steven Mnuchin: In many of these cases, these companies don’t need more debt. They need support. So one of the things we will want to look at in the next CARES Act, as I said, is additional support for these hardest hit industries. As the Chair has said, there’s a difference between lending and spending.
1:58:40 Rep. Ed Perlmutter (CO): And we also know that at the end of July, the pandemic unemployment insurance payments cease, as it’s currently written. We know that a number of the moratorium on evictions and foreclosures begin to cease. And the eight weeks provided under the PPP, certainly for those initial takers of the loans start to run out. So I see a brick wall at the end of July.
Hearing: Accountability in Crisis: GAO’s Recommendations to Improve the Federal Coronavirus Response, House Committee on Oversight and Reform: Select Subcommittee on the Coronavirus Crisis, June 26, 2020
- Gene Dodaro – Comptroller General at the Government Accountability Office
56:40 Rep. Maxine Waters (CA): Tell me, how did it happen, that these hotels and these restaurants, were able to identify each of their installations under 500 people that they could get paid, get a loan for all of them. How did that happen? Gene Dodaro: My understanding of that is that that was a change that was made in the legislation at the last minute to allow them to be able to do that. That was part of the original legislation. My understanding…If I’m wrong, I’ll provide a correction of the answer for the record, but that allowed that industry that applied if they had 500 people or less employees per location. Rep. Maxine Waters (CA): Did the SBA sign off on that? Gene Dodaro: Pardon me? Rep. Maxine Waters (CA): Did SBA sign off on that? Gene Dodaro: I don’t know their involvement in the legislation. I’m sure the administration did if the President signed the bill. Rep. Maxine Waters (CA): Do you think that basically undermined what the PPP was supposed to be about?Gene Dodaro: Well, I wouldn’t second guess the Congress and what it did and what, in the legislation that it passed. So, I mean, I was assuming it was part of congressional intent if it’s in the legislation.
1:00:30 Rep. Blaine Luetkemeyer (MO): With the issue with regards to the stimulus checks going to people who shouldn’t get them. You made a comment while ago about the social security’s death master file. And it’s something that you recommended, apparently for a number of years that we Congress have never done. In fact, the Trump administration has proposed in every single budget to give Treasury access to this, and we Congress have not done that. Is that roughly correct? Gene Dodaro: That’s correct. And I know Treasury I’ve talked to Secretary Mnuchin about this and they… Rep. Blaine Luetkemeyer (MO): So this problem could have been eliminated, and alleviated if we Congress had done our job and allowed this to happen in previous years. Gene Dodaro: That’s a reasonable hypothesis. Rep. Blaine Luetkemeyer (MO): Okay. Thank you very much for that.
1:27:45 Rep. Jaime Raskin (MD): Gene Dodaro: Rep. Jaime Raskin (MD): GAO also reported the Treasury and IRS sent nearly $1.4 billion in payments to 1.1 million dissidents, that is Americans who’d already died. And I’d also heard from some honest constituents who called up and said, we got this check for my wife or my husband who’s no longer with us. IRS apparently was aware this was happening back in March, but didn’t begin to correct it until months later. What’s up with that? That’s just shocking. How’d that happen? Gene Dodaro: Well, IRS is original determination was that the law required them to send a check to everybody who filed the return in 2018 or 19. And so they figured it would include those people. So they did it with foresight, that that’s what they were supposed to do. Rep. Jaime Raskin (MD): Wow. Okay. Just let me pause you there, because that seems to contradict common sense. In other words, because we said that it should go to everyone who filed taxes, they thought you’d go to people who had died right who had filed taxes. All right. What is the law? Because some people were saying, should we cash this check? Why would the government sending it to us? Gene Dodaro: Right. Yeah, no, no, I agree. Rep. Jaime Raskin (MD): Well, what is the correct legal interpretation? Gene Dodaro: We believe Treasury’s interpretation after that was that the intent was to help people who are affected by the situation which wouldn’t include people who were deceased. So they stopped it at that point in time after IRS had made the first three payments. So we believe the correct interpretation now is they should not have been sent and our recommendation is to try to get as much of the money back as possible. Rep. Jaime Raskin (MD): Ok. And they’ve changed that policy of sending checks to people who have died? Gene Dodaro: That’s correct.
Video: Ticked Off Vic: A Message to the Government | VicDiBitetto.net, Vic Dibitetto, April 16, 2020
Executive Producer Recommendations
- Article: JAXA and Private Businesses are Co-Creating the Space Business By Yuta Kikuchi and Shinichi Takata, Japan Aerospace Exploration Agency
- Article: Touchdown! Japan space probe lands new robot on asteroid, Phys.Org, October 3, 2018
- Article: The asteroid trillionaires By Andrew Glester, Physics World, June 11, 2018
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