President TrumpDonald TrumpBiden heading to Kansas City to promote infrastructure package Trump calls Milley a 'f---ing idiot' over Afghanistan withdrawal First rally for far-right French candidate Zemmour prompts protests, violence MORE’s battle against government watchdogs amid a global health crisis is raising questions about how his administration will hand out the recently approved coronavirus pandemic relief funds.
Congress and the administration agreed to an unprecedented $2 trillion dollar stimulus package aimed at mitigating the economic toll inflicted by the pandemic. The bill allocates hundreds of billions of dollars for large corporations and small businesses, expands unemployment benefits for the more than 16 million people who have lost their jobs in recent weeks, and provides $1,200 checks for many Americans.
But looming over the bailout are fears that it could repeat the mistakes of the 2008 stimulus that came amid the financial recession. That bailout was widely considered a major boost for large corporations that left many workers and homeowners behind.
The latest relief package will be doling out assistance on a more massive scale and gives Treasury Secretary Steven MnuchinSteven MnuchinThe Hill's Morning Report - Presented by Facebook - Biden to tackle omicron risks with new travel rules Mnuchin and McConnell discuss debt limit during brief meeting Major Russian hacking group linked to ransomware attack on Sinclair: report MORE unprecedented authority over the money, with critics warning that it could be vulnerable to improper influence and that it has the potential to exacerbate economic inequality.
Democrats in Congress and other advocates are calling for vigorous oversight of the program to police, deter or at least expose potential malfeasance.
Brad Miller, a former North Carolina House Democrat who served on the Financial Services and Oversight and Reform committees and has written extensively about oversight during the Trump administration, says the scale of the coronavirus bailout presents problems that could dwarf those of the 2008 stimulus.
“I think that there will be much more potential for abuse, for self-dealing in this bailout because it covers a whole economy and there's much more money,” Miller told The Hill.
Democrats agreed to nearly $500 billion in assistance for large corporations, largely on the condition that the bill would include several watchdogs to oversee the fund. Those include a special inspector general nominated by the president and confirmed by the Senate, a panel of inspectors general from government agencies, and a committee whose members will be picked by congressional leaders.
But since signing the bill late last month, Trump has pushed back against oversight of his administration’s management of the bailout amid a broader fight against the independent government watchdogs.
He announced in a signing statement that he considered the parts of the bill requiring the special inspector general to issue certain reports to Congress to be unconstitutional and would not allow them without “presidential supervision.” This week, he demoted Pentagon Inspector General Glenn Fine, effectively disqualifying him from chairing the panel of watchdogs overseeing the fund. And he’s nominated one of his own lawyers, associate White House counsel Brian Miller, to serve as the special inspector general.
The prospect that Trump could install officials loyal to him to oversee his own administration’s bailout spending has some worried that the fund will be mismanaged and that large corporations will reap the benefits at the expense of small businesses and workers.
“I do think that there are lessons from 2008 about what having a good inspector general on the program can do,” said Graham Steele, a former Democratic Senate Banking Committee counsel who now runs the Corporations and Society Initiative at Stanford University's business school. “There are limits to it as well, but a really vigorous and aggressive inspector general can actually shine a light on ways programs are operating.”
The special inspector general for the 2008 Troubled Asset Relief Program was a Democratic career prosecutor named Neil Barofsky, who regularly excoriated the Obama administration’s handling of the bailout in reports to Congress.
"The idea is that an inspector general should be independent and should not conduct his investigations and reports with an eye towards protecting the administration from criticism," said Miller, the former congressman. "If criticism is warranted, then the inspector general's report should contain it."
The new special inspector general will also face structural hurdles in overseeing the program. Congress set aside just $25 million for the watchdog’s office, a little more than half of Barofsky’s budget when he was overseeing a program about a quarter of the size of the coronavirus bailout.
Jeff Hauser, the director of the Revolving Door Project, says that even the most vigorous and independent inspector general would face a monumental task in policing all the areas of concern in the program.
“It's worrisome that the process might include favor trading for the individuals in the Trump administration making these decisions, which definitely includes Steven Mnuchin and may well include Jared KushnerJared Corey KushnerBiden celebrates start of Hanukkah Kushner looking to Middle East for investors in new firm: report Watchdog finds no money has flowed out of agency tasked by Trump admin to fight pandemic MORE, Wilbur RossWilbur Louis RossHolding defiant Trump witnesses to account, Jan. 6 committee carries out Congress's constitutional role Bannon's subpoena snub sets up big decision for Biden DOJ House panel, Commerce Department reach agreement on census documents MORE and others,” Hauser said, referring to the president’s son-in-law and the Commerce secretary. “So it's a process with enormous possibilities for mischief that would be very hard for even the most talented inspector general to determine since a lot of this could come down to a wink and a nod and in-person meetings and whatnot.”
With the program still in its early stages, critics already see numerous areas in the stimulus in need of close scrutiny because of the prospect for major windfalls for big businesses and the financial sector. The financial firm BlackRock has already secured a contract with the Federal Reserve to manage the agency’s massive bond-buying programs, raising concerns about potential conflicts of interest given the investment group’s expansive holdings.
The private equity firm Apollo Global Management has reportedly lobbied the Trump administration to allow financial firms access to credit programs in the bailout designed for small businesses. Joshua Harris, who co-founded the firm, is a minority owner of The Hill.
“I think it's really troubling that we're picking large financial institutions and empowering them to get even bigger and stronger,” Hauser said. “It's not really my view of American political economy that what we lack is large enough financial institutions.”
And small businesses are already reporting difficulties in obtaining loans from the $349 billion designated for the Small Business Administration, which is doling out the assistance through major banks.
Democrats in Congress have lashed out at the administration over its crackdown on government watchdogs amid the pandemic.
“Congress is appropriating trillions of taxpayer dollars in response to the coronavirus crisis, and Americans across the political spectrum need these funds allocated effectively and efficiently,” 23 House committee chairmen wrote in a letter to a council of inspectors general on Friday. “They do not want these funds squandered, mismanaged, or subjected to waste, fraud, or abuse.”
If Congress is unsatisfied with the program’s special inspector general, it may try to conduct its own oversight efforts by issuing investigative subpoenas and putting officials in the spotlight with public hearings.
Amanda Fischer, the policy director for the nonprofit Center for Equitable Growth, says that the uncertainty around the program and the potential for improper influence require close scrutiny of every aspect of the bailout in order to assure the public that taxpayer money is going to the right places.
“I think bailouts are always political. It was political in 2008, and I think it's even more complex now,” Fischer said.
“We need to make sure that there's accountability up and down the chain from the tiniest small business owner to the largest business receiving assistance," she added, "Or else it runs the risk of really undermining public confidence in our institutions in a very precarious moment for the country.”