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The Oversight Playbook From 2008 Returns as Bailout Swells The Oversight Playbook From 2008 Returns as Bailout Swells
(2 months later)
WASHINGTON — One of the most contentious questions dogging talks over the $2 trillion economic stabilization bill revolves around how to ensure that such a sweeping bailout is administered fairly and without preferential treatment.WASHINGTON — One of the most contentious questions dogging talks over the $2 trillion economic stabilization bill revolves around how to ensure that such a sweeping bailout is administered fairly and without preferential treatment.
Democrats have made Treasury Secretary Steven Mnuchin the face of the bailout, warning that one of President Trump’s closest advisers should not be in charge of a $500 billion “slush fund” with few strings attached that could be used to unfairly benefit Mr. Trump or businesses that did not properly compensate their workers.Democrats have made Treasury Secretary Steven Mnuchin the face of the bailout, warning that one of President Trump’s closest advisers should not be in charge of a $500 billion “slush fund” with few strings attached that could be used to unfairly benefit Mr. Trump or businesses that did not properly compensate their workers.
To prevent any favoritism, lawmakers and Mr. Mnuchin have agreed to essentially dust off the 2008 playbook for overseeing a giant government rescue program.To prevent any favoritism, lawmakers and Mr. Mnuchin have agreed to essentially dust off the 2008 playbook for overseeing a giant government rescue program.
The final bill, which was still being negotiated late Tuesday, is expected to include the appointment of a new special inspector general to oversee the disbursement of funds to companies and ensure they qualify, according to a congressional aide.The final bill, which was still being negotiated late Tuesday, is expected to include the appointment of a new special inspector general to oversee the disbursement of funds to companies and ensure they qualify, according to a congressional aide.
The legislation would also create a five-person oversight panel, chosen by congressional leaders, that would monitor whether companies that received bailout money were living up to the obligations detailed in the bill to retain workers and limit executive pay. Mr. Mnuchin would be required to make regular appearances before Congress to discuss the bailout package and how it was being carried out.The legislation would also create a five-person oversight panel, chosen by congressional leaders, that would monitor whether companies that received bailout money were living up to the obligations detailed in the bill to retain workers and limit executive pay. Mr. Mnuchin would be required to make regular appearances before Congress to discuss the bailout package and how it was being carried out.
Those guardrails are similar to what lawmakers put in place for the Troubled Asset Relief Program, the $700 billion bank bailout that Congress passed during the 2008 financial crisis. That bill created a special inspector general for the Troubled Asset Relief Program, or SIGTARP, as well as a congressional oversight panel that was led by Elizabeth Warren, now a Democratic senator from Massachusetts.Those guardrails are similar to what lawmakers put in place for the Troubled Asset Relief Program, the $700 billion bank bailout that Congress passed during the 2008 financial crisis. That bill created a special inspector general for the Troubled Asset Relief Program, or SIGTARP, as well as a congressional oversight panel that was led by Elizabeth Warren, now a Democratic senator from Massachusetts.
The quick injection of federal money into the economy, combined with a fast-moving public health crisis, means that opportunities for fraud will be rampant. An effective oversight mechanism will be crucial to ensuring that the vast injection of government money goes toward relieving the brunt of the economic fallout from the coronavirus pandemic.The quick injection of federal money into the economy, combined with a fast-moving public health crisis, means that opportunities for fraud will be rampant. An effective oversight mechanism will be crucial to ensuring that the vast injection of government money goes toward relieving the brunt of the economic fallout from the coronavirus pandemic.
“To me, one of the biggest disasters you can have with this is if either in reality or perception there are a handful of policymakers with no guidance and no guardrails picking winners and losers based on a criteria that is only known to themselves,” said Neil M. Barofsky, who was the first special inspector general of the $700 billion TARP bailout for banks.“To me, one of the biggest disasters you can have with this is if either in reality or perception there are a handful of policymakers with no guidance and no guardrails picking winners and losers based on a criteria that is only known to themselves,” said Neil M. Barofsky, who was the first special inspector general of the $700 billion TARP bailout for banks.
Of the $2 trillion stimulus package, the pot of money that has received the most scrutiny is Treasury’s Exchange Stabilization Fund, which is traditionally used for managing currency markets.Of the $2 trillion stimulus package, the pot of money that has received the most scrutiny is Treasury’s Exchange Stabilization Fund, which is traditionally used for managing currency markets.
The original Senate legislation set out $500 billion in funding to be used in support of companies and local governments, with $75 billion earmarked for airlines and national security companies at the Treasury secretary’s discretion. The remaining $425 billion was meant to be used to support Federal Reserve programs.The original Senate legislation set out $500 billion in funding to be used in support of companies and local governments, with $75 billion earmarked for airlines and national security companies at the Treasury secretary’s discretion. The remaining $425 billion was meant to be used to support Federal Reserve programs.
An ambiguity in the bill’s text could have allowed Mr. Mnuchin to use that money with considerable discretion, said Peter Conti-Brown, a lawyer and Fed historian at The Wharton School at the University of Pennsylvania. He added that the ambiguity seemed like sloppy drafting rather than the intent.An ambiguity in the bill’s text could have allowed Mr. Mnuchin to use that money with considerable discretion, said Peter Conti-Brown, a lawyer and Fed historian at The Wharton School at the University of Pennsylvania. He added that the ambiguity seemed like sloppy drafting rather than the intent.
The Republican bill alternately said the funds should be used “in support of” or “as part of” Fed programs; the latter would be much more limiting from the Treasury’s standpoint.The Republican bill alternately said the funds should be used “in support of” or “as part of” Fed programs; the latter would be much more limiting from the Treasury’s standpoint.
The compromise bill updated that language, so now the funds are specifically dedicated “to” Fed liquidity programs or facilities. “They’re trying to do this as a Fed-Treasury partnership,” Mr. Conti-Brown said, though he added that the new language went “sprinting in the other direction” of the earlier loophole and now left the Fed in charge.The compromise bill updated that language, so now the funds are specifically dedicated “to” Fed liquidity programs or facilities. “They’re trying to do this as a Fed-Treasury partnership,” Mr. Conti-Brown said, though he added that the new language went “sprinting in the other direction” of the earlier loophole and now left the Fed in charge.
Assuming that $425 billion is used purely to back Fed emergency lending programs, Mr. Mnuchin would have some — but not absolute — say over how the money is used.Assuming that $425 billion is used purely to back Fed emergency lending programs, Mr. Mnuchin would have some — but not absolute — say over how the money is used.
The Treasury secretary legally must sign off on the Fed’s emergency lending programs. And in practice, the department has been financially backing the programs, agreeing to take the first round of losses if the interventions sour. As a result, Mr. Mnuchin will probably consult on program design, but the Fed does most of the legwork in setting up emergency lending facilities and administering them, according to lawyers who study the programs.The Treasury secretary legally must sign off on the Fed’s emergency lending programs. And in practice, the department has been financially backing the programs, agreeing to take the first round of losses if the interventions sour. As a result, Mr. Mnuchin will probably consult on program design, but the Fed does most of the legwork in setting up emergency lending facilities and administering them, according to lawyers who study the programs.
There are rules governing the Fed’s emergency lending. After the 2008 crisis, Congress insisted that the Fed must set up the programs to benefit broad groups of counterparties and not individual companies, for instance. That has been interpreted to mean that there must be five eligible participants.There are rules governing the Fed’s emergency lending. After the 2008 crisis, Congress insisted that the Fed must set up the programs to benefit broad groups of counterparties and not individual companies, for instance. That has been interpreted to mean that there must be five eligible participants.
Despite the additional oversight of how the bailout money is doled out, Mr. Mnuchin will still have broad discretion to pick winners and losers and to provide business to his friends on Wall Street. One provision of the legislation provides Mr. Mnuchin with $100 million in funds for hiring financial institutions to help manage Treasury’s services related to cities, states and businesses.Despite the additional oversight of how the bailout money is doled out, Mr. Mnuchin will still have broad discretion to pick winners and losers and to provide business to his friends on Wall Street. One provision of the legislation provides Mr. Mnuchin with $100 million in funds for hiring financial institutions to help manage Treasury’s services related to cities, states and businesses.
Updated June 5, 2020
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
The funds could be used to hire Wall Street asset managers like BlackRock or banks like Goldman Sachs to administer the program or to hire people from financial firms to design it.The funds could be used to hire Wall Street asset managers like BlackRock or banks like Goldman Sachs to administer the program or to hire people from financial firms to design it.
A draft of the legislation obtained by The New York Times on Tuesday afternoon said disclosure of the names of states, municipalities and cities that received federal money could be delayed by Mr. Mnuchin for up to six months. The comptroller general of the United States will also review the loans and provide reports to Congress.A draft of the legislation obtained by The New York Times on Tuesday afternoon said disclosure of the names of states, municipalities and cities that received federal money could be delayed by Mr. Mnuchin for up to six months. The comptroller general of the United States will also review the loans and provide reports to Congress.
Democrats remain concerned that even the most robust oversight panel could be rendered toothless by the Trump administration, which has defied congressional requests for information and challenged subpoenas for witnesses and documents.Democrats remain concerned that even the most robust oversight panel could be rendered toothless by the Trump administration, which has defied congressional requests for information and challenged subpoenas for witnesses and documents.
“I think it’s an impossible task in terms of oversight,” said Barney Frank, the former Democratic congressman from Massachusetts who led the bailout negotiations in 2008. “This is a separation-of-powers problem.”“I think it’s an impossible task in terms of oversight,” said Barney Frank, the former Democratic congressman from Massachusetts who led the bailout negotiations in 2008. “This is a separation-of-powers problem.”
Mr. Trump did nothing to alleviate those concerns when asked on Monday evening about his Treasury Department having too much power to hand out money.Mr. Trump did nothing to alleviate those concerns when asked on Monday evening about his Treasury Department having too much power to hand out money.
“Look,” he said. “I’ll be the oversight.”“Look,” he said. “I’ll be the oversight.”