Their initial proposals called for the fund to be worth $208 billion. But after a flurry of lobbying over the weekend, Senate Republicans’ legislation now calls for a $500 billion program that would award loans to states and cities as well as businesses, according to a copy of the most recent GOP proposal.
The provision has become one of the principal logjams in urgent congressional negotiations over emergency help for an American economy facing its worst calamity since the Great Recession, in part because the Treasury Department would have broad discretion over where the money would go. President Trump already has said he wants the money to be used to rescue the cruise ship and hotel industries, making his preferences clear, but at a press conference on Sunday refused to say whether his own hotel properties would apply for the funding.
“There’s too much money with no oversight,” Sen. Jon Tester (D-Mont.) told reporters Sunday.
Congressional Democrats have demanded the legislation include guardrails to prevent firms that receive the emergency aid from firing their workers or stripping them of their health care, among other asks by labor groups. They also are balking at giving Treasury Secretary Steven Mnuchin so much authority to determine which firms receive the assistance.
Section 4003 of the legislation accounts for $500 billion for “emergency relief and taxpayer protections.” Of that money, $50 billion would go to passenger airlines, $8 billion to cargo airlines, $17 billion for companies deemed important to national security, and $425 billion for businesses, cities and states. The bill doesn’t give much more information than that in terms of who would qualify for loans and loan guarantees, leaving much of it up to Mnuchin.
Congressional aides in both parties say they will not budge on the issue, although top party leaders huddled in emergency meetings Sunday to resolve this impasse and others, and talks remained fluid. Senate Majority Leader Mitch McConnell (R-Ky.) said the Senate would move to vote Monday on the legislation, calling it “pretty solidly bipartisan” despite Democratic anger over the bailout provisions and others.
The heated fight over the emergency aid for large businesses revives the long-standing debate over the Wall Street bailouts during the 2008 financial crisis that reshaped American politics. Republicans are forging ahead with a plan they say is necessary to save large parts of the economy from collapse but has garnered fierce criticisms, including from within their own ranks.
When Congress created the $700 billion Troubled Asset Relief Program in 2008, they installed several levels of scrutiny to ensure the money wasn’t abused or misappropriated. For example, it created a group of regulators as well as a group of congressionally appointed experts to examine the funds. Lawmakers also created a special inspector general to investigate wrongdoing, and numerous instances of abuse eventually were uncovered.
“The arguments over attaching strings to government aid to business now reflect the persistent public backlash over the rescues and bailouts of the global financial crisis,” said David Wessel, a senior fellow at the Brookings Institution. “The underlying problem here is the lack of trust, both by the public and among some members of Congress in each other and in the administration.”
The Republican proposal would create limitations on the loans. It would prohibit companies receiving aid from issuing new stock buybacks as long as the loans remain in effect, a provision supported by both Democrats and President Trump. It would limit salary increases for employees who earn more than $425,000 annually for two years. The plan also says firms receiving the federal aid should maintain “existing employment levels as of March 13, 2020 to the extent practicable” before the loans have been paid back.
“We are not bailing out the airlines or other industries — period,” Sen. Richard C. Shelby (R-Ala.), chair of the appropriations committee, said in a statement last week. “We are allowing the Treasury Secretary to make or guarantee collateralized loans to industries whose operations the coronavirus outbreak has jeopardized. … This approach strikes an appropriate balance between providing assistance and protecting taxpayers.”
The Senate is advancing a separate, $350 billion measure for smaller firms hit hard by the coronavirus, while Republicans also have agreed to some Democratic demands to shore up safety net programs such as unemployment insurance.
Democratic lawmakers and labor groups say the GOP plan amounts to a “corporate bailout” that could reward business recklessness and hurt workers. Democratic leadership has demanded funding for corporations include protections related to workers, such as ensuring their job security and health care, pensions, and 401(k) contributions, as well as prohibitions on discharging their collective bargaining agreements.
Democratic lawmakers have pushed for forgiveness of the loans if more than 90 percent of company employees are retained. They want provisions mandating employee retention to have legal teeth, complaining the Senate GOP bill has too much wiggle room for companies to cut workers loose. The Treasury Department would have to publish the application criteria for firms within 10 days of passage of the law.
Critics also have expressed alarm over the transparency provisions in the GOP legislation.
“There is great unhappiness with how they’re trying to advance a proposal that would be great for giant corporations but leave everyone else behind,” Sen. Elizabeth Warren (D-Mass.) told reporters Sunday. “We’re not here to create a slush fund for Donald Trump and his family, or a slush fund for the Treasury Department to be able to hand out to their friends.”
The bill also would require disclosure of the loan recipients within only six months of enactment. Trump administration officials have said they are interested in providing federal assistance to help the cruise, hospitality and oil and gas industries, among others severely hurt by the downturn since the beginning of the outbreak.
On Sunday, Trump declined to commit to preventing his own extensive properties from qualifying for the program. He complained that nobody had thanked him for not taking a salary as president and said he had given up substantial business opportunities to run for public office.
“I committed publicly I wouldn’t take the full $450,000 salary. It’s a lot of money, whether you’re rich or not – it’s a lot of money. I did it and nobody cared. Nobody said ‘Thank you,’” Trump said. “I’ve learned, let’s just see what happens because we have to save some of these great companies.”
Other experts downplayed the risk for malfeasance in a potential Treasury program. The Treasury Department has an inspector general who could probe the administration’s handling of the loans, and companies have a legitimate interest in keeping from their competitors immediate information on whether they have received the aid, said Tony Fratto, a former Treasury and White House official during the George W. Bush administration. Fratto also said there’s an important distinction between the Wall Street banks receiving bailout money after having a role in creating the economic crisis and businesses shuttered by the coronavirus through no fault of their own.
“All of this is going to be public; there is nothing to hide here, and no public interest served in reporting it immediately,” Fratto said. “We are not talking about companies that did something wrong. We are dealing with companies with orders to shut down their business.”
The amount of authority delegated to Treasury in the law still is likely to provoke debate. After Sept. 11, 2001, Congress gave the Department of Justice sweeping authority to compensate victims of the terrorist attacks. But the Bush administration chose Kenneth Feinberg, a Democrat, to oversee the efforts, giving it bipartisan credibility.
During the bank bailouts of the 2008 financial crisis, Congress gave Treasury authority to set executive pay for financial firms receiving the most taxpayer assistance. But Congress also made clear which firms should be eligible for the money, Feinberg said.
“It’s an unprecedented crisis, and Congress has to decide how much discretion it wants to delegate to executive branch officials,” Feinberg said.
— Seung Min Kim and Rachael Bade contributed to this report.