Into this breach is stepping Sen. Elizabeth Warren. In a letter to Treasury Secretary Steven Mnuchin, the Massachusetts Democrat seeks to put Trump and Mnuchin on notice, in a novel way that will bear watching.
At stake is whether true public need will be served by this massive rescue effort, or whether Trump, Mnuchin and big corporations will hijack it to their benefit even as the rest of the country endures extraordinary hardship amid a horrific public health emergency and a brutally punishing recession.
Warren’s letter to Mnuchin seeks to fill a major hole in the rescue package. While the package does impose some conditions on businesses benefiting from its financial assistance — such as limits on stock buybacks — progressive economists have mostly panned them as insufficient.
The risk, as Josh Bivens and Heidi Shierholz of the Economic Policy Institute noted, is that there is no guarantee that these huge sums of rescue money will be “directed toward saving the jobs, wages, and benefits of typical workers rather than the wealth of shareholders, creditors, and corporate executives.”
Warren has hatched her own answer to this problem.
As Warren’s letter tells Mnuchin, the law creating the package gives the treasury secretary immense discretion to decide which firms get financial assistance. Warren points out that the statute allows Mnuchin to make loans on “terms and conditions” that he “determines appropriate.”
This discretion granted to the Trump administration, of course, was central to the problem identified by progressives.
But as Warren points out, this also means that Mnuchin himself — that is, the Trump administration — can exercise this discretion toward good ends:
As a result, the Secretary can choose to reject companies that have long records of financial mismanagement or lawbreaking and establish terms and conditions that protect jobs and workers’ rights, or further limit executive compensation or shareholder distributions beyond the specifications in the legislation.
And so, Warren calls on Mnuchin to use his discretion to only make assistance available to companies that keep virtually all workers on payroll, raise their minimum wage to $15, don’t goose balance sheets to transfer federal money to stockholders, and refrain from trampling on labor rights, among other things.
Warren also calls on Mnuchin to pledge not to dispense assistance to firms that don’t show transparency about their use of those funds. She also calls on him to comply with the inspector general audits that Trump has vowed to crumple up and throw in the trash.
Warren’s letter is also addressed to the Federal Reserve — which will oversee the distribution of much of the assistance. Warren calls on the Fed to use its authority over that money to ensure its use “to provide support to workers during a time of crisis.”
“I will be watching your actions carefully as you administer this $500 billion bailout for corporate America,” Warren warns Mnuchin and the Fed.
In this sense, Warren is building on the original conditions she had hoped would be codified in law, by calling on the administration to stick to these principles, under pain of scrutiny from lawmakers and the public.
That may seem unlikely to succeed. But as Mike Konczal, the director of progressive thought at the Roosevelt Institute, put it to me, the very fact that the treasury secretary now has such discretion itself draws a circle around him as a focal point for public and lawmaker scrutiny.
“You can imagine this process going responsibly or irresponsibly,” Konczal said. “This will be a choice that the treasury secretary makes.”
Konczal noted that if administered responsibly, the public actually could share in the social gains of these sorts of bailouts.
Those social gains, Konczal said, could include a real public stake in assisted companies (as opposed to public loans that get transferred to wealthy shareholders via clever accounting), preserved jobs, and a use of financial assistance to compel more socially responsible corporate behavior.
None of this is a substitute for the failure to codify far stricter conditions on this assistance, of course, and there’s reason to worry that the insider scamming will be terrible.
Trump, after all, is the last person you’d want in charge of these bailouts. As Konczal pointed out, Trump has personal experience with manipulating corporate balance sheets and structures in ways that have bilked the public and showered benefits on well-connected insiders.
That’s in addition to Trump signing a massive tax giveaway to corporations while seeking to shred health coverage for millions, after getting elected on a platform of (sham) economic populism that promised to take on financial elites gaming a rigged economy.
But public and lawmaker scrutiny could matter. Trump will be facing reelection having presided over a full-scale public health emergency and a slide into economic calamity. Good luck if he also turns this fund into something that helped corporations and wealthy investors, rather than workers, at a time of severe public suffering.
“With so many people sacrificing for the common good, it would be criminal to see shareholders and CEOs who have treated workers so poorly get rewarded with bailouts during this crisis,” Konczal said. “Warren has the expertise to watch all of this closely.”