Friday, May 15, 2020

SENATOR DIANNE FEINSTEIN'S PAYMASTERS WELLS FARGO PLANNING ANOTHER NATIONWIDE PLUNDER OF THE AMERICAN PEOPLE - WATCH FEINSTEIN VOTE FOR THEIR BAILOUT

WAR PROFITEER’S SECOND LARGEST BRIBSTERS ARE BANKSTERS WELLS FARGO AND BANK OF AMERICA. SHE HAS FOR DECADES COLLUDED IN THEIR WHOLESALE PLUNDER OF THE AMERICAN PEOPLE AND VOTED FOR ANY AND ALL THAT WOULD PUT MORE MONEY AND POWER INTO THESE CRIMINAL ENTERPRISES’ POCKETS

Of course, it wasn’t really God who opened the window to Mnuchin’s foreclosure profiteering or the profiteering of all the well-heeled investors who bought low during the financial crisis, then sold high amid the bailout-buoyed recovery (the Almighty contracts out those jobs to protect his brand integrity). Rather, it was an economic system that keeps a wide swath of Americans one bad break from financial ruin — and another tiny class draped in gold-plated armor.

Whistleblower: Wall Street Has Engaged in Widespread Manipulation of Mortgage Funds

Securities that contain loans for properties like hotels and office buildings have inflated profits, the whistleblower claims. As the pandemic hammers the economy, that could increase the chances of another mortgage collapse.

by Heather Vogell
 May 15,
A whistleblower complaint accuses 14 major lenders, including Wells Fargo, one of the country’s biggest CMBS issuers, of widespread manipulation of mortgage funds. 

Among the toxic contributors to the financial crisis of 2008, few caused as much havoc as mortgages with dodgy numbers and inflated values. Huge quantities of them were assembled into securities that crashed and burned, damaging homeowners and investors alike. Afterward, reforms were promised. Never again, regulators vowed, would real estate financiers be able to fudge numbers and threaten the entire economy.

Twelve years later, there’s evidence something similar is happening again.

Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank — as well as other lenders have engaged in a systematic fraud that allowed them to award borrowers bigger loans than were supported by their true financials, according to a previously unreported whistleblower complaint submitted to the Securities and Exchange Commission last year.
Whereas the fraud during the last crisis was in residential mortgages, the complaint claims this time it’s happening in commercial properties like office buildings, apartment complexes and retail centers. The complaint focuses on the loans that are gathered into pools whose worth can exceed $1 billion and turned into bonds sold to investors, known as CMBS (for commercial mortgage-backed securities).
Lenders and securities issuers have regularly altered financial data for commercial properties “without justification,” the complaint asserts, in ways that make the properties appear more valuable, and borrowers more creditworthy, than they actually are. As a result, it alleges, borrowers have qualified for commercial loans they normally would not have, with the investors who bought securities birthed from those loans none the wiser.
ProPublica closely examined six loans that were part of CMBS in recent years to see if their data resembles the pattern described by the whistleblower. What we found matched the allegations: The historical profits reported for some buildings were listed as much as 30% higher than the profits previously reported for the same buildings and same years when the property was part of an earlier CMBS. As a rough analogy, imagine a homeowner having stated in a mortgage application that his 2017 income was $100,000 only to claim during a later refinancing that his 2017 income was $130,000 — without acknowledging or explaining the change.
It’s “highly questionable” to alter past profits with no apparent explanation, said John Coffee, a professor at Columbia Law School and an expert in securities regulation. “I don’t understand why you can do that.”
In theory, CMBS are supposed to undergo a rigorous multistage vetting process. A property owner seeking a loan on, say, an office building would have its finances scrutinized by a bank or other lender. After that loan is made, it would be subjected to another round of due diligence, this time by an investment bank that assembles 60 to 120 loans to form a CMBS. Somewhere along the line, according to John Flynn, a veteran of the CMBS industry who filed the whistleblower complaint, numbers are being adjusted — inevitably to make properties, and therefore the entire CMBS, look more financially robust.
The complaint suggests widespread efforts to make adjustments. Some expenses were erased from the ledger, for example, when a new loan was issued. Most changes were small; but a minor increase in profits can lead to approval for a significantly higher mortgage.
The result: Many properties may have borrowed more than they could afford to pay back — even before the pandemic rocked their businesses — making a CMBS crash both more likely and more damaging. “It’s a higher cliff from which they are falling,” Flynn said. “So the loss severity is going to be greater and the probability of default is going to be greater.”
With the economy being pounded and trillions of dollars already committed to bailouts, potential overvaluations in commercial real estate loom much larger than they would have even a few months ago. Data from early April showed a sharp spike in missed payments to bondholders for CMBS that hold loans from hotels and retail stores, according to Trepp, a data provider whose specialties include CMBS. The default rate is expected to climb as large swaths of the nation remain locked down.
After lobbying by commercial real estate organizations and advocacy by real estate investor and Trump ally Tom Barrack — who warned of a looming commercial mortgage crash — the Federal Reserve pledged in early April to prop up CMBS by loaning money to investors and letting them use their CMBS as collateral. The goal is to stabilize the market at a time when investors may be tempted to dump their securities, and also to support banks in issuing new bonds. (Barrack’s company, Colony Capital, has since defaulted on $3.2 billion in debt backed by hotel and health care properties, according to the Financial Times.)
The Fed didn’t specify how much it’s willing to spend to support the CMBS, and it is allowing only those with the highest credit ratings to be used as collateral. But if some ratings are based on misleading data, as the complaint alleges, taxpayers could be on the hook for a riskier-than-anticipated portfolio of loans.
The SEC, which has not taken public action on the whistleblower complaint, declined to comment.
Some lenders interviewed for this article maintain they’re permitted to alter properties’ historical profits under some circumstances. Others in the industry offered a different view. Adam DeSanctis, a spokesperson for the Mortgage Bankers Association, which has helped set guidelines for financial reporting in CMBS, said he reached out to members of the group’s commercial real estate team and none had heard of a practice of inflating profits. “We aren’t aware of this occurring and really don’t have anything to add,” he said.
The notion that profit figures for some buildings are pumped up is surprising, said Kevin Riordan, a finance professor at Montclair State University. It raises questions about whether the proper disclosures are being made.
Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said, they rely on summaries from investment banks and the credit ratings agencies that analyze the securities. To make wise decisions, investors’ information “out of the gate has to be pretty close to being right,” he said. “Otherwise you’re dealing with garbage. Garbage in, garbage out.”
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The whistleblower complaint has its origins in the kinds of obsessions that keep wonkish investors up at night. Flynn wondered what was going to happen when some of the most ill-conceived commercial loans — those made in the lax, freewheeling days before the financial crisis of 2008 — matured a decade later. He imagined an impending disaster of mass defaults. But as 2015, then 2017, passed, the defaults didn’t come. It didn’t make sense to him.
Flynn, 55, has deep experience in commercial real estate, banking and CMBS. After growing up on a dairy farm in Minnesota, the youngest of 14 children, and graduating from college — the first in his family to do so, he said — Flynn moved to Tokyo to work, first in real estate, then in finance. Jobs with banks and ratings agencies took him to Belgium, Chicago and Australia. These days, he advises owners whose loans are sold into CMBS and helps them resolve disputes and restructure or modify problem loans.
Burr’s resignation comes after the FBI seized his cellphone Wednesday. The Republican from North Carolina is being investigated for selling stock ahead of the market crash due to coronavirus fears.
He began poring over the fine print in CMBS filings and noticed curious anomalies. For example, many properties changed their names, and even their addresses, from one CMBS to another. That made it harder to recognize a specific property and compare its financial details in two filings. As Flynn read more and more, he began to wonder whether the alterations were attempts to obscure discrepancies: These same properties were typically reporting higher net operating incomes in the new CMBS than they did for the same year in a previous CMBS.
Flynn ultimately collected and analyzed data for huge numbers of commercial mortgages. He began to see patterns and what he calls a massive problem: Flynn has amassed “materials identifying about $150 billion in inflated CMBS issued between 2013 and today,” according to the complaint.
The higher reported profits helped the properties qualify for loans they might not have otherwise obtained, he surmised. They also paved the way for bigger fees for banks. “Inflating historical cash flows creates a misperception of lower current and historical cash flow volatility, enables higher underwritten [net operating income/net cash flow], and higher collateral values,” the complaint states, “and thereby enables higher debt.”
Flynn eventually found a lawyer and, in February 2019, he filed the whistleblower complaint. The complaint accuses 14 major lenders — including three of the country’s biggest CMBS issuers, Deutsche Bank, Wells Fargo and Ladder Capital — and seven servicers of inflating historical cash flows, failing to report misrepresentations, changing names and addresses of properties and “deceptively and inaccurately” describing mortgage-loan representations. It doesn’t identify which companies allegedly manipulated each specific number. (Spokespeople for Deutsche Bank and Wells Fargo declined to comment on the record. The complaint does not mention Barrack or his company. )
The SEC has the power to fine companies and their executives if fraud is established. If the SEC recovers more than $1 million based on Flynn’s claim, he could be entitled to a portion of it.
When Flynn filed the complaint, the skies looked clear for the commercial mortgage market. Indeed, last year was a boom year for CMBS, with private lenders in the U.S. issuing roughly $96.7 billion in commercial mortgage-backed securities — a 27% increase over 2018, which made it the most successful year since the last financial crisis, according to Trepp. Overall, investors hold CMBS worth $592 billion.
Flynn’s assertions raise questions about the efficacy of post-crisis reforms that Congress and the SEC instituted that sought to place new restrictions on banks and other lenders, increase transparency and protect consumers and investors. The regulations that were retooled included the one that governs CMBS, known as Regulation AB. The goal was to make disclosures clearer and more complete for investors, so they would be less reliant on ratings agencies, which were widely criticized during the financial crisis for lax practices.
Still, the opinion of the credit-ratings agencies remains crucial today, a point reinforced by the Fed’s decision to hinge its bailout decisions on those ratings. That’s a problem, in the view of Neil Barofsky, who served as the U.S. Treasury’s inspector general for the Troubled Assets Relief Program from 2008 to 2011. “Practically nothing” was done to reform the ratings agencies, Barofsky said, which could lead to the sorts of problems that emerged in the bailout a decade ago. If things truly turn bad for the commercial real estate industry or if fraud is discovered, he added, the Fed could end up taking possession of properties that default.
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CMBS can be something of a last resort for borrowers whose projects are unlikely to qualify for a loan with a desirable interest rate from a bank or other lender (because they are too big, too risky or some other reason), according to experts. Underwriting practices — the due diligence lenders do before extending a loan — for CMBS have gained a reputation for being less strict than for loans that banks keep on their balance sheets. Government watchdogs found serious deficiencies in the underwriting for securitized commercial mortgages during the financial crisis, just as they did in the subprime residential market.
The due diligence process broke down, Flynn maintains, in precisely the mortgages he was worried about: the 10-year loans obtained before the financial crisis. What Flynn discovered, he said, was that rather than lowering the values for properties that had taken on bigger loans than they could pay off, their owners instead obtained new loans. “Someone should have taken the losses,” he said. “Instead, they papered over it, inflated the cash flow and sold it on.”
For commercial borrowers, small bumps in a property’s profits can qualify the borrower for millions more in loans. Shaving expenses by about a third to boost profit, for instance, can sometimes allow a borrower to increase a loan’s size by a third as well — even if the expenses run only in the thousands, and the loan runs in the millions.
Some executives for lenders acknowledged to ProPublica that they made changes to borrowers’ past financials — scrubbing expenses from prior years they deemed irrelevant for the new loan — but maintained that it is appropriate to do so. Accounting firms review financial data before the loans are assembled into CMBS, they added.
The financial data that ProPublica examined — a sample of six loans among the thousands Flynn identified as having inflated net operating income — revealed potential weaknesses not readily apparent to the average investor. For those six loans, the profits for a given year were listed as 9% to 30% higher in new securities than in the old. After they were issued, half of those loans ended up on watch lists for problem debt, meaning the properties were considered at heightened risk for default.
In each of the six loans, the profit inflation seemed to be explained by decreases in the costs reported. Expenses reported for a particular year in one CMBS simply vanished in disclosures for the same year in a new CMBS.
Such a pattern appeared in a $36.7 million loan by Ladder Capital in 2015 to a team that purchased the Doubletree San Diego, a half-century-old hotel that struggled for years to bring in enough income to satisfy loan servicers, even under a previous, smaller loan.
The hotel’s new loan saddled it with far greater debt, increasing its main loan by 60% — even though the property had landed on a watchlist in 2010 because of declining revenue. Analysts at Moody’s pegged the hotel’s new loan as exceeding the value of the property by 40.5% (meaning a loan-to-value ratio of 140.5%).
Filings for the new loan claimed much higher profits than what the old loan had cited for the same years: The hotel’s net operating income for two years magically jumped from what had previously been reported: 21% and 16% larger for 2013 and 2014, respectively.
Such figures are supposed to be pulled from a property’s “most recent operating statement,” according to the regulation governing CMBS disclosures.
But, in response to questions from ProPublica, lender Ladder Capital said it altered the expense numbers it provided in the Doubletree’s historical financials. Ladder said it wiped lease payments —$700,608 and $592,823 in those two years — from the historical financials, because the new owner would not make lease payments in the future. (The previous owner had leased the building from an affiliated company.)
Ladder, a publicly traded commercial real estate investment trust that reports more than $6 billion in assets, said in a statement, “These differences are due to items that were considered by Ladder Capital during the due diligence process and reported appropriately in all relevant disclosures.”
Yet when ProPublica asked Ladder to share its disclosures about the changes, the firm pointed to a section of the pool’s prospectus that didn’t mention lease payments, or explain or acknowledge the change in income.
The Doubletree did not fare well under its new debt package. Revenues and occupancy declined after 2015 and by 2017, the hotel’s loan was back on the watch list. The hotel missed franchise fee payments. Ladder foreclosed in December 2019, after problems with an additional $5.8 million loan the lender had extended the property.
The Doubletree loan was not the only loan in its CMBS pool, issued by Deutsche Bank in 2015, with apparently inflated profits. Flynn said he was able to track down previous loan information for loans representing nearly 40% of the pool, and all had inflated income figures at some point in their historical financial data.
There was also a noticeable profit increase in two loans Ladder issued for a strip mall in suburban Pennsylvania. The mall’s past results improved when they appeared in a new CMBS. Its 2016 net operating income, previously listed as $1,101,207 in one CMBS, now appeared as $1,352,353 in another, data from Trepp shows — an increase of 23%. The prospectus for the latter does not explain or acknowledge the change in income. The mall owner received a $14 million loan.
Less than a year after it was placed into a CMBS, the loan ran into trouble. It landed on a watchlist after one of its major tenants, a department store, declared bankruptcy.
Ladder said it excluded $203,787 in expenses from the new loan because they stemmed from one-time costs for environmental remediation of pollution by a dry cleaner and a roof repair. Ladder did not explain why the previous lender did not exclude the expense also.
The pattern can be seen in loans made by other lenders, too. In a CMBS issued by Wells Fargo, a 1950s-era trailer park at the base of a steep bluff along the coast in Los Angeles reported sharply higher profits — for the same years — than it previously had.
The Pacific Palisades Bowl Park received a $12.9 million loan from the bank in 2016. The park reported expenses that were about a third lower in its new loan disclosures when compared with earlier ones. As a result, the $1.2 million in net operating income for 2014 rose 28% above what had been reported for the same year under the old loan. A similar jump occurred in 2013. (Edward Biggs, the owner of the park, said he gave Wells Fargo the park’s financials when refinancing its loan and wasn’t aware of discrepancies in what was reported to investors. “I don’t know anything about that,” he said.)
Flynn said he found that for the $575 million Wells Fargo CMBS that contained the Palisades debt, about half of the loan pool appeared to have reported inflated profits at some point, when comparing the same years in different securities.
Another of the loans ProPublica examined with apparently inflated profits was for a building in downtown Philadelphia. When the owner refinanced through Wells Fargo, the property’s 2015 profit appeared 23% higher than it had in reports under the old loan. Wells bundled the debt into a mortgage-backed security in 2016.
The building, One Penn Center, is a historic Art Deco office high-rise with ornate black marble and gold-plated fixtures, and a transit station underneath. One of the primary tenants, leasing 45,000 square feet for one of its regional headquarters, happens to be the SEC. The agency declined to comment.

OBAMA CRONY DONORS Goldman Sachs, JPMorgan Chase, Bank of America and every other major US bank have been implicated in a web of scandals, including the sale of toxic mortgage securities on false pretenses, the rigging of international interest rates and global foreign exchange markets, the laundering of Mexican drug money, accounting fraud and lying to bank regulators, illegally foreclosing on the homes of delinquent borrowers, credit card fraud, illegal debt-collection practices, rigging of energy markets, and complicity in the Bernie Madoff Ponzi scheme.

 

Treasury Secretary Steven Mnuchin embodies the plutocratic principle that a crisis is a terrible thing to waste.


Steve Mnuchin knows his way around a crisis. Twelve years ago, the Treasury secretary was still a middling multi-millionaire of little renown or historical import. But whenever God closes a door on an underwater home-owner, he opens a window to an unscrupulous speculator, and in 2008, the Big Man began closing a lot of doors. Mnuchin didn’t miss his opening. He may have been just a humble Goldman Sachs nepotism hire turned Hollywood financier back then, but he had a few million dollars to play with and a few friends with many millions more. Together, they bought up a failing mortgage lender, rapidly foreclosed on thousands of borrowers, and resold the homes at a nifty profit. By the end of his tenure as a bank CEO, Mnuchin had earned himself the title “Foreclosure King” — and a return of $200 million. That’s the kind of money that can buy you entrance into the good graces of a Republican nominee, especially if he’s already alienating a lot of the party’s biggest donors. And from there, it’s walking distance to the White House.
Thus far, the COVID-19 crash has been as kind to Mnuchin as the Great Recession once was. If the last global economic crisis made him rich enough to purchase a lofty perch in our government, this one is making the Treasury secretary powerful enough to claim a prominent place in U.S. history. Before the novel coronavirus made its presence felt, Mnuchin’s most memorable achievement as a public servant may have been commandeering a government plane for a solar-eclipse-themed day trip. Since the pandemic sickened global markets, he has brokered the largest stimulus legislation ever passed and won control of a multi-trillion-dollar bailout fund.
Which is to say: We’ve put one of the primary beneficiaries of America’s inequitable response to the last economic crisis in charge of crafting our nation’s response to this one.
Of course, it wasn’t really God who opened the window to Mnuchin’s foreclosure profiteering or the profiteering of all the well-heeled investors who bought low during the financial crisis, then sold high amid the bailout-buoyed recovery (the Almighty contracts out those jobs to protect his brand integrity). Rather, it was an economic system that keeps a wide swath of Americans one bad break from financial ruin — and another tiny class draped in gold-plated armor.
From the first capital-gains-tax cut of the modern era in Jimmy Carter’s day to the supply-side bonanza of Donald Trump’s, this system’s essential rationale has remained the same: If capitalists cannot reap big rewards from their winning bets, they will have no incentive to take the great personal risks that fuel collective prosperity.
Mnuchin’s career and the pandemic response he has overseen belie most of that sentence’s premises. In truth, the Treasury secretary owes his success to a series of low-risk, high-reward bets of little-to-negative social value. Which makes sense. After all, if America’s brand of capitalism actually required the superrich to assume great personal risk in order to reap outsize returns, they wouldn’t be so invested in it.
Steve Mnuchin wasn’t born on third base so much as a few inches to the left of home plate. His grandfather co-founded a yacht club in the Hamptons. His father was a Yale-educated partner at Goldman Sachs. If his family’s name didn’t secure Steve’s own Yale admission, its wealth certainly covered his tuition, books, personal Porsche, and “dorm” at New Haven’s Taft Hotel. From this perch, it would have been harder for Mnuchin to tumble down America’s class ladder than to climb higher still. The former would have required prodigious acts of self-destruction; the latter mere fluency in ruling-class social mores and the art of strategic sycophancy — and the wallflower cipher Steve Mnuchin is a master of both.
At Goldman, Mnuchin’s colleagues did not consider him “especially book smart.” And some have suggested that his steady ascent at the firm was fueled less by merit than pedigree (Mnuchin’s elevation to partner in 1996 came at the expense of Kevin Ingram, an African-American trader who’d risen from a working-class childhood up through MIT’s engineering school, then Goldman’s ranks, where he struck one colleague as both “much smarter than Steven” and more “accomplished”).
After Mnuchin paid his dues at Goldman, he founded a hedge fund called Dune Capital and a motion-picture-financing company called Dune Entertainment (both named after a stretch of beach near his house in the Hamptons). He helped bankroll Avatar and the X-Men franchise, hobnobbed in Beverly Hills, and hoarded his investment profits in a tax haven. He had everything America’s “temporarily embarrassed millionaires” imagine a person could want. But Mnuchin longed for higher things. And when the housing market collapsed, he knew he was in luck.
Early in his career, Mnuchin had watched his superiors turn America’s savings-and-loan crisis into their own buying-and-selling bonanza. In the summer of 2008, Mnuchin was watching television in his New York office when an invitation to emulate his old mentors flashed across the screen: Out in California, frightened depositors were lined up outside IndyMac, one of the nation’s largest mortgage lenders, waiting to withdraw their cash. “This bank is going to end up failing, and we need to figure out how to buy it,” Mnuchin told a colleague. “I’ve seen this game before.”
He played it like a natural. Mnuchin reached out to George Soros, John Paulson, and other billionaires whose trust he’d cultivated. They marshaled a $1.6 billion bid. Eager to unload the bank — whose balance sheet was chock-full of toxic assets — the FDIC agreed to cover any losses that might accrue to the investors above a certain threshold. Which is to say, the government agreed to partially socialize Mnuchin & Co.’s downside risk. This public aid came with one major condition: The new bank, which Mnuchin dubbed OneWest, would need to make a good-faith effort to help homeowners avoid foreclosure. The FDIC would ultimately pay OneWest more than $1.2 billion.
This was not enough to buy Steve Mnuchin’s good faith.
Purchasing IndyMac secured OneWest a claim on a lot of undervalued housing. The catch, of course, was that much of it was full of broke people. And California’s foreclosure laws make the process of separating low-net-worth humans from high-value housing stock long and arduous. But this was nothing a little entrepreneurship couldn’t solve: Mnuchin’s bank (ostensibly) bet it could get away with “robo signing” and backdating documents to expedite foreclosures. One-West got caught red-handed on the first count but emerged with a slap on the wrist. Investigators at the California attorney general’s office concluded the bank was guilty on the second and requested authorization to pursue an enforcement action. It’s unclear exactly why then–Attorney General Kamala Harris denied this request. But as the investigators themselves noted, to pursue legal action against an entity with OneWest’s resources would mean investing years of time — and large sums of the public’s money — in a deeply uncertain enterprise. The government could afford to take only so many risks, which meant the idea that the state could hold all its superrich residents accountable to its laws was a bluff. Mnuchin called it.
In the spring of 2016, another promising investment opportunity caught the eye of the now-former One-West CEO. Mnuchin had crossed paths with Trump several times over the years; his hedge fund had invested in (at least) two of the mogul’s projects. So when Donald invited Steve to swing by his tower on the night he won the New York primary, Mnuchin obliged. A dozenish hours (and a glass or two of Trump-branded wine) later, Mnuchin agreed to become the finance chairman of the future GOP nominee’s campaign.
This decision baffled some of Mnuchin’s Hollywood pals. The bankroller of The LEGO Batman Movie didn’t strike them as a political animal, let alone a Trumpist. But his motives weren’t mysterious. For someone in Mnuchin’s socioeconomic position, Trump’s presidential campaign was just another low-risk, high-reward bet. Or, as Mnuchin himself put it in an interview in August 2016, “Nobody’s going to be like, ‘Well, why did he do this?,’ if I end up in the administration.”
Mnuchin is the last of the “adults in the room” — that cabal of semi-credentialed advisers whose presence in the West Wing eased the troubled minds of Never Trump pundits circa 2017. None of the others — not Rex Tillerson, Gary Cohn, James Mattis, H.R. McMaster, or John Kelly — could marshal the requisite combination of unscrupulous sycophancy and patient politicking to weather each turn in Trump’s tempestuous moods. Only the former Foreclosure King has what it takes to unequivocally defend the president’s kind words for alt-right marchers in Charlottesville or echo his attacks on NFL players who dared to protest police abuse. So when the biggest economic crisis since the Great Depression hit, Mnuchin became — in The Wall Street Journal’s appellation — “Washington’s indispensable crisis manager.” Unburdened by ideological conviction or economic literacy, Mnuchin has proved to be the GOP’s most able dealmaker. Working out of a temporary office in the Capitol’s Lyndon Baines Johnson Room, Mnuchin spent the closing weeks of March running (and massaging) messages between the Senate’s Democratic and Republican camps as they sought consensus on a gargantuan coronavirus relief bill. “Mnuchin played the middleman, and he must have been in my office 20 times in three days,” Senate Minority Leader Chuck Schumer told the Journal, going on to praise the reliability of the Treasury secretary’s word. House Speaker Nancy Pelosi has said that she and Mnuchin can communicate through a “shorthand” devoid of time-wasting “niceties or anything like that.”
The soft skills Mnuchin had once deployed to ink billion-dollar investment deals now eased the passage of a $2.2 trillion economic-relief package. And there was much to admire in the legislation’s headline provisions: an unprecedented expansion in federal unemployment benefits that would leave many laid-off workers with as much — if not more — income than they’d earned at their old jobs, forgivable loans for small businesses that agreed to forgo layoffs during the crisis, and onetime cash payments to all nonaffluent Americans.
But this is still a Republican stimulus, however much schmoozing Steve has done with Chuck and Nancy this spring. Congress’s persistent underfunding of the small-business aid has kept America’s most vulnerable mom-and-pops out in the cold. And our nation’s decrepit unemployment-insurance offices have struggled to administer benefits as the ranks of the jobless grow millions stronger every week. The Treasury Department has allowed debt collectors to garnish the relief checks of cash-strapped Americans, and Congress has essentially refused to bail out hospitals whose budgets have suddenly been destroyed by COVID-driven shortfalls, meaning that over the next few years, whole essential health systems and services could abruptly be suspended.
Most of all, the legislation’s largest appropriation — $454 billion to backstop a $4 trillion Federal Reserve lending program to large corporations — gives Mnuchin significant personal discretion over which firms will have access to low-cost credit and on what terms, thereby leaving a connoisseur in the art of subverting federal crisis management for personal profit in charge of preventing America’s corporate titans from subverting federal crisis management for personal profit.
The White House’s next big idea for promoting economic recovery is, reportedly, to formally suspend the enforcement of labor and environmental regulations on small businesses, a measure that would enable petit bourgeois tyrants to suspend all pretense of concern for their workers’ health and well-being in the midst of a pandemic.
Nevertheless, could we have reasonably expected anything better, all things considered? A GOP president and Senate majority were always going to comfort the comfortable and toss crumbs to the afflicted. And when Congress approved $2.2 trillion in coronavirus relief funds last month, nurses were intubating patients without proper PPE, grocery-store clerks were jeopardizing their health to keep others fed, and delivery drivers were forfeiting the security of social distancing so others could more comfortably enjoy it. The legislation included zero dollars in hazard-pay benefits for those workers. It did, however, provide $90 billion in tax cuts to the owners of pass-through businesses, such as, for instance, the Trump Organization. Such “relief” was necessary, the American Enterprise Institute later explained, to mitigate the “penalty” on economic risk-takers.

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