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.”
________________________________________
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.
________________________________________
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.
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.
No comments:
Post a Comment