A member of the Congressional Oversight Commission says so far, the Federal Reserve and and Treasury Department have propped up the stock market, but have failed to protect workers’ jobs amid the coronavirus pandemic.
Bharat Ramamurti was the first member appointed to the commission — a group created in the CARES Act to oversee the $500 billion Congress gave to the Fed and Treasury to stabilize the U.S. economy.
The Federal Reserve has opened up nine facilities to backstop various financial markets, many with the help of the U.S. Treasury. But the Fed still has yet to stand up a taxpayer-supported facility that would offer cheap loans to medium and large businesses to bridge them through the coronavirus crisis. Fed Chairman Jerome Powell said last week that its Main Street Lending Program, which will be open to businesses with under 15,000 employees or less than $5 billion in annual revenue, would launch in “a few days.”
“The mere announcement of their program and how they plan to use the money has provided real assurance to corporate bond markets and to investors,” said Ramamurti in an interview with Yahoo Finance. “The Fed and the Treasury programs so far have been very successful, if the goal of the program is to prop up the stock market and the corporate bond market. If the goal of the program is to protect jobs and to help state and local governments and midsize companies too — then I think it’s been a failure.”
Ramamurti is a managing director of the Corporate Power program at the Roosevelt Institute and a former economic adviser to Sen. Elizabeth Warren (D-MA). He argues there should be more conditions on taxpayer-backed support for big businesses to ensure companies are prioritizing workers.
“At the moment, there are no strings attached to literally hundreds of billions of dollars of support that the Fed and the Treasury are ticketing for large businesses — including, for example, through the purchase of new issued corporate bonds,” said Ramamurti.
Smaller businesses seeking loans through the Paycheck Protection Program have to spend most of the money on payroll, while the Main Street Lending Program puts restrictions on stock buybacks, executive compensation and dividends. Businesses also have to make efforts to retain employees.
“None of those limitations apply to larger companies and I think that’s concerning because we’ve seen historically these really big American companies, oftentimes their first priority is to take care of shareholders and executives, and their last priority is to take care of workers — and what we need to see right now is the opposite,” said Ramamurti.
The commission issued its first report last month and asked the Fed and Treasury about the lack of limitations.
On the facility that purchases new bonds from big corporations with few limitations on how corporations spend that money, we ask: do the Treasury and the Fed believe the money will help stabilize the economy regardless of how companies use it? 8/ pic.twitter.com/X8mivhLd3F
— Bharat Ramamurti (@BharatRamamurti) May 18, 2020
Ramamurti told Yahoo Finance the commission has not yet received a response, but he hopes to hear back “relatively soon.”
‘Why is it taking so long?’
Ramamurti said so far, little of the $500 billion has actually been put to use and it’s a “significant concern” that it’s taking so long to get money out the door.
“If this was an emergency, why is it taking so long to get this money in place? Why is it that as of today not a single dollar has gone to support midsize companies through loans? Why is it that as of today, not a single dollar has gone to loans to state and local governments that are already suffering through huge budget crunches and that are already laying off workers,” said Ramamurti.
The Congressional Oversight Committee currently has two Republican and two Democratic members, each appointed by Congressional leadership. Speaker Nancy Pelosi and Majority Leader Mitch McConnell still haven’t agreed on a person to chair the commission.
“Each member of the commission so far is working together and working hard to do what we can with the resources that we have available. I don’t think we’re making any excuses, but I would like to see a chair and I would like to see the commission fully staffed up so we can continue to dig into the details of this program,” said Ramamurti.
The commission is set to release its second report in mid-June.
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.