Bailout fallout: the rich got richer

Bill Knight column for 6-22, 23 or 24, 2020      

           

Days ago, lawmakers blasted Treasury Secretary Steven Mnuchin after he refused to reveal which businesses received any of the $500 billion in Paycheck Protection Program loans backed by public money.

Recipients that maintain payrolls will have the loans forgiven under the program, which notes in its application that borrowers’ names and loan amounts could be released if someone requests them under the Freedom of Information Act.

But for now, it’s a guessing game. However, according to “Tale of Two Crises,” a new report from Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS), various assistance from the government and Federal Reserve seems to have contributed to enriching industry and the wealthiest individuals. U.S. billionaires’ fortunes increased by $434 billion during the nation’s lockdown between mid-March and June, the report shows.

“Tale of Two Crises” used Forbes magazine data on America’s 630 billionaires between March 18 and May 19 (when most states were in lockdown) and says the net worth of America’s wealthiest billionaires alone grew 15% during the two-month period, to $3.382 trillion from $2.948 trillion. Those engorging themselves the most were at the top, with the richest five billionaires – Jeff Bezos (Amazon), Bill Gates (Microsoft), Mark Zuckerberg (Facebook), Warren Buffett (Berkshire Hathaway), and Larry Ellison (Oracle) – together enjoying gains of $76 billion.

“The surge in billionaire wealth during a global pandemic underscores the grotesque nature of unequal sacrifice,” said Chuck Collins, director of IPS’ Program on Inequality. “While millions risk their lives and livelihoods as first responders and front-line workers, these billionaires benefit from an economy and tax system that is wired to funnel wealth to the top.”

Away from company suites, the streets show another story: 42+ million people lost jobs, at least temporarily; millions lost employer-based health insurance; some 20% of Americans are unsure whether they’ll be able to pay rent or mortgages.

But this spring, government’s eyes were on Wall Street. Its paper value dropped dramatically when corporations realized the nation was caught in a pandemic unprepared. Investors fled from stocks, bonds and everything short of free bank pens. At one point this month, the S&P 500 was up more than 44% since March, effectively recovering all of its losses. So the bailout worked – for investors.

The first relief measure, the $2.3 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, turns out to have mostly protected the investor class, letting everyone else mostly scramble for “free market” crumbs after the feeding frenzy. Lawmakers from both major political parties seemingly can’t tell the difference between Wall Street and the U. S. economy.

 “One of the realities of our system is that corporate America has a large influence on how these bills play out.” said Neil Barofsky, author of “Bailout” and a former economist in both the Trump and Obama administrations.

At first, Democrats went along with the top-heavy handouts because individuals at least got something, such as the $1,200 checks President Trump insisted on signing in a shallow-but-predictable campaign gimmick.

Maybe urgency, an unforeseen panic attack or a new-found compassion for constituents contributed to the bipartisan go-along-to-get-along rubber stamp that approved it in a week, by voice vote in the House and unanimously in the Senate.

The fine print: The measure supposedly provides $560 billion for “individuals” (including $300 billion in “Trump checks”), plus $377 billion for small businesses, $339 billion for state and local governments, and $100 billion for hospitals and other health-care providers, plus some aid for students and children. But $454 billion was earmarked for discretionary big-business help.

“Essential” workers who during the virus’ spread kept working, and let the country keep going, were mostly relegated to the kids menu of peanut butter sandwiches while investors feasted on champagne and caviar. Relief didn’t include paid sick leaves, medical coverage or a jobs plan even faintly resembling FDR’s Works Progress Administration (WPA) or Civilian Conservation Corps (CCC).

 “Congress really didn’t insist on the strings attached to a lot of this money that I think we originally had been told they would,” Barofsky said. “[It] is a cause of concern.”

Some Republicans and most Democrats are concerned about Mnuchin and the “loans,” especially with no strings attached – or at least used.

Although the Pandemic Response Accountability Committee (PRAC) was appointed, Trump after signing the legislation declared, “I’ll be the oversight,” and since then fired Glenn Fine, acting Defense Department Inspector General (and the first PRAC chair), Michael Atkinson, Intelligence Community IG, and Steve Linick, State Department IG. So it’s anyone’s guess how much oversight there is.

But few need to guess how and why workers got the shaft and investors got the gold.