With the U.S. economy largely shut down and the number of jobless Americans growing by millions each week, lawmakers in March moved swiftly to approve a historic stimulus package that would inject trillions of dollars into the economy as incomes and revenues evaporated.
The Coronavirus Aid, Relief, and Economic Security, or CARES, Act injects more than $7 trillion into the economy: $2.2 trillion for direct checks to Americans, expanded unemployment benefits, money for health care, forgivable small business loans, and authorization for the Federal Reserve to invest more than $5 trillion into custom-made lending programs.
In crafting the most expensive piece of legislation ever passed by Congress, lawmakers ripped out red tape — and in some cases rules — to get the money out faster.
“The more requirements we came up with, the harder it was going to be to get the money out the door,” said Sen. Marco Rubio, R-Fla., chairman of the Senate Small Business Committee. “We erred on the side of expediency.”
With so much money being issued so quickly, the potential for scams and misuse runs rampant. Just one month after the stimulus bill became law, the Department of Justice has already charged three men with providing fraudulent information about businesses that no longer existed in an attempt to obtain loans from a new small business aid program.
The inspector general for the Small Business Administration is expected to issue a “flash report” on the rollout of the two-part, $600 billion program by Friday — just one of many expected from oversight teams at each agency on the pieces of the law that touch their departments and budgets.
Watchdogs out
To tamp down on illicit activity, the law itself also creates a slew of new watchdog roles, some of which have already fallen prey to politics as usual.
The law outlines a new Pandemic Response Accountability Committee, filled mostly by existing agency watchdogs who would choose a chair. Their first selection — Glenn Fine, the Pentagon’s acting inspector — didn’t sit well with President Donald Trump. The president removed him from his acting role, thereby disqualifying him from sitting on the panel.
Three weeks later, Trump replaced Christi Grimm, the acting IG from Health and Human Services Department, whom he said was biased in reporting that hospitals were short on vital supplies.
“‘Where did he come from, the inspector general? What’s his name? No, what’s his name? What’s his name?” Trump asked reporters of Grimm, before later attacking her on Twitter for serving eight years under President Barack Obama.
Ethics experts say the political nature of the president’s moves is problematic.
“The president has taken aggressive steps to undermine independent oversight,” said Donald Sherman, deputy director of the Citizens for Responsibility and Ethics in Washington. Purging inspectors general, Sherman said, shows “the president is less interested in getting a, you know, independent and rigorous oversight than he is in having loyalists rubber stamp this stimulus package,”
Under the law, Trump gets to pick a “special inspector general for pandemic recovery,” a role created by lawmakers to oversee the disbursement of Treasury funds in this package and ensure they aren’t paid to reward political favors. Trump selected Brian Miller, a White House lawyer and former IG at the General Services Administration, to serve in this role.
Independence in question
At his May 5 confirmation hearing, Miller attempted to allay concerns about his independence, given the recent actions by his most recent boss.
“President Trump has shown outright hostility to anyone who has tried to hold him accountable,” said Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, appearing on videoconference to comply with new social distancing rules.
Miller, who along with lawmakers wore a nonmedical mask, declined to say whether he endorsed the president’s personnel decisions.
“I will be independent. I will follow the facts wherever they lead,” Miller told the Senate Banking Committee. “If they’re critical of the administration, I will say so. I will have no hesitancy to do so.”
Finally, the law provides for a five-member commission of congressional appointees to study whether money lent by the Treasury and Federal Reserve is done so in a way to ensure “financial well-being.”
So far, the group has met over Zoom video meetings, and is expected to issue its first report this week — despite having the chairman post remain vacant and the goal of the group fairly nebulous.
For exactly what “well-being” means, Rep. French Hill, R-Ark. — selected by House minority leader Kevin McCarthy to join the commission — is looking to the lenders themselves for answers.
“We want to ask the Treasury and the Fed what’s your strategy, what’s your focus, how do you design this in order to benefit the economy as a whole, so the well-being of American families, the economy as a whole, how do we do that in a market transparent way.”
Democrats selected as one of their picks Bharat Ramamurti, an economic advisor to Sen. Elizabeth Warren who was instrumental in setting up the Consumer Financial Protection Bureau after the last financial crisis. Ramamurti said he is particularly focused on making sure companies that take government money keep their workers employed.
“Are the benefits of that flowing through to working people? Or are they being shunted off mostly to executives, and to shareholders?” Ramamurti asked.
Other cops on the beat
Beyond these bodies, other cops are still on the beat: a House Select Committee on Coronavirus, to evaluate the White House’s handling of the medical and financial response to the pandemic.
And the Government Accountability Office has established its own effort to run down fraud claims by setting up a webpage for leads. But with few controls on money going out at a record pace, it’s a case of “pay and chase,” according to GAO investigators.
Even then, it’s only a fraction of the fraud that’s going to happen.
“You’re only looking at what you actually caught,” said J. Howard Arp, GAO’s director of investigations and forensic audits. “You don’t know what you don’t know.”
A 1% loss would represent $72 billion in fraud when such a large package is considered. But ethicist Sherman said these myriad investigators should be able to work effectively once it’s up and running and appointees are confirmed.
Pitchforks on Main Street ought to keep them motivated, according to Sherman: “I think people are paying attention to this now in a way that they haven’t been.”