- Business Insider spoke with Bharat Ramamurti, the first person to be appointed to the five-member Congressional Oversight Commission monitoring the $500 corporate bailout fund under the stimulus law.
- He warns that a 2008-style populist revolt could occur if corporate executives benefit disproportionately from bailouts, relative to average American workers.
- Ramamurti is demanding the Federal Reserve disclose which large businesses are receiving taxpayer-backed loans and how the cash is being used.
- He says small businesses face more restrictions with the use of federal money compared to large corporations under the stimulus law.
- Read the full interview below.
- Visit Business Insider’s homepage for more stories.
Bharat Ramamurti is one of four people currently sitting on a five-member panel set up under the $2 trillion coronavirus relief law known as the CARES Act — three of whom were appointed only on Friday.
A former top economic adviser to Sen. Elizabeth Warren’s presidential campaign, Ramamurti recently became the first member of the Congressional Oversight Commission. The panel is tasked with policing the Treasury Department’s $500 billion bailout fund for large corporations and distressed industries during the pandemic.
The former Democratic Senate aide has tried harnessing his Twitter to jumpstart oversight efforts over the past week. He sent letters to the Federal Reserve calling for transparency as trillions of dollars in loans rush out the federal government’s doors. The Fed is working to publish transactions on its website, though the level of detail it will disclose remains unclear, Bloomberg reported.
Still, the panel’s work will likely not get underway until a chair is named by Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell.
Business Insider spoke with Ramamurti about the lessons learned after the 2008 financial crisis, his drive to ensure “robust oversight” of corporations receiving loans, and the risk of populist backlash if the bailout is seen benefiting the wrong people.
This is a transcript of the interview between Ramamurti and Business Insider. The interview has been lightly edited for clarity and length.
If corporate executives disproportionately benefit from the bailout while workers suffer, Ramamurti warns there could be another surge of populist anger on the right and left.
Business Insider: During the last recession, there was deep public anger at the perception that Wall Street got bailed out and the government didn’t do enough for average Americans. That unleashed the Tea Party on the right and Occupy Wall Street on the left. Could we see a similar political revolt depending how these programs are administered?
Ramamurti: The context is a little bit different, but the overarching question is the same. Are we using taxpayer dollars in a way that will broadly benefit American workers and their families? Or are we using it in a way that will predominantly help the wealthiest Americans and the biggest businesses?
Those types of concerns still exist with what the Treasury and the Fed are doing here. If you’re pumping $5 trillion worth of loans into medium-sized and big businesses with relatively few strings attached, my concern is that you’re gonna see a turbocharged version of what happened in the last 10 years — shareholder payouts, dividends, stock buybacks, and executive compensation goes up and up, but wages for workers remain stagnant.
If you have a big company that gets a large subsidized loan from the Fed that’s backed by taxpayers and that company ends up slashing payroll while paying out multimillion dollar bonuses and spending billions on stock buybacks, then yeah, I think you’re going to see the exact same kind of anger and frustration we saw in 2008.
Business Insider: The Oversight Commission was modeled on the 2008 panel that policed the bank bailouts. Do you feel that lessons learned then are being applied now?
Ramamurti: One of the things I look back on in ’08 is the role of then-Professor Warren performing oversight on the bailout and what that tells us about effective oversight in 2020. I believe what she did effectively was demystify a lot of this: Back then it was credit-default swaps, CDOs, and CLOs along with other complicated terms that made it harder to follow what was happening with the money and who was to blame.
That’s what I see as the goal of this commission. At the end of the day whenever you have the Treasury, the Fed, and other agencies that have a lot of discretion how to use a lot of taxpayer money, that requires robust oversight in order to make sure it’s used in the public interest.
One last point is that Congress passed this bill essentially unanimously, which means Congress broadly is supportive of the oversight panel. In the middle of the crisis, whether you are a Democrat, Republican, or an independent, we’re all invested seeing the money used as well as possible.
Ramamurti is calling on the Federal Reserve to reveal the identities of the companies receiving loans and how the money is being used.
Business Insider: Are you concerned your work is being hobbled since Congress hasn’t appointed the full panel yet?
Ramamurti: Well I’d like to see all the other members appointed. In the meantime, what I’m trying to do is begin the oversight work. In the week and a half since I was appointed by Sen. Schumer, I’ve started raising questions about what the Fed and Treasury are doing with this pot of money. I put out several questions last Thursday when the Fed and the Treasury made their initial announcement.
—Bharat Ramamurti (@BharatRamamurti) April 9, 2020
I wrote a letter to Fed Chair Powell about what the Fed was going to be disclosing about the individual transactions that take place under these facilities. I’m trying to dig in on the work to get the information we’re going to need to do robust oversight — at the start, I think, framing up the questions the commission should be looking at.
Business Insider: The Payroll Protection Program for small businesses just ran out of money, and much of it was aimed at keeping people employed. You recently said some of the restrictions those businesses face are more “onerous” — could you elaborate?
Ramamurti: Sure, and just to be clear, the PPP program is not within the jurisdiction of the oversight commission. The distinction I was trying to draw was that money for small businesses is reliant in part to keep workers on payroll. In other words, the money converts from a loan to a grant if the business shows they were able to keep a certain percentage of their workforce.
Obviously, the goal of that money from the taxpayers’ perspective is we have an interest in seeing people stay employed, connected to health insurance, and therefore we are willing to help small businesses facing a rough time. The money for bigger businesses through this $500 billion pot of money does not come with such restrictions. A big chunk of it comes with no requirement on payroll whatsoever — and similarly comes with no restrictions on executive compensation, share repurchases, or dividends.
It’s essentially taxpayer-backed money from the Fed to companies that gives them free rein to decide what they want to do with it. I have significant concerns about that given for the last several years we have seen a lot of corporations prioritize their executives and shareholders over outcomes for their workers.
Ramamurti has drawn lessons about “robust oversight” of corporations from his time working for Warren.
Business Insider: You recently served as a top economic adviser in Sen. Warren’s presidential campaign, which had a rallying cry for “big, structural change.” Then you’ve also monitored implementation of Dodd-Frank, the financial reform bill. How do both those experiences inform your work and perspective today?
Ramamurti: What I learned from both experiences working for Sen. Warren is that robust oversight is about asking hard questions and fighting to get real answers, and try to distill that information into analysis the public can understand. I think a lot of what happens in finance is it can sound highly technical and complicated, and that can be used to hide the kinds of behavior that if you are able to explain to people clearly, they would think it’s appalling.
Part of what I see as my goal on the oversight commission is to explain to people as clearly as I can: You handed the Treasury and the Fed $500 billion of your money, here’s where it went, these are the companies that got it, here’s what those companies ended up doing with it, here’s my analysis of whether that was in the public interest or not. Trying to tell that story should be the overarching goal of this commission.
Business Insider: It sounds like you’re really honing in on the Federal Reserve.
Ramamurti: There’s a lot of moving pieces here. There’s $500 billion worth of Fed lending to state and local governments. That’s important because state and local governments are getting hit hard by the coronavirus. But there are a lot of decisions that the Fed and Treasury made about how to structure that lending program that are concerning.
One is that created these eligibility cutoffs where you have to be a city of a million residents to get support from the Fed. That kind of cutoff excludes a lot of cities with very good credit ratings. It also excludes the 35 cities in America with the highest black populations proportionally — cities like Detroit, Atlanta, and Baltimore. The Fed should look into adjusting those eligibility standards.
They’re also demanding state and governments repay their loans more quickly than businesses are required. That’s also a curious decision.
Business Insider: So far, we’ve already seen that Trump fired the head of the watchdog panel recently, and he’s moved to install White House lawyer Brian Miller as the new special inspector general. How worried are you that the president will further try to undercut oversight, and should Miller be confirmed by the Senate?
Ramamurti: This underscores the importance of the work of the commission I’m on. There are three different oversight bodies in the CARES Act to oversee different parts of it. The other two give Donald Trump the opportunity to tamper with them directly by either appointing or firing members. He’s already done both.
The oversight commission, because it’s purely named by members of Congress, it’s free from that kind of interference. So that’s yet another reason that we should get it up and running as quickly as possible. I think it represents a chance to do robust oversight free from the executive branch trying to tamper with it.
As for the nomination, that’s up to the Senate and I defer to them on their evaluation of his qualities for the job.
Ramamurti wants to “contextualize” what’s going on with the corporate bailout fund in the committee’s first report next month.
Business Insider: The rollout of the Treasury lending facilities on April 9 started a 30-day clock for the issuing of the first public report of your panel. What do you expect to focus on and what should people take away from your work?
Ramamurti: The initial report needs to contextualize all of this. Five hundred billion dollars is more than the federal government is projected to spend on Medicaid. It’s several times more than it will spend on education and housing this year. The Treasury and the Fed have a lot of discretion in how to use that money.
There are ways of using it that can broadly benefit the public. It could help keep millions of workers on payroll, attached to their health insurance and put them in a position to ride out the crisis. Or it can accelerate the trends we’ve seen in the last 10 years where executives and shareholders do great while workers are left behind.
We have a major obligation to the public to track this money carefully, to explain to people the decisions the Fed and Treasury are making and their implications. My goal for the first report, whether there are members of the commission or not, would be to explain.
The commission also has the purpose to determine how programs are affecting the financial wellbeing of American families. We have an obligation to say not only this is what the Fed did and this is who they lent to, but what did that company do afterwards? Did it use that money to help American workers or did it use it to help executives and shareholders only? The report should tee up all those questions.