Bipartisan lawmakers warn the Trump administration’s largest disbursement of federal rescue dollars is being deliberately held in secret.
Inspectors general warn the Treasury Department is deliberately withholding information on trillions in rescue spending.
Transparency watchdogs warn there is no indication the Trump administration will cooperate with a myriad of legal oversight requirements in the more than $2 trillion CARES Act.
Bottom line: For months there has been a simmering oversight war brewing between the Trump administration, lawmakers and the entities tasked with overseeing the largest emergency economic rescue package in the nation’s history. The stakes are enormous, with checks and balances over trillions in federal spending currently hanging in the balance. It’s now starting to boil over.
Coming to a head
“The position is simply not sustainable.” That’s what an administration official told CNN of the current refusal to release details about loan recipients of the $670 billion Paycheck Protection Program.
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Treasury Secretary Steven Mnuchin appeared to acknowledge this much Monday, when he tweeted he was beginning bipartisan talks about transparency for the program. But how far Treasury is willing to go given some of the concerns raised by small businesses about disclosure remains an open question – as does whether the current effort will be enough to address the concerns of Democratic lawmakers.
Republican Sen. Marco Rubio of Florida, the chairman of the Small Business Committee, said he’d spoken to Mnuchin after that tweet and they were trading ideas back and forth about how to structure potential disclosure of loan recipients. Rubio told CNN there “will be disclosure,” but the talks were based on how to shield smaller businesses like sole proprietorships – entities that have voiced concern about what disclosure would reveal about their businesses due to the structure of the program.
“If you have a big loan, there’s no avoiding it,” Rubio said. “We’re going to need to know who you are.”
The risks
It’s important to put into context what PPP was designed to do – and has done. It was essentially designed to flood the small business marketplace with cash, as quickly as possible, in order for those businesses to maintain payroll. After a rocky and uneven start, the program has done just that – so much so that there is still $130 billion in funds that haven’t even been tapped yet.
But with the speed comes the risk of fraud, or entities obtaining funds that shouldn’t have, or uneven distribution across sectors or significant racial disparities. That’s where the oversight comes in – and that’s why lawmakers have been so interested in obtaining more information.
That concern becomes particularly acute when the oversight structures put into place become clear. PPP is outside the purview of the Congressional Oversight Commission. Treasury is now saying it’s outside the purview of the Pandemic Response Accountability Committee. The Government Accountability Office has had issues obtaining information, as has the congressional select committee overseeing the stimulus funds. There is, to some degree, the potential for a gap in oversight of a massive federal loan program. That’s at the heart of the dispute – and the risk lawmakers are most concerned about.
The reality
The administration’s broad position has little merit. The SBA program the PPP is modeled after, known as 7(a), has released granular borrower information for decades. The public pressure is becoming immense. The loan application itself made clear to borrower disclosure was possible, and Mnuchin himself pledged “full transparency” when the rescue package was signed into law.
“The Trump Administration’s failure to release this detailed information fails to meet the standard of transparency that has been set in SBA’s major loan programs,” said Sen. Ben Cardin of Maryland, the top Democrat on the Small Business Committee and key player in the drafting of the program.
The bipartisan concern is growing. There is legislation in both chambers that would require disclosure of loan recipients.
As one Republican senator supportive of the program and the administration put it to CNN bluntly: “We want to talk about how this program is a success, not about why they’re hiding things. All they’re doing is stepping on what we’re trying to do and it looks bad.”
The new investigation
The House Select Subcommittee on the Coronavirus Crisis has officially launched an investigation into the $670 billion Paycheck Protection Program, specifically whether the largest banks that participated in the program favored large, well-funded companies over struggling small businesses in underserved communities. As part of that investigation the committee majority requested a list of all PPP applications received and loans issued by June 29.
Read the letter to Mnuchin and SBA Administrator Jovita Carranza.
The siren
While the public battle over transparency in the Paycheck Protection Program has spilled into the open over the last week, it’s a quiet move from a central pillar of the oversight mechanisms for the CARES Act that has raised the most concern amongst lawmakers and aides.
The top two officials for the Pandemic Response Accountability Committee, a panel of inspectors general tasked with overseeing the trillions in rescue spending, sent a letter to lawmakers late last week to notify of a Treasury Department legal opinion that appeared to limit administration reporting requirements related to the key business aid components of the law.
The perspective: An official from an inspectors general office contacted CNN to underscore how serious of a flag this was by the PRAC – not just because of the Treasury legal opinion, but “because nobody in our world wants to pop their head up right now for fear it will get taken off.”
Given how President Donald Trump has operated with inspectors general – including lopping off the head of the PRAC less than a week after it launched – for Justice Department Inspector General Michael Horowitz and Robert A. Westbrooks, executive director of the Pandemic Response Accountability Committee, to go to Congress and issue a warning carries serious weight.
The protection
A close read of the Horowitz letter notes that the actual intent of the heads up to lawmakers is to lean into potential legislative action to reverse the Treasury opinion: “We raise this possible ambiguity in the CARES Act to your attention for any legislative action you deem appropriate.”
Notably, lawmakers in both parties appear amenable to doing just that.
House Oversight Committee Chairwoman Carolyn Maloney, a Democrat from New York: “If the Administration believes the law needs to be clarified, it should propose – and support –any potential change to the legislation. This money belongs to the American people – not the President – and the Administration has an obligation to explain where these funds are going.”
Senate Appropriations Committee Chairman Richard Shelby, a Republican from Alabama: “I believe that American taxpayers ought to know where the money is spent and who gets the money.”
What the Treasury Department says
From Treasury Spokeswoman Monica Crowley:
“The CARES Act ensures that all Treasury-run programs are subject to comprehensive oversight by three inspectors general, the new Congressional Oversight Commission, and the Government Accountability Office. Treasury is also reporting on its CARES Act implementation on its website, on the government-wide reporting site USAspending.gov, in written updates to Congress, and in Congressional testimony. The Pandemic Response Accountability Committee’s scope under the CARES Act covers other programs that are not already reviewed by these overlapping oversight bodies. Further duplication of these oversight functions by the PRAC would not increase transparency or oversight. Treasury is fully complying with all of the substantial oversight, transparency, and reporting requirements of the CARES Act.”
Historical precedent matters
There is zero trust on Capitol Hill the Trump administration will comply with the reporting requirements in the law.
“Anyone who has lived through the last three years knows that trusting anything they say about oversight is complete bulls***,” one senior Democratic aide told CNN.
Treasury says they are complying with the law’s requirements and will continue to do so. But there’s already some question about that when it comes to the Government Accountability Office. The watchdog has said the administration hasn’t fully complied with information requests related to the Paycheck Protection Program.
Mnuchin told lawmakers his department was working with the GAO to find a resolution to the issue.
The Fed, which is overseeing a series of lending facilities that will use US taxpayer dollars to leverage the potential for trillions in loans to businesses, has committed to disclose the names of the companies that are receiving money at least every 30 days. Lawmakers are looking for similar commitments across the myriad of programs put into place by the rescue law.
Along those lines: Senate Democrats are ramping up pressure on the newest oversight entity just as it launches. Senate Democratic Leader Chuck Schumer and Ohio Sen. Sherrod Brown, the top Democrat on the Banking Committee, greeted newly confirmed Special Inspector General for Pandemic Recovery Brian Miller with a letter on Monday reminding him of his commitments to lawmakers during his confirmation hearing – and their view of his role atop the powerful oversight office.
“Ultimately, your duty is to the American people, not the President,” the senators wrote to Miller. “The American people, our colleagues, and both of us will judge you against your commitments, made under oath before the Banking Committee, as well as the basic expectation of an inspector general and public servant to demonstrate the utmost integrity, transparency, and diligence.”
