Nam Y. Huh/AP Photo
Unsanitized-051420
A store closing in Illinois. Desperate need demands additional responses, but Congressional Democrats are working out the details.
First Response
First-time jobless claims now have the number two in front of them at least, with a skinny 2.98 million people applying, a figure that’s still more than four times larger than any week in the history of this survey going back to 1971. And it’s two months after the lockdowns started.
Federal Reserve chair Jay Powell yesterday released data that 40 percent of households making $40,000 a year or less lost their jobs just in March. He said that Congress will simply have to appropriate more money to deal with the surging economic pain. “Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell noted, and for central bankers his words were the equivalent of someone stopping traffic and yelling at the top of their lungs in the middle of the street.
That was a timely speech for Nancy Pelosi, whose $3 trillion Heroes Act will get a vote tomorrow, despite anger from the right and the left. The right simply doesn’t want to spend much more money, especially when it’s not targeted at corporate America. Interestingly, Long Island Republican Peter King came out in favor of the Heroes Act, but I imagine he will be more of an anomaly.
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On the left there’s still a sense that if this is intended to be the best foot forward to put Democrats in negotiating position for another relief package, then muddying it up with dubious measures that buy off special interests makes no sense. “This is a fake messaging bill that somehow still falls short in the depth of the stimulus it signals,” said David Segal of the Demand Progress Education Fund, one of the key groups urging a no vote on the Heroes Act.
Some of the proposals triggering the highest concern include a repeal of the state and local tax deduction (a giveaway to high earners in blue states), the K Street bailout for trade organizations and dark money groups, and the very strange mandate for Federal Reserve loans to large owners of rental apartments (liquidity for slumlords, really) and debt collectors. The expensive subsidies for COBRA, rather than placing the unemployed on Medicare, have also drawn criticism. And then there’s this philosophical argument about whether to push people into unemployment, which is boosted through January in the bill, or whether to subsidize payrolls.
The really bad provisions don’t make sense in a messaging bill; they perhaps do if you’re trying to fashion a compromise that could pass into law. King’s support of the bill suggests the latter. But if the Republicans you need to be engaged—Trump, really, and the Senate—aren’t engaging at all, you’re just negotiating with yourself.
The Progressive Caucus appears to be trying to build a coalition to block the bill on the floor and demand changes. As I noted yesterday, this fight is rooted in longstanding anger over Pelosi commandeering Congress without member input. The disconnection between outside groups and the leadership will make this a hard climb; the Congressional Progressive Caucus Center, the outside nonprofit connected to the CPC, tweeted support for the Heroes Act initially, before Jayapal decided to fight.
By the way, here's what Mary Small, legislative director for Indivisible, had to say about their position. Indivisible has come out in favor of the bill. “Republicans and Trump have put the country in a terrible place by refusing to advance policy solutions that match the scale of the crisis, so Indivisible and every responsible actor trying to save people's lives have to deal with two things simultaneously: there are great things in the HEROES Act that we support enthusiastically and are ready to defend, and there are still gaps, and we're ready to work with anyone, including the CPC, who has a plan to strengthen the bill before or during the vote.”
We’ll see what happens on the floor tomorrow.
Ridiculous D.C. Invite of the Week
The Federal Reserve has finally started to make purchases of corporate bonds on Tuesday, the first purchases under its bailout authority from the CARES Act. They’re buying exchange-traded funds made up of corporate bonds, to be precise. And it’s not really the Fed doing the buying, its BlackRock, the asset manager giant that the Fed hired to make the purchases. A funny story came out yesterday about how BlackRock managers, per the Fed’s management agreement, can trade on whatever they’ve learned from the sales after a two week “cooling off period.” The Fed will only announce purchases every month. So the ability to front-run, trading on knowledge that the rest of the market doesn’t have, is built into the structure of the agreement.
Meanwhile, French Hill is a little-known House Republican serving on the Congressional Oversight Commission, the group that’s supposed to oversee the Fed bailout. Should Congress ever pick a damn chair, the panel will have to scrutinize BlackRock, which after all is the purchasing agent for the Fed, and which has this looming set of conflicts of interest (BlackRock issues corporate bond ETFs, which are soaring in price, so they can benefit and even literally buy their own stuff). Which is why it’s interesting that I was passed an invite for a “virtual breakfast” fundraiser for French Hill, happening on May 21, put together by the Investment Company Institute. The ICI is a trade group representing mutual funds, closed-end funds, and… exchange traded funds. One of the largest members of the organization is BlackRock.
The event costs up to $2,500 to sit at computer and Zoom with French Hill. Presumably he wants to keep those checks coming to fund his future campaigns. So I’d assume his role on the Congressional Oversight Commission will be rather, well, muted. I know I’ve been leaning on Donna Shalala, the House Democrat on the panel, but to my knowledge she’s not raising money directly from the very company that she’s supposed to be overseeing.
Ready Set Don’t Merge
I mentioned the Uber-Grubhub deal yesterday, one of the first high-profile post-pandemic mergers. There’s a crazy rumor out today about Wells Fargo and Goldman Sachs combining, which I don’t think will happen. At least the business community hopes it doesn’t; if you could name one merger that would energize the public about monopolization, it would be Wells Fargo and Goldman Sachs.
There’s a case to be made that, during a crisis where disproportionate support is going to large companies, we shouldn’t allow them to use that support to further extend their dominance by scooping up smaller, sicker rivals on the cheap. In fact, Elizabeth Warren, Amy Klobuchar and David Cicilline (the last two are the ranking Democrats on the Senate and House antitrust subcommittees, respectively) are making that case today. They are asking the Fed “to restrict large corporations that receive bailout funds from engaging in potentially harmful mergers and acquisitions.” (I appreciate them citing my reporting on private equity preparing to go on a buying binge.)
This is certainly a condition that the Fed can place on its bailout funds, though they’re engaging in a kind of double game on conditionality generally. By purchasing corporate bonds, or even ETFs backed by corporate bonds, they’ve abstracted the support so no conditions actually fall on the individual company, even though they get the help. But these Democrats are trying to hold the Fed to its stated purpose to provide “relief and stability” during the economic crisis. “Publicly subsidizing the exploitative takeover of small and medium-sized companies would have the opposite effect,” they write, “upending competition that helps keep markets functioning and stable.”
A very dense Republican staffer with the ear of Politico was quoted as saying “Only those in the hipster antitrust movement think banning mergers is a good idea and it’s clear they’ve let their kombucha ferment for too long,” and it’s always good in politics to make absolutely no sense without backstory. You see, Josh Wright, a Republican former FTC commissioner who has flipped from Google to government service at least four times, coined this phrase “hipster antitrust,” which is obviously sweeping the nation, to define opponents who think maybe overwhelming corporate dominance is a bad idea. It really stings.
The kombucha guy seemingly ghostwrote this Republican letter in support of mergers, saying that a ban would reflect “latent socialism.” Adam Smith would be interested to know that supporting regulated market competition is socialistic.
By the way, Cicilline’s proposed merger moratorium is not in the Heroes Act, which is another reason why some progressive groups oppose it.
Today I Learned
- Wisconsin’s notorious Supreme Court decides a stay at home order to save lives is unconstitutional. (Vox)
- Sen. Richard Burr (R-NC) was served with a warrant and had his phone confiscated in the coronavirus briefing insider trading scandal. (Los Angeles Times)
- Joe Biden endorses rent and mortgage forgiveness because of the pandemic. (The Hill)
- A Kaiser report estimates that 27 million Americans have lost employer-based health insurance due to the crisis. Already. (Kaiser Family Foundation)
- A separate Kaiser report shows that hospitals with the highest shares of private insurance revenue received twice as much per hospital bed in relief funds than those with the lowest shares of revenue. (Kaiser Family Foundation)
- Wuhan, China will now test all of its 11 million residents for the virus over the next week. (Talking Points Memo)
- American man tries to sneak into Germany dressed as a janitor to see his girlfriend. (The Hill)
