Unsanitized: Katie Porter Talks Supply Chains and Bailouts

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Tom Williams/CQ Roll Call via AP Images

Porter's report shows exports out of the U.S. of medical equipment increasing in January and February.

First Response

With COVID-19 still raging, and the health system still pressured like never before, the Trump administration is tapped out on medical supplies in the Strategic National Stockpile (SNS). The House Oversight Committee has the numbers on this. Some states that are deep in crisis have been crying foul over shares that will not outlast the outbreaks. But the truth is that the stockpile was critically inadequate to meet the need.

One reason why can be found in an interesting short report from Congresswoman Katie Porter (D-CA). While known more for her knowledge of consumer protection and banking, Porter dug into trade figures and found some shocking statistics. In January and February, when the administration had space to prepare for the flood of coronavirus cases to come, exports of critical supplies like facemasks and ventilators jumped 22 percent, while imports shrunk 12.7 percent. In particular, exports to China went up as high as 1,094 percent.

“There was no sense of stockpiling what we need and what we make here,” Porter told me in an interview. While most medical supplies are made abroad, use of the Defense Production Act early could have turned that around and at least partially filled in the gaps. But in this critical time, the Trump administration was encouraging export sales. On March 2, when COVID-19 cases were still low but starting to elevate, and community spread seen, the Commerce Department was highlighting relaxed rules in China that would allow for more exports. Congressman Lloyd Doggett (D-TX) pointed this out at the time.

So manufacturers and middlemen made money in the first two months of the year shipping medical supplies out of the country, and now they’re making more money in the next two months shipping them back in. The trade imbalance took precedence over self-sufficiency and resiliency. “I think the big takeaway is the failure of the administration to use the planning tools that it has available,” Porter said. Moreover, she added, this is still happening, as the administration was late to order more supplies in a scramble to restock. “The vast majority of government contracts show that these will not be delivered until September or October,” she said.

Indeed, the first contracts for ventilators with GM under the Defense Production Act were announced yesterday. (The interesting clinician debate over whether ventilators are being overused aside, at least some of them are required.) The administration is scrambling now to react through seizing exports at the border. But pre-planning, if it went back the years it should have, would have prevented the chaos scenario, with extreme price gouging and the rise of profiteering middlemen. “I’m concerned about the inability to use the system we have,” Porter said. She mentioned a Democratic caucus call with the head of the FEMA supply chain task force, real admiral John Polowczyk, where he admitted that the team had no visibility into the medical supply chain at the outset, and now, through a Pentagon system, distribution is only track at the county level. “That doesn’t address shortfalls between providers,” she noted. “In Los Angeles County, there’s a dramatic difference between UCLA medical center, a large network with purchasing power, versus a standalone hospital in a low-income community.”

The overall picture is one of mismanagement of the trade and contracting processes. And the report brought me back to Porter’s work when she was monitoring the foreclosure fraud settlement in California. Oversight is kind of her thing. She has asked Speaker Pelosi to serve on the Congressional Oversight Commission, the five-member panel that will oversee the bailouts and other pandemic programs. “The oversight is only as effective as the communications channel,” Porter said. “Our inspectors general do wonderful work, but by and large the reports linger unread and the problems are not addressed. In my years teaching business related concepts, I can communicate to the American public, this is a term sheet, what’s being charged, what are the conditions.”

Porter acknowledges that this will be after-the-fact oversight, and that the Trump administration seems dead-set on destroying any semblance of it. I am quite skeptical of its impact. But Porter’s pitch is that the $4.5 trillion Federal Reserve facility hasn’t put any money out, so a quickly assembled oversight panel (which only has 1 of 5 members appointed) can engage in a real-time fashion. Additionally, the panel is part of the legislative branch and not as subject to Trump administration control (though getting Trump’s people to comply with the panel at all will be challenging).

“Every homeowner I ever talked to wanted to express anger about the bailouts,” Porter told me, drawing on her experience during the financial crisis. “Public cynicism was very high and not partisan. They were foreclosed on, Wall Street got help overnight and they didn’t. So the ability in real time to use data, to use clear communications to both influence the process and educate the American public… if we are truthful an doing a good job, we can address and reduce some of that cynicism. It’s an objective for progressives to show that government can work.”

Odds and Sods

On the site today we have an exhibit called Mapping Corruption. It’s the interactive companion piece to our current issue’s cover story, on how Donald Trump changed Washington. There’s a map of Washington, and you can click on any federal building on the map, and unlock a dossier about what’s going on inside. Hours of fun! Check out Mapping Corruption today.

And here’s a follow-up on my recent Unsanitized about bankruptcy. According to the U.S. bankruptcy trustee, the $1,200 checks are apparently safe from creditors. Of course, filers and/or their attorneys must be vigilant.

Who Lives and Who Dies

Over the past few days there’s been an explosion of coverage about the disproportionate mortality of people of color from the coronavirus. We don’t have the full data on this because the CDC and the states haven’t released complete demographic information yet. But what we know is striking. Based on numbers from Michigan, Louisiana, Wisconsin, and elsewhere, African Americans have three times the rate of infections and nearly six times the rate of deaths than their white counterparts.

People of color are almost laser-targeted to suffer from this pandemic, because it lifts up all the inequities already present in society. Black people are more likely to be homeless; the disease spreads within unsheltered communities. Black people are more likely to work in low-wage “essential” businesses, and have no means to take time off and sit out the epidemic. Black people are more likely to live in areas with higher rates of air pollution, which has been linked to COVID-19 mortality. Black people are more likely to have pre-existing conditions because of environmental racism and lack of access to health care.

These things also line up favorably with class, as a new paper from Stanford shows. “Preliminary data show that deaths cluster in areas with high levels of poverty and underprivileged populations,” according to the paper. That means that the growth of the outbreak in rural areas, which was slower than in more populous centers with direct contact with cases in Europe and Asia, is likely to turn deadly, especially given the lack of stable health care infrastructure there. This too is baked into the horrific design of our country; the links between how we treat poor blacks and poor whites could never be more visible than with the coronavirus crisis. This expected tragedy will also make it very difficult to “re-open the country” in May, as Trump wants. Parts of the country are simply operating on different timelines.

Wells Fargo Update

A couple days ago, I mentioned how Wells Fargo was engaged in some shadow lobbying. They were refusing to offer more than $10 billion in Paycheck Protection Program (PPP) loans for small business, claiming that an asset cap placed on them by the Federal Reserve because of their rampant lawbreaking prohibits them from adding more loans. This was always special pleading, and unnecessary: the Fed is buying the loans, meaning Wells could always stay under the cap.

Well, on Wednesday the Fed buckled, albeit in a targeted way, announcing that PPP loans, and another type of small business loan, would not count against the cap. This is temporary and narrow, which is good. A letter from the Committee for Better Banks, a coalition of frontline bank workers that has been instrumental in exposing Wells Fargo’s deceitful behavior, notes that “Wells Fargo’s request appeared disingenuous and a pretext to simply seek the asset cap’s complete removal.”

So Wells Fargo’s hostage-taking of desperate small business owners has been exposed, of a fashion. Still, there’s a certain wariness here. Wells Fargo was able to get temporary relief from the cap, even though, given the Fed’s willingness to buy PPP loans from banks, it was really unnecessary. It’s good that the Fed held the line, but they still gave a few inches. And it shows who gets listened to in this time of crisis.

Today I Learned

• Korean officials say the disease can “reactivate” in surviving carriers. (Bloomberg)
• Most early U.S. cases of COVID-19 came from Europe, not Asia. (New York Times)
• Another 6.6 million first-time jobless this week. (NPR)
• Almost one-third of renters didn’t pay rent in April. Staggering. (Wall Street Journal)
• Staples, owned by a private equity firm, also skipped out on rent, but that’s a sign of their strategic acumen of course. (Axios)
• Amazon workers not getting promised paid sick leave. (CNBC)
• At least someone’s thriving amid this chaos: lobbyists. (AP)
• Iraq war contractor getting paid $40 million for a 200-bed field hospital. (Courthouse News)