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Mnuchin had been placing pressure on Postal Service leadership even before the CARES Act, but it ramped up to a new level afterward.
David C. Williams, former vice chair of the U.S. Postal Service Board of Governors, testified before the Congressional Progressive Caucus today that Treasury Secretary Steven Mnuchin played a direct and heavy-handed role in recent changes to postal policy that have led to a critical slowdown in mail service before the election.
“Treasury was using its responsibility to make demands that I believe would turn the Postal Service into a political tool,” Williams said in his opening statement.
According to the testimony, Mnuchin used leverage gained from a CARES Act provision that offered the Postal Service a $10 billion line of credit. Under the CARES Act, passed unanimously by the Senate and by a voice vote in the House in March, the Treasury Department may lend the $10 billion “upon terms and conditions mutually agreed upon by [Mnuchin] and the Postal Service.” Mnuchin used this opportunity, Williams said, to pressure the Board of Governors to make operational changes, including measures that the new postmaster general, Louis DeJoy, has instituted. Mnuchin was “keenly interested“ in labor agreements, postal pricing, and contractural agreements made with private shipping partners like Amazon, FedEx, and UPS.
Williams resigned days before DeJoy’s unanimous selection by the Board of Governors. At the time, sources indicated that Williams resigned in protest, after the Republican majority on the Board acceded to Mnuchin’s wishes. This is the first time Williams, a former inspector general of the Postal Service with more than 40 years in the federal government, has spoken publicly about his time on the board.
“I resigned from the Board of Governors because I was convinced that its independent role had been marginalized,” Williams said. “I felt the public was owed the truth in this matter.”
Mnuchin, Williams stated in his testimony, had been placing pressure on Postal Service leadership even before the CARES Act, but it ramped up to a new level afterward.
Since June, the Board of Governors has blocked Sen. Chuck Schumer from interrogating Russell Reynolds Associates, the executive search firm that assisted with the postmaster general hiring. Schumer later said he has learned about “previously undisclosed contacts” between Mnuchin and the board regarding the DeJoy selection.
DeJoy immediately moved to implement several operational changes that aligned with what Mnuchin was asking for, including cancellation of overtime for postal employees, reshuffling of senior management, and (as a condition of the line of credit) the transfer of propriety contract information about U.S. Postal Service agreements with private-sector partners.
After enormous pressure from Democrats and a series of lawsuits against DeJoy for tampering with the election, DeJoy claimed to have suspended the operational changes that triggered the slowdown until after November. However, it doesn’t appear that much has changed as of yet, and Speaker Nancy Pelosi reported after talking with DeJoy on Wednesday that “he had no intention of replacing the sorting machines, blue mailboxes, and other key mail infrastructure that have been removed and that plans for adequate overtime, which is critical for the timely delivery of mail, are not in the works.”
The line of credit has not been tapped yet, and the terms are incredibly onerous. The USPS must have cash on hand under $8 billion to draw funds (right now it’s at $12.9 billion), which gives DeJoy a means to restrict the drawdown by cutting costs, like restricting overtime. It can also only take 30 days’ worth of cash needs at any one time.
I previously highlighted the Treasury Department’s role in the postal slowdown, framing the DeJoy appointment itself as a concession the board was forced to accept, in exchange for gaining access to the line of credit. Williams’s testimony is additional evidence pointing in that direction.
DeJoy testifies before the Senate on Friday, and both DeJoy and Mike Duncan, chair of the Board of Governors, testify at the House Oversight Committee on Monday. Thursday’s testimony could spur House Democrats to call another witness: Steven Mnuchin.
This is an ongoing story which will be updated as the hearing continues.
UPDATE: The testimony also offered details on how DeJoy became a candidate for the postmaster general position, and potential Trump administration interference in that selection. The Board of Governors, like a board of directors in a private company, has exclusive control over the hiring of the postmaster general, and a key alibi from defenders of the administration has been that the board unanimously chose DeJoy, including its Democratic members.
Williams testified that DeJoy’s name came from John Barger, a Republican member of the board who was leading the search, rather than through the executive search process. “To my knowledge the name came from the postal governor,” Williams said. The board had two interviews with DeJoy. During the first interview, DeJoy mostly asked the board questions. In the second interview, Barger finished DeJoy's sentences and chronically explained what DeJoy meant. “He didn't strike me as a serious candidate,” Williams said. He raised concerns about DeJoy's fitness after each interview.
In addition, Williams stated that, to his knowledge, DeJoy never passed a standard background investigation for positions in the federal government. Williams continually inquired about the background check but he never received it. Williams only resigned the day before DeJoy got the job. DeJoy, it was later revealed, had conflicts of interest in his financial records, including substantial stock holdings in companies competing with the Postal Service.
Williams later added that he sat in on other interviews with qualified applicants for the position.
UPDATE II: Williams offered more details into Treasury Secretary Mnuchin's demands, based on the leverage he had over the Postal Service in controlling the line of credit. “Mnuchin indicated he wanted to have some say over how the postal service ran,” Williams said. “They were very intrusive. I hadn't seen anything like it before.” Williams added that Mnuchin wanted the Postal Service to adopt a pricing methodology known as fully allocated cost, which would be “ruinous for the Postal Service to adopt.” He alleged that the idea came from UPS, the private shipper, and that they would benefit from it, because it would make the Postal Service non-competitive in package delivery.
The USPS General Counsel sent Mnuchin a letter arguing that this proposed transfer of duties was illegal. Mnuchin continued to press for the changes.
Mnuchin, Williams alleged, would bring members of the board into his office and berate them about postal changes he wanted.
UPDATE III: Rep. Ted Lieu (D-CA) said at the hearing that based on the Williams testimony, Secretary Mnuchin should explain himself in a House hearing, and if he will not come in voluntarily he should be subpoenaed.
UPDATE IV: Rep. Pramila Jayapal (D-WA) called the testimony “stunning,” characterizing it as an all-out attack on the public mail service.
