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02 Apr

The corporate bailout doesn’t include the limits Democrats promised

The corporate bailout doesn’t include the limits Democrats promised

Democrats promised strict limits on what corporations can do with the half-trillion dollars in loan money they’re getting. But the Fed doesn’t have to abide by them.

Jerome Powell

“Congress left a lot of discretion, a lot more than people realize,” one former Fed official said.

The half-trillion-dollar corporate bailout amounts to a quarter of the $2 trillion emergency relief package that Congress passed with overwhelming bipartisan support last week. Washington is still scarred by the intense political backlash against the $700 billion Wall Street bailout of 2008, when the insurance giant AIG used taxpayer dollars to pay bonuses to the reckless executives who brought down the company. This time, Democratic leaders have made assurances that they have reshaped a Republican plan for a blank-check bailout to avoid a reprise, crafting the CARES Act’s aid to companies with over 500 employees to prevent mass layoffs without enabling recipients to redistribute money from taxpayers to their own executives and investors.

 

“We ensured in the bill that any taxpayer dollars given to industry goes first and foremost to worker paychecks and benefits, not CEO bonuses, stock buybacks or dividends,” Speaker Nancy Pelosi declared in her floor speech before the House passed the CARES Act.

But the complex language and multiple caveats in the section of the CARES Act devoted to Federal Reserve programs leave significant room for the central bank’s leaders and their partners at the Treasury to structure the assistance however they want. And there are already indications that they’re leery of weighing down the bailout with overly burdensome conditions.

Running the bulk of the bailout through the nonpartisan Fed helped ease Democratic fears that the Trump Treasury would create a partisan slush fund to reward the president’s allies. The Fed’s massive financial leverage will also amplify the bailout’s power, expanding the $454 billion in capital into more than $4 trillion of lending. But the central bank has never been in the business of making sure its borrowers protect their workers, and the most prescriptive language in the CARES Act applies only to the Treasury aid to airlines and firms designated vital to security, which most likely will mean Boeing and perhaps some struggling oil companies.

Senator Mark Warner (D-Va.) did insert one provision with a sweeping list of restrictions on bailed-out companies—including retention of 90 percent of the workforce, pay cuts for executives earning more than $3 million a year, bans on outsourcing and offshoring, and even protections for collective bargaining agreements and union organizing campaigns. But that provision only directs Treasury Secretary Steven Mnuchin to “endeavor to” set up a program with those specifications, and insiders suggest the Fed doesn’t feel bound by them. And while the CARES Act does seem to limit companies that receive direct loans through Fed programs from buying back stock, paying dividends, or raising executive pay for a year, it allows Mnuchin to waive those provisions as long as he explains his rationale to Congress.

Democrats also managed to insert some oversight provisions into the legislation, including a special inspector general to oversee the spending, but President Trump has already issued a signing statement signaling his intention to ignore many of them. Even Democratic congressional aides who worked on the deal concede that Mnuchin and Fed Chairman Jerome Powell will have broad flexibility to design the bailout in the coming days. But Democrats hope they can ratchet up enough political pressure to avoid a repeat of the 2008 Wall Street rescue.

“The Fed has the power and the responsibility to require any big corporations that take taxpayer money to put workers first,” said Senator Elizabeth Warren of Massachusetts, a vocal proponent of a strings-attached approach. “Congress and the American people will be watching closely to make sure the Fed and Treasury Secretary Mnuchin do this right.”

Neither Fed nor Treasury officials would comment on the record. But the Fed quietly began to signal its discomfort with onerous conditions on Monday when it unveiled the terms of two new corporate credit programs that are likely to play a significant role in the bailout. One had no restrictions on how borrowers can use the money, while the other had extremely mild limits on stock buybacks and dividends, and only for firms that defer their loan payments.

Those two programs represent an extraordinary escalation in fighting the crisis, empowering the Fed for the first time to buy investment-grade corporate bonds and financial instruments backed by corporate bonds, with the potential to expand to even riskier corporate debt once the Treasury injects some bailout funds as a backstop.

But while the programs don’t look like the “Trump slush fund” some Democrats feared, they don’t look like the worker-first initiatives some Democrats promised. Unlike the CARE Act’s separate $360 billion small business bailout, they impose no requirements that the beneficiaries use the money to retain their employees. And unlike the 2008 bank bailout, they impose no limits on executive pay.

The Fed has also announced a “Main Street” lending program that could take the central bank even farther out of its comfort zone, providing liquidity to mid-sized companies that wouldn’t dream of Fed assistance in normal times. Senator Warner’s restrictions were designed with a program like this in mind, but as vice chairman Krishna Guha of the research firm Evercore ISI wrote in a note to clients, the few-strings approach in the term sheets for the corporate bond programs “might hint that Fed lawyers are preparing to take a minimalist rather than maximalist interpretation of the new legislation,” rejecting “the new conditionality.”

In a statement, Senator Warner suggested that even if the Main Street lending program doesn’t include the conditions he wanted, it’s a victory considering that the Fed didn’t even want to do a Main Street lending program when he started pushing for one a few weeks ago.

“I’m encouraged the Fed has moved off that position and is preparing to offer targeted programs that will help businesses keep their doors open and workers employed,” Warner said.

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31 Mar

D.J.T. Is No F.D.R.

Roosevelt’s first inaugural cleared the way for action, pointing the country toward a singular goal. Where is that spirit now?

By 

Opinion Columnist

The McGlynn: Born in 1932 I was raised during the depression. To those born years later, please register and VOTE! The bastard Trump does not even belong in our country.

People gathered in Washington for Franklin Roosevelt’s inauguration in March 1933.

Credit…Library of Congress

The coronavirus pandemic may plunge the United States into its worst social and economic crisis since the Great Depression. But our response — from the president’s blame-shifting rhetoric to the Senate’s inadequate relief package — has yet to rise to the scale and scope of the challenge.

I’ve written before about why Congress needs to do far more than it has if it wants to save the economy from disease-induced depression. Here, I want to focus on rhetoric. If the country needs a New Deal-esque effort to stop the pandemic, then it also needs New Deal-esque leadership to mobilize manpower and resources to that end.

It’s with this in mind that I want to look to Franklin Roosevelt’s first Inaugural Address. Elected in November 1932, Roosevelt was well aware of a deep national hunger for leadership — for someone to bring energy to government and confront an economic crisis that threatened the entire social order.

Roosevelt was inaugurated on March 4, 1933. The day was gray and grim. “Though the city was gay with flags and lively with the music of bands and cheers for the marchers in the inaugural parade which followed the oath taking,” Arthur Krock wrote in The New York Times, “the atmosphere which surrounded the change of government in the United States was comparable to that which might be found in a beleaguered capital in wartime.”

For good reason. “In the agonizing interval between Roosevelt’s election in November 1932 and his inauguration in March 1933, the American banking system shut down completely” and “the global economy slid even deeper into the trough of the Depression,” the historian David M. Kennedy writes in “Freedom From Fear: The American People in Depression and War, 1929-1945.” In “The Crisis of the Old Order,” the first of his three volumes on Roosevelt and the New Deal, Arthur Schlesinger Jr. described the situation as a “fog of despair.”

“One out of every four American workers lacked a job,” he wrote:

Factories that had once darkened the skies with smoke stood ghostly and silent, like extinct volcanoes. Families slept in tarpaper shacks and tin-lined caves and scavenged like dogs for food in the city dump.

Schlesinger continued:

Thousands of vagabond children were roaming the land, wild boys of the road. Hunger marchers, pinched and bitter, were parading cold streets in New York and Chicago.

Americans didn’t just hurt in the present; they feared for the future. “Hope proved elusive,” the historian Ira Katznelson writes in “Fear Itself: The New Deal and the Origins of Our Time:”

The rumble of deep uncertainty, a sense of proceeding without a map, remained relentless and enveloping. A climate of universal fear deeply affected political understandings and concerns. Nothing was sure.

Rather than avoid or ignore that fear, Roosevelt used his first words as president to face it head on. “A host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment,” he said. And yet, he continued, the nation’s distress “comes from no failure of substance,” before adding, “We are stricken by no plague of locusts.” Instead, Americans face poverty and deprivation because “the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence.”

To be fair, Roosevelt said, these men “have tried.” But their efforts “have been cast in the pattern of an outworn tradition.” In the face of a devastating crisis, they did more of the same. “They have no vision, and where there is no vision the people perish.”

Thankfully, those men were now gone from the scene. “The money changers have fled from their high seats in the temple of our civilization,” Roosevelt said. “We may now restore that temple to the ancient truths.” And what are those truths? It is the truth that “happiness lies not in the mere possession of money” but in the “joy of achievement, in the thrill of creative effort.” It is the truth that “the joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits.”

For Roosevelt, the nation needed a change in ethics: an “abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit” and “an end to conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.” At the same time, the country also needed immediate relief. To that end, he asked Americans to treat the challenge of unemployment and idle production “as we would treat the emergency of a war.”

This meant an end to the timid policies of the past and the orthodoxy that constrained Washington in the face of crisis and the start of a new, energetic approach to wielding the powers of the federal government. Roosevelt called for “direct recruiting by the government itself” to relieve unemployment and “direct efforts to raise the values of agricultural products” to prevent “the tragedy of the growing loss through foreclosure of our small homes and farms.” He called for “unifying of relief activities” and “national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character.” And he insisted that all of this is “feasible under the form of government which we have inherited from our ancestors.” The Republic was under stress, but it hadn’t been broken.

As Roosevelt neared the end of his address, he returned to the language of ethics as well as the language of war:

If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we cannot merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline.

The American people craved leadership and Roosevelt delivered it, taking center stage in the nation’s political life and holding it for the next 12 years. Still, it would be another two years before his legislative program matched his rhetorical ambitions. It was the so-called second New Deal of the Social Security Act and the National Labor Relations Act that fundamentally altered the federal government’s relationship to its citizens.

The larger point, however, is this: It took more than competence and ability to resolve the crisis of the 1930s. President Herbert Hoover was competent (in the early 1920s he spearheaded a relief effort that saved millions of Russians from starvation in the wake of famine and civil war); Hoover was able. But Hoover was committed to a failed orthodoxy, unable to think beyond the dogma of the past. Roosevelt wasn’t a blank slate, but he was flexible. He could think creatively about government, and his allies were eager to experiment. They brought openness and imagination to Washington and helped save the country in the process.

As we face what may become the great crisis of our age, we need that Rooseveltian leadership: flexible, creative and deeply aware of the power of words. Roosevelt’s first inaugural wasn’t just an impressive speech; it was a harbinger of things to come. Like nearly all of the most memorable presidential rhetoric, it cleared the way for action, pointing the country toward a singular goal. Put another way, the Roosevelt of March 1933 did not know how the future would unfold, but he understood the power he had to shape the limits of what was possible — and he didn’t hesitate to put it to work.

Jamelle Bouie became a New York Times Opinion columnist in 2019. Before that he was the chief political correspondent for Slate magazine. He is based in Charlottesville, Va., and Washington. @jbouie

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27 Mar

THIS DAY IN HISTORY

THIS DAY IN HISTORY

  • 1973 Marlon Brando declines Best Actor Oscar

    On March 27, 1973, the actor Marlon Brando declines the Academy Award for Best Actor for his career-reviving performance in The Godfather. The Native American actress Sacheen Littlefeather attended the ceremony in Brando’s place, stating that the actor “very regretfully” could not accept the award, as he was protesting Hollywood’s portrayal of Native Americans in film.

  • Russia

    1958

    Khrushchev becomes Soviet premier

    On March 27, 1958, Soviet First Secretary Nikita Khrushchev replaces Nicolay Bulganin as Soviet premier, becoming the first leader since Joseph Stalin to simultaneously hold the USSR’s two top offices. Khrushchev, born into a Ukrainian peasant family in 1894, worked as a mine …read more

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26 Mar

A Foreign Perspective, News and Analyses

English Online International Newspapers

Nearly all of these are English-edition daily newspapers. These sites have interesting editorials and essays, and many have links to other good news sources. We try to limit this list to those sites which are regularly updated, reliable, with a high percentage of “up” time.

Recommended:

The Guardian>>

Irish Examiner>>

France 24>>

Spiegel>>

The Age>>

The Observer>>

View All>>

Army corps of engineers ordered to conduct full environmental review, which could take years

Dakota Access Pipeline water protectors in Standing Rock, North Dakota, in 2017. The Standing Rock Sioux chief welcomed the court’s action on Wednesday.

Dakota Access Pipeline water protectors in Standing Rock, North Dakota, in 2017. The Standing Rock Sioux chief welcomed the court’s action on Wednesday. Photograph: Michael Nigro/REX/Shutterstock

The future of the controversial Dakota Access pipeline has been thrown into question after a federal court on Wednesday struck down its permits and ordered a comprehensive environmental review.

The US army corps of engineers was ordered to conduct a full environmental impact statement (EIS), after the Washington DC court ruled that existing permits violated the National Environmental Policy Act (Nepa).

The ruling is a huge victory for the Standing Rock Sioux tribe of North Dakota, which rallied support from across the world and sued the US government in a campaign to stop the environmentally risky pipeline being built on tribal lands.

“After years of commitment to defending our water and earth, we welcome this news of a significant legal win,” said the tribal chairman, Mike Faith. “It’s humbling to see how actions we took to defend our ancestral homeland continue to inspire national conversations about how our choices ultimately affect this planet.”

In December 2016, the Obama administration denied permits for the pipeline to cross the Missouri river and ordered a full EIS to analyze alternative routes and the impact on the tribe’s treaty rights.

In his first week in office, Donald Trump signed an executive order to expedite construction. Construction of the 1,200-mile pipeline was completed in June 2017.

The tribe challenged the permits – and won. As a result, the corps was ordered to redo its environmental analysis, which it did without taking into consideration tribal concerns or expert analysis.

The pipeline continued to transport oil from North Dakota to Illinois. The tribe and EarthJustice, an environmental law not-for-profit group, sued again.

In his ruling on Wednesday, the federal judge James Boasberg, an Obama appointee, said the environmental analysis by both the companies behind the pipeline and the corps was severely lacking.

The abysmal safety record of the pipeline parent company, Sunoco, “does not inspire confidence”, he added.

The court-mandated EIS will be more in depth than the assessment already completed by the corps – and could take years. The court will next decide if the pipeline should be shut down until the EIS is done.

The corps did not respond to a request for comment.

“This validates everything the tribe has been saying all along about the risk of oil spills to the people of Standing Rock,” said Jan Hasselman, an EarthJustice attorney. “The Obama administration had it right when it moved to deny the permits in 2016.”

The setback for the pipeline comes as the Trump administration moves to severely curtail Nepa, the 1969 legislation which is widely considered the cornerstone of US environmental protection. Trump has repeatedly blamed Nepa for blocking fossil fuel projects.

FBI says Timothy Wilson, 36, had planned for several months to carry out a bombing and decided to target a Kansas City-area hospital

Kansas City, Missouri.

Kansas City, Missouri. Photograph: Charlie Riedel/AP

A man fatally injured by the FBI was planning a bomb attack on a medical facility in the Kansas City area, the agency said in a news release on Wednesday.

Timothy Wilson, 36, was injured on Tuesday when FBI agents served a probable cause arrest warrant in Belton, Missouri, after a long-running domestic terrorism investigation, according to a statement on Wednesday from Timothy Langan, special agent in charge of the FBI’s Kansas City office.

The statement did not detail what happened when agents served the warrant, but said Wilson was armed when he was injured and died later at a hospital.

A months-long investigation determined that Wilson was a potentially violent extremist, motivated by religious, racial and anti-government beliefs, according to the statement. He had planned for several months to carry out a bombing and decided to target a Kansas City-area hospital using a “vehicle-borne” improvised explosive.

Wilson chose a hospital that was providing critical care during the current coronavirus pandemic and had taken steps to acquire materials to build the bomb in an attempt to cause “severe harm and mass casualties”, according to the statement.

The FBI’s Joint Terrorism Task Force kept close watch on Wilson and was prepared to arrest him when he tried to pick up what he thought was a bomb, although there was no bomb, the statement said. The FBI worked with federal prosecutors in the US attorneys office in Kansas City during the investigation.

No further details were released.

World Politics

United States

Several local ordinances have allowed firearms stores to remain open, insisting that safety is as important as food and medical care

A gun shop in Culver City, California, was ordered to close in an effort to stop the spread of Covid-19.

A gun shop in Culver City, California, was ordered to close in an effort to stop the spread of Covid-19. Photograph: Mario Tama/Getty Images

US gun industry groups are engaged in an intense attempt to persuade state and federal lawmakers that gun shops should be considered “essential” businesses during the coronavirus crisis, and therefore allowed to stay open.

The National Shooting Sports Foundation (NSSF), one of the largest US pro-gun ownership groups, told its members this week it had been in contact with the White House, Capitol Hill and the Department of Homeland Security (DHS), to advocate for “national critical infrastructure industry” status.

“We want you to know the [NSSF] is hard at work for you during this challenging time as the nation faces the Covid-19 pandemic,” the group said in a statement.

According to the Wall Street Journal, Lawrence Keane, NSSF senior vice-president for government and public affairs, said in a letter to the DHS the “critical infrastructure” designation should be extended to the whole gun industry, including dealers and shooting ranges.

“Food, water, shelter and adequate medical care are paramount for survival, but so too is the ability for an individual to defend his or herself, their family, as well as their home, business and property,” Keane reportedly wrote.

According to the NSSF, gun dealers have reported an unprecedented surge in firearm sales, with lines forming outside gun stores and background checks up 300% on 16 March compared with the same day last year.

In Florida, the Miami Herald reported, background checks were up nearly 500% on last Friday alone, with 13,192 checks recorded compared to 2,646 on the same date last year.

Florida’s Firearm Purchase Program, which conducts background checks, posted a message on its website which said the volume of requests was so high it was “currently unable to receive customer service phone calls”.

Across the US, a patchwork of orders and local ordinances allowing gun stores to remain open as “essential businesses” has emerged as the coronavirus crisis has developed.

In Illinois, Governor Jay Pritzker declared that “firearm and ammunition suppliers and retailers, for purposes of safety and security” were deemed “essential” and could thus stay open.

In Connecticut, Democratic senator and gun-control advocate Richard Blumenthal argued that closing gun stores would be broadly in line with other anti-coronavirus measures, including restrictions on travel and assembly.

“Plain and simple, there is no reason why gun stores should be given this exemption,” the senator tweeted.

But the stores stayed open and the National Rifle Association praised the state governor, Ned Lamont, its legislative wing saying in a statement it thanked him “for upholding the right of law-abiding citizens to defend themselves and their loved ones”.

In Pennsylvania, Governor Tom Wolf allowed gun shops to open on a limited basis, reversing an earlier order at the urging of several state supreme court justices.

“I am extremely pleased that Governor Wolf has acknowledged that he may not eviscerate citizens’ inviolate rights, regardless of any states of emergency that may exist,” said Joshua Prince of the Firearm Protection Coalition, a group that filed a lawsuit opposing the gun shop shutdown.

State justice David Wecht said the governor’s initial order to close gun shops amounted to “an absolute and indefinite prohibition upon the acquisition of firearms by the citizens of this commonwealth – a result in clear tension with the second amendment” of the US constitution as well as the constitution of Pennsylvania itself.

Wolf’s office did not announce the policy change: it was included on an updated list of businesses subject to an order to close because they are deemed “non-life-sustaining”.

In Albuquerque, New Mexico, efforts to update a city ordinance granting the mayor emergency powers were approved only after repeated assurances from Mayor Tim Keller that the city would not restrict firearms sales.

In other jurisdictions, including San Jose and Castro Valley, California, local authorities have ordered stores to close.

“Since we don’t live in the wild west, where people are dependent on guns for food, and we do have a well-functioning police department, it would be hard to articulate a basis for arguing that a gun shop would be an essential service,” Sam Liccardo, the San Jose mayor, told the Wall Street Journal.

The Los Angeles county sheriff’s department began closing gun shops on Tuesday, but dropped the effort less than 12 hours later. Sheriff Alex Villanueva told FOX 11 the county legal counsel had issued an opinion that under Governor Gavin Newsom’s statewide executive order, gun stores should be classified as essential.

Trump accuses media of wanting to keep economy shut to hurt his reelection

US gun industry groups urge lawmakers to keep gun shops open

US Senate passes historic $2tn relief package as coronavirus devastates economy

 

 

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