No More Bad Bailouts

An opinion piece from The Boston Globe describes a policy a sensible government would adopt:

Twice in a dozen years, Congress has undertaken enormous bailouts to rescue companies and individuals in the economy. In 2008, the federal government drafted legislation on the fly that bailed out the big financial institutions, but left many homeowners drowning with underwater mortgages. Amid popular outcry, Congress then promised to end bailouts forever with the passage of the Dodd-Frank Wall Street Reform Act in 2010.

Less than a decade later, Congress has authorized an even more enormous bailout. This time, the legislative process has been even more complicated. Congress once again scrambled, drafting legislation to address both the public health and economic emergencies stemming from COVID-19. So far it has rushed through five separate relief bills in a matter of months because each successive bill was insufficient to address not only the public health crisis but also the economic crisis. Congress will now likely take up a sixth bill in late July [assuming Sen. Turtle Face, the Kentucky Republican, agrees], in part to deal with the imminent expiration of expanded unemployment insurance benefits.

Once again, the rescue legislation has been a bonanza for lobbyists, financial institutions, and big businesses, which have been able to get access to financing relatively swiftly and with few conditions. Once again, the public is left wondering where all the money went. And once again, workers and Main Street businesses have been relegated to second-class status. Small businesses have struggled to get limited rescue funds under the Paycheck Protection Act. Even with trillions of dollars going out the door, 40 million Americans remain out of work. The public health crisis continues, as testing remains woefully limited and incidence of the virus is growing in many parts of the country. Communities of color have been hit especially hard, setting back efforts to expand equality and opportunity.

This ad hoc approach to responding to economic crises is inefficient at best and malpractice at worst. Emergency response and disaster management professionals do not “wing it” every time there is a forest fire or a hurricane. They prepare in advance, developing policies and procedures so they can react swiftly and effectively. When Congress starts thinking about a response only after an economic crisis starts, it’s no surprise that the response isn’t very effective.

Policymakers should take a page from the disaster response playbook. Economic crises are emergencies, and just like with a fire or a hurricane, many aspects of a response can be anticipated — unemployment, income shocks, and liquidity constraints. What we need, therefore, is a standing set of procedures and policies — an emergency economic resilience and stabilization law that can be activated when a crisis hits.

The benefits of this approach are significant. Congress could respond to economic emergencies more quickly because it wouldn’t need to reinvent the wheel every time there is a crisis. Executive branch agencies would also be able to anticipate the administrative capacities needed to implement the program. And individuals and businesses would have a good sense of what happens during a crisis, reducing fear and uncertainty.

Because the standing law would address the major foreseeable problems, Congress could focus its attention on the unique causes of the specific downturn. In the case of COVID-19, for example, Congress would have been able to spend much of the spring focused on the public health aspect of the crisis, such as facilitating production of tests and establishing a contact tracing system.

A standing program would also reshape the political dynamics around rescue legislation. In the fog of an economic crisis, lobbyists see a bonanza: a chance to stuff goodies for their clients into must-pass legislation. Members of Congress who simply want good governance can end up using their limited political capital fighting off such bad policies or ensuring that uncontroversial provisions make it into the final bill rather than advancing the best policies.

While Congress would be free to change the economic resilience program even in the midst of a crisis, the fact that a program already exists would require members to explain any divergences. There would likely be fewer concerns about lobbying, favoritism, and corruption because the rules would be written without anyone knowing which particular companies need help—or which lobbied hardest. So what might such a program look like? We think it should have four parts.

First, it would end no-strings-attached bailouts by providing a restructuring process for large or publicly traded companies. The companies would have the option to get funding from the US government, but their shareholders would be wiped out. Their debt would be converted into equity — meaning the company would now be owned by its lenders and by the federal government, which would get a preferred equity stake. Alternatively, companies would still have the option to pursue a traditional restructuring in bankruptcy, but without federal aid.

Second, there would be a program for smaller businesses to cover payroll and operating expenses to prevent mass layoffs and closures on Main Street. The small business program would be akin to what Congress attempted with the Paycheck Protection Program, but with direct payroll subsidies for employers to maintain payroll and cover operating expenses, rather than operating through banks as third-party intermediaries.

Third, there would be reforms to the financial system infrastructure so that every person or business could get an account to which emergency government payments could immediately be credited. That would make it possible for people and businesses to get direct payments, like checks, much more quickly than they have in this crisis.

Finally, the program would include “automatic stabilizers,” a wonky term for policies that are automatically triggered based on data, rather than relying on repeated and recurrent congressional action. In the event of an economic crisis like the crash in 2008 or COVID-19 this past spring, funding for state and local governments, for example, would automatically kick in and would continue until the economy has bounced back.

A standing economic resilience program like this one is possible for a simple reason. We can predict many of the policy responses that are needed in a crisis. While every crisis undoubtedly has its own unique trigger and features, the next time won’t be very different. Rather than live through another round of ad hoc bailouts for the wealthy and powerful and suffering for everyone else, Congress should get prepared, so our country’s response to the next crisis can be quicker, fairer, and more effective.

Unquote.

This week the government was forced to identify some of the “small businesses” that received stimulus money. They included top law firms, the Secretary of the Treasury’s family business, several chains with wealthy private-equity investors, twenty-two tenants of an office building owned by the president, Kanye West’s company, the Ayn Rand Institute and the Archdiocese of New York. 

It would be cynical to say a sensible policy like this would never, ever happen in a country like ours.

(It would probably never happen in a country like ours.)

A Remedy and an Oath

Adam Schiff closed the prosecution’s case yesterday, calling on the Senate to remove an unfit president from office:

“They gave you a remedy and they meant for you to use it. They gave you an oath and they meant for you to observe it”. 

I couldn’t find a complete transcript of his closing statement. Here’s some of it (the complete video is below):

The Republican party of Nixon’s time broke in to the [Democratic National Committee] and the president covered it up. Nixon too abused the power of his office to gain an unfair advantage over his opponent. But in Watergate, he never sought to coerce a foreign power to aid his reelection, nor did he sacrifice our national security in such a palpable and destructive way as withholding aid from an ally at war. And he certainly did not engage in the wholesale obstruction of Congress or justice that we have seen this president commit.

The facts of President Clinton’s misconduct pale in comparison to Nixon’s and do not hold a candle to [this president’s]. Lying about an affair is morally wrong and when under oath it is a crime, but it had nothing to do with his duties in office. The process being the same, the facts of President Trump’s misconduct being far more destructive than either past president, what then accounts for the disparate result in bipartisan support for his removal? What has changed?

The short answer is we have changed. The members of Congress have changed. For reasons as varied as the stars, the members of this body and ours in the House are now far more accepting of the most serious misconduct of a president as long as it is a president of one’s own party. And that is a trend most dangerous for our country….

It must have come as a shock, a pleasant shock, to this president that our norms and institutions would prove to be so weak. The independence of the Justice Department and its formerly proud Office of Legal Counsel now mirror legal tools at the president’s disposal to investigate enemies or churn out helpful opinions not worth the paper they are written on.

The FBI painted by a president as corrupt and disloyal. The intelligence community not to be trusted against the good counsel of Vladimir Putin. The press portrayed as enemies of the people….Does none of that matter anymore if he’s the president of our party?

I hope and pray that we never have a president like D—- T—- in the Democratic Party. One that would betray the national interest and the country’s security to help with his reelection. And I would hope to God that if we did, we would impeach him, and Democrats would lead the way. But I suppose you never know just how difficult that is until you are confronted with it. But you, my friends, are confronted with it. You are confronted with that difficulty now and you must not shrink from it…. among you who will say enough?

America believes a thing called truth. She does not believe we are entitled to our own alternate facts. She recoils at those who spread pernicious falsehoods. To her truth matters. There is nothing more corrosive to a democracy than the idea that there is no truth.

America also believes there is a difference between right and wrong and right matters here. But there is more. Truth matters, right matters, but so does decency. Decency matters. When the president smears a patriotic public servant like Marie Yovanovitch in pursuit of a corrupt aim, we recoil…. Because decency matters and when the president tries to coerce an ally to help him cheat in our elections and then covers it up, we must say, “Enough. Enough.”

He has betrayed our national security and he will do so again. He has compromised our elections and he will do so again. You will not change him. You cannot constrain him. He is who he is. Truth matters little to him. What’s right matters even less and decency matters not at all. I do not ask you to convict him because truth or right or decency matters nothing to him, but because we have proven our case and it matters to you. Truth matters to you, right matters to you. You are decent. He is not who you are.

In Federalist 55, James Madison wrote that there were certain qualities in human nature, qualities I believe like honesty, right, and decency, which would justify our confidence in self government. He believed that we possessed sufficient virtue, that the chains of despotism were not necessary to restrain ourselves from destroying and devouring one another.

It may be midnight in Washington, but the sun will rise again. I put my faith in the optimism of the founders. You should too. They gave us the tools to do the job, a remedy as powerful as the evil it was meant to constrain: impeachment. They meant it to be used rarely, but they put it in the constitution for a reason. For a man who would sell out his country for a political favor, for a man who would threaten the integrity of our elections. For a man who would invite foreign interference in our affairs. For a man who would undermine our national security and that of our allies. For a man like D— J. T—-. They gave you a remedy and they meant for you to use it. They gave you an oath and they meant for you to observe it. We have proven D—- T—- guilty. Now do impartial justice and convict him.

Unquote.

For the conclusion to his remarks, please jump ahead to 20:00.

Note: The fifty-three Republican senators are expected to ignore Rep. Schiff’s remarks and vote “No” on the articles of impeachment tomorrow.

Enough Said

Adam Schiff spoke last for the prosecution on Day 4 of the impeachment trial. If you were watching one of the Murdoch channels, you missed it. The video is below.

In the first twelve minutes, he reviews the two articles of impeachment.

You can jump ahead to 12:12 to hear him talk about the second article, Obstruction of Congress. The case for that article is so clear-cut and the offense is so serious, that it alone justifies removing this “president” from office:

Article 2 is every bit as important as Article 1. Without Article 2, there is no Article 1 ever again. No matter how egregious this president’s conduct or any other. It is fundamental to the separation of powers. If you can’t have the ability to enforce an impeachment power, you might as well not put it in the Constitution.

At 18:30, he starts previewing the arguments the president’s lawyers are expected to make in the next few days. He knocks each one to pieces. His conclusion at 47:50:

So what do all these defenses mean? … What do they mean collectively when you add them all up? What they mean is that under Article 2 [of the Constitution] the president can do whatever he wants…. That’s really it, stripped of all the detail and all the histrionics. What they want us to believe is that the president can do whatever he wants under Article 2 and there is nothing you [the Senate] or the House can do about it.

At 48:30, he quotes Robert Kennedy, who said:

Moral courage is a rarer commodity than bravery on the battlefield or great intelligence.

Schiff said he was skeptical of that remark until he realized what Kennedy was referring to. It doesn’t take moral courage to disagree with your enemies, it takes moral courage to disagree with your friends. Or your political party. Or your president. Or the majority of voters who elected you. He was challenging the Republicans in the Senate to exhibit moral courage by standing up for the Constitution.

At 58:20, he repeats the Democrats’ demand for a fair trial in the Senate, with testimony from witnesses and production of documents. Four Republicans would have to join the Democrats to make that happen. The senators will vote on that question after the president’s lawyers use their time to lie, whine and say stupid things.

One note:

At one point, Schiff refers to a CBS news report that someone who works for the president told Republican senators that if they vote against the president, their heads will end up “on a pike”. A number of Republicans claim to have been shocked that Schiff would even mention this report. Apparently, some accounts of tonight’s proceedings led with that story. It’s the kind of fake outrage Republicans have practiced for years and news people love to report. It’s bullshit. But that’s the state of the union today.