Has leadership vacuum hamstrung CARES Act watchdog?
WASHINGTON — A congressional watchdog panel is hitting a roadblock in its oversight of the federal government’s economic recovery programs, as House and Senate leaders have yet to agree on a person to chair the commission mandated by the Coronavirus Aid, Relief, and Economic Security Act almost three months after it became law.
Although the Congressional Oversight Commission has issued two reports, including one released Thursday about the recipients of government aid, sources close to the panel say a lack of agreement by Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Mitch McConnell, R-Ky., on who will run the watchdog is slowing down its work. The lack of a leader has prevented the commission from hiring dedicated staff.
One source close to the commission said the inability to hire staff has become a "significant" obstacle, noting that a similar watchdog overseeing the Troubled Asset Relief Program in 2008 needed its own staff to probe the bailout.
“We are doing our best without staff, but the 2008 [Congressional Oversight Panel] had more than 40 staff by comparison, so it's a serious problem,” the source said.
The Congressional Oversight Commission was established to oversee the implementation of Title IV of the CARES Act, which includes the Federal Reserve's emergency lending facilities and Treasury Department loans to sectors hit hard by the pandemic.
Another source close to the commission said that the lack of a chair has “complicated our process.”
Neil Barofsky, a partner at Jenner & Block who served separately as the special inspector general for the Troubled Asset Relief Program in 2008, said that the Congressional Oversight Commission “can’t really do its job at all without a chair.”
“To conduct hearings, to get staff, to do all those things, you need to have a chair,” Barofsky said. “So essentially one of the cornerstone pieces of oversight for the CARES Act … is empty, unconstructed. It’s really remarkable in a lot of ways.”
Barofsky added that the chair of the commission is also needed to set the direction and tone of oversight for Title IV.
“There’s going to be a chief of staff, there’s going to be a general counsel, there’s going to be the leadership,” Barofsky said. “And the chair is not going to inherit that from other members of the commission. They are going to pick their own. And who would agree to take a job right now working for the commission without knowing who the chair is, whether it’s going to align with what they want to do, and their values and their vision?”
Lawmakers had been rumored at one point to be considering former Federal Deposit Insurance Corp. Chair Sheila Bair to lead the panel. But Bair said publicly that she didn't want the job, and it's unclear whether Pelosi and McConnell are holding further discussions.
Some groups say they are concerned that there is a lack of oversight for the roughly $500 billion in emergency lending that Congress authorized in the CARES Act in Title IV without a chair of the commission.
“This is a tremendous amount of money that’s being put out there and there really aren’t conditions on it from the Federal Reserve in terms of potential uses of the money,” said Marcus Stanley, policy director at Americans for Financial Reform. “So oversight is very important.”
A spokesperson for the Fed noted that some of the facilities authorized through the CARES Act, such as the Main Street Lending Program, have restrictions on stock buybacks and dividends for companies that borrow through the program.
But lawmakers on Wednesday warned that other programs, such as the Primary Market Corporate Credit Facility, don’t have the same restrictions.
A spokesperson for the Treasury said that the department is “reporting on its CARES Act implementation on its website, on the governmentwide reporting site USAspending.gov, in written responses to Congress, and in congressional testimony.”
Isaac Boltansky, director of policy research at Compass Point Research & Trading, who also served as a staffer on the Congressional Oversight Panel for TARP, noted that members who have been appointed to the commission have been tasked with a “data-intensive and time-sensitive job.”
“Right now, we are talking about hundreds of billions of dollars and at least four commission members who have to spend time on this and don’t have all the resources to spend the time on this as they should,” Boltansky said. “It’s absurd and deeply, deeply disappointing, not just as someone who worked for the last TARP oversight panel but also as a taxpayer.”
As of now Sen. Pat Toomey, R-Pa., and Reps. French Hill, R-Ark., Donna Shalala, D-Fla., and Bharat Ramamurti, a former adviser to Sen. Elizabeth Warren, D-Mass., have been appointed to serve on the commission.
Barofsky said that watchdogs like the Congressional Oversight Commission, when fully constituted, can make a real-world impact on how policymakers are aiding business sectors struggling during the pandemic. He recalled how the 2008-era Congressional Oversight Panel, then chaired by Warren, focused in on issues with housing relief available through the bailout that was not working as intended.
"One of the key failures in the last crisis was the housing program, which in many instances did more harm to struggling homeowners through its flawed trial modification process," he said. "Warren, as chair, had a hearing in which [former Treasury Secretary Tim Geithner] had to testify, which helped lead to changes in the program.
"Also, transparency and accountability lead to programs being changed and errors fixed. Hearings of high level officials contribute to that."
Boltansky said a number of factors have likely contributed to the failure of Pelosi and McConnell to name a chair at this time, including the fact that “there probably aren’t many things that those two agree on.”
“There’s probably something to the idea of slowing or stopping progress by not installing a director,” Boltansky added. “There doesn’t seem to be any urgency from leadership and I fear that there isn’t anything in the near term that is going to catalyze that.”
The commission's first report summarizes the purpose of the Fed’s lending and liquidity facilities, and poses a number of operational questions to the Treasury Department and Fed about the programs.
The second report, released Thursday, suggests that the actions of the Fed and Treasury have enabled larger companies to issue debt and continue operations, but that there is “less evidence that the actions ... have been as beneficial for small and mid-sized businesses and state and local governments.”
“I give them a lot of credit for pushing out the first report and raising important questions and getting to agreement to be able to ask those questions,” Barofsky said. “The real work of the commission includes having public hearings, and doing in-depth analysis and research. I have no doubt that members of the commission will do their best in the interim, but they can’t really function as a commission.”