WASHINGTON (AP) — President Donald Trump aims to shovel $2.2 trillion into the U.S. economy over the next few weeks to try to cushion its free fall. But that means putting his fate in the hands of banks, profit-minded businesses and government bureaucrats he has frequently derided, along with a man who has emerged as arguably the biggest power broker to business in Washington: Treasury Secretary Steven Mnuchin.
The massive bailout package, which includes direct cash payments, $349 billion in loans for small businesses and a $500 billion corporate rescue fund, is the biggest ever in U.S. history. It’s an attempt to keep the economy afloat as Trump warns Americans to brace for a “hell of a bad two weeks,” with 100,000 to 240,000 coronavirus deaths now projected in the U.S. even if current social distancing guidelines are followed. At the same time, the country is hemorrhaging more than 3 million jobs a week, with economic forecasters warning of a deep recession that could compromise the president’s reelection chances.
At the center is Mnuchin, a former hedge fund manager and movie producer who helped to write the package and shepherd it through Congress and now has enormous discretion over which industries are most in need and how to dole cash out accordingly.
And then there is the matter of the president — and questions about whether he’ll want to meddle.
Trump has already made clear he is more inclined to work with those who earn his favor, including returning the calls of governors who praise him and prioritizing requests for equipment and vital supplies from Republicans he gets along with in states that will be crucial to his reelection, like Florida.
As for Mnuchin, “He has so much authority under the CARES Act that he can determine pretty much any terms that he wants,” said Peter Henning, a law professor at Wayne State University and a former Justice Department attorney. “He can negotiate the terms of any loan or loan guarantee, so it’s a much broader authority than back in 2008,” when Congress offered a bailout to banks and automakers during the last financial crisis.
With so much discretionary power, Henning wondered whether businesses with political ties to Trump might end up benefiting.
“Is he going to favor businesses that are friendly to the president? I don’t know,” Henning said. “He’s got $2.3 trillion to dole out. That’s an awful lot of money.”
The legislation does establish a system of oversight on how companies can use the money that is widely thought to exceed the standards set in 2008-09. Borrowers, for instance, must be based in the U.S. and companies cannot repurchase outstanding stock or pay dividends until one year after their borrowing is repaid. The legislation also prevents companies from providing raises to executives earning over $425,000 annually. And it makes companies ineligible for loans if top Trump administration officials, members of Congress or their families have 20% control of the company or more.
The law also created a new government watchdog — a special inspector general to be appointed by Trump — and a panel appointed by Congress to monitor how the aid is deployed. Trump, however, has already rejected the independence of the office and disputed other aspects of the oversight rules, including that Congress should be consulted in the allocation of relief money.
The Treasury Department did not respond to questions about Mnuchin’s role. And the White House declined to answer questions about the potential for influence and instead offered a statement trumpeting the bill.
“Last week, President Trump signed historic legislation that keeps his promise to take care of all Americans, including affected industries and small businesses, in unprecedented ways during this ongoing pandemic. His signature ensures that we will emerge from this challenge stronger and with a prosperous and growing economy,” said spokesman Judd Deere.
The $2.2 trillion relief bill also contains up to $50 billion in support for passenger airlines and $8 billion for air cargo carriers, half of the money intended to pay workers. Mnuchin said Wednesday he was already in discussions with airline companies on possible support packages, but stressed, “The way the program works with Congress it is very specific.”
“There are limited industries I can deal with — the passenger airlines, the cargo airlines,” Mnuchin said.
Administration officials indicate that the first major wave of cash to hit the economy will likely come Friday in the form of $349 billion in forgivable loans to small businesses that agree to retain or rehire their workers. That will be followed by cash deposits of $1,200 per person with incomes below $75,000. The infusion will depend on banks approving loans at a record pace and an Internal Revenue Service with 20,000 fewer workers than it had a decade ago.
It will also depend on bank websites not crashing amid a crush of loan applications and checks reaching the proper accounts without the money being garnished for people’s past debts.
Mary Miller, who oversaw efforts to revive the economy after the Great Recession as the Treasury Department’s undersecretary for domestic finance, noted that many banks appear unready to process loans that are forgivable if small businesses keep their workers on payroll.
“I want to see the money hit the ground as quickly as possible, but I’m skeptical that it can work like magic,” said Miller, who is now running for mayor of Baltimore. “We’re racing against time. Small businesses can’t wait a few weeks before they fail.”
Companies will have to decide whether it makes more sense to take the loans or let go of employees who can then collect more generous unemployment benefits. And some are wrestling with what will happen if they choose to take the money, but end up having to close their doors down the line. Under the program, loans are provided on a first-come, first-served basis, and will be forgiven if employers can provide documentation showing they retained workers or hired back workers they have laid off.
The Trump administration has projected a sense of confidence that the loans to small businesses will go out almost instantly after applications are approved starting this Friday. The Small Business Administration says it has expanded from 3,000 employees to 5,000 and more in order to manage the effort.
“Time is of the essence,” Mnuchin stressed Wednesday in an interview on CNBC. “We have a lot of money. We need to get that money in Americans’ hands.”
If the money is exhausted, he said, the administration plans to go back to Congress for more money. “That will be at the top of the list to go back to Congress,” he said.
Other agencies are also operating with diminished manpower, including the IRS, which will help distribute nearly $300 billion in checks — it has lost more than 20% of its workers since fiscal 2010. There are also unfilled spots at Treasury, which will force Mnuchin to scramble in order to distribute funds successfully.
“They’re not starting from a full or complete base because they’ve let the positions remain vacant for a long time,” said Sarah Bloom Raskin, who succeeded Miller at Treasury and later served as a Federal Reserve governor. “You can’t get the medicine administered if you don’t have the people to administer it.”
Tony Fratto, a former Treasury and White House spokesman during George W. Bush’s administration, said the scope of the effort means errors are likely — but argued that’s worth it, for now.
“There are absolutely going to be mistakes. There’s no doubt about it. You just can’t do something this big, this quickly, with so little documentation without mistakes,” he said. But, he added, “The objective right now to minimize damage to the U.S. economy means that you put a much higher priority on pushing money out the door as quickly as possible.”