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Congress is on track to allocate more than $2.5 trillion in new spending to help combat the COVID-19 epidemic and its economic effects, but in the month since the passage of the CARES Act, there has almost no oversight of this spending, according to Neil Barfosky, the former special inspector general overseeing the Troubled Asset Relief Fund, popularly known as the financial-crisis bank bailouts in 2008-2009.
“Right now you have nothing,” Barofksy said in an interview with MarketWatch. “You have no congressional oversight committee, because it doesn’t have a chairperson, you have no special inspector general, because he’s not been confirmed, and you have no active Pandemic Response Accountability Committee, because it’s leaderless.”
The CARES Act, signed into law by President Trump on March 27, included three layers of oversight of planned spending.
The first is a special inspector general, to be appointed by the president, who will oversee grants and loans to the airline industry and a program overseen by the Federal Reserve, and seeded with $500 billion in taxpayer money, which will lend money to businesses, states and localities harmed by the coronavirus epidemic.
The second is a Congressional Oversight Commission, a five-member panel appointed by leaders in Congress, to watch over the same spending.
The third is PRAC, a committee of at least nine federal inspectors general tasked with overseeing all coronavirus-related spending, including the Paycheck Protection Program, a nearly $700 billion small-business lending initiative, and $500 billion in direct payments and tax breaks for individual citizens.
PRAC is best situated to conduct aggressive oversight immediately, Barofsky said, because it was given $80 million to stand up its operation, broad authority to hire needed staff members, and because its members have already been dictated by legislation. But President Trump’s move to oust the elected chairman of the committee, Glenn Fine, on April 7 has left the organization leaderless.
“They haven’t named a new chair, which is kind of amazing, given that’s its been several weeks,” Barofsky said. “One big fear is that a message has been sent by the president: volunteer to head this committee at your own peril, and risk getting the same treatment that Glenn Fine got.”
He added that now is a critical time for oversight, when programs are being established and the first evidence of mismanagement arises, including accusations that banks have favored larger, existing clients when approving applications for PPP, the small-business lending program.
President Trump announced he had picked White House lawyer Brian Miller as the special inspector general overseeing the $500 billion fund, but Miller has yet to be confirmed by the Senate, and there has been little indication as to when confirmation hearings will begin.
House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer have each appointed members to the five-person Congressional Oversight Commission, but Senate Majority leader Mitch McConnell and House Minority leader Kevin McCarthy have yet to select their appointments. The Chair, to be jointly nominated by Pelosi and McConnell, also remains unnamed.
“This is a time when PRAC could really fill that void and provide the necessary oversight, but instead it has no leader,” Barofsky said. “Now they’re operating within a committee where it’s already been made known that it could be a politically life-threatening move to be assertive and critical.”
To be sure, the Trump Administration is not unique in its aversion to oversight, as Barofsky encountered fierce opposition from the Obama Treasury Department during his tenure as special inspector general overseeing the bank bailouts. At the same time, this sort of oversight can ultimately be in the administration’s best interest, as oversight helps bring attention to wrongdoing that could be even more politically damaging in the long run if left unchecked.
The office of SIGTARP eventually charged 438 individuals for fraud related to that Obama era program, including bankers, bank borrowers and homeowners, while recovering $11 billion in misallocated funds. The opportunity for fraud and abuse of CARES Acts funds are just as prevalent, Barofsky said, and aggressive oversight can help punish and prevent those crimes.
Though the Trump Administration has signalled a greater-than-usual aversion to oversight, with moves to fire inspectors general and a signing statement by the president that he intends to ignore certain oversight provisions in the CARES Act, Barofsky believes its within Congress’ power to force effective management, if it presents a united front.
“One of the reasons TARP oversight had an opportunity to be effective was there was bipartisan support for it in Congress,” he said. “When I was criticizing the Bush Administration, there was Republican support from figures like Senators Richard Shelby and Chuck Grassley and when the administrations flipped, important Democrats were supportive of us.”
“That was really what made the difference because if they didn’t care or dismissed us, there would have been no political consequences to ignoring me or flat-out firing me.”
