WASHINGTON – Treasury Secretary Steven Mnuchin was reprimanded Thursday by a congressional oversight body over his management of economic relief efforts. Members asked if he had politicized the handling of hundreds of billions of dollars in economic funds.
Mr Mnuchin, who was at times defiant and defensive against his efforts, insisted that he simply follow the law and the intentions of Congress in making his decisions. However, the audit could further complicate its role in attempting to secure yet another pandemic fight package with lawmakers who criticized the secretary’s management of virus funds.
Republicans and Democrats on the board of directors questioned whether Mr. Mnuchin had given YRC Worldwide, a troubled freight forwarder, a $ 700 million loan because of its links with White House officials. And the Democrats continued to press Mr. Mnuchin whether he had terminated several Federal Reserve emergency loan programs to curtail the future Biden administration.
“This was a political decision – one that should hamper the future government even though Covid deaths are increasing and economic recovery is slowing,” Bharat Ramamurti, an appointed member of the Supervisory Board of Congress, said at the hearing on Thursday. Let me put it this way: does anyone think the Treasury Department would have ended these programs if Donald Trump had been re-elected?
The central focus of the hearing should be on the $ 17 billion that the Treasury Department allocated to support businesses that are considered critical to national security. The loan to YRC, which was struggling financially before the pandemic, has been a concern of the Commission since the Finance Department approved it in June. Republicans on the commission, Senator Patrick J. Toomey of Pennsylvania and Representative French Hill of Arkansas, both asked questions about why the company was worth a loan justified on the grounds that the company was vital to national security be.
“It’s been hanging by a thread since the global financial crisis,” said Hill.
Mr Toomey said that YRC, hired by the Department of Defense to provide food sets, protective equipment and other supplies for military bases, appeared near insolvent and asked if it was a judicious use of taxpayers money to give money.
Mr Mnuchin, a former banker, agreed that he would not have subscribed to the loan if he had still been in the private sector, but said the law allowed the department to deal with financial problems and corporate job losses that are seen as critical to national security. He defended the loan, saying it was granted to prevent job losses and that as the economy recovers, the government would ultimately take a profit on the deal.
“There was an enormous risk to the Department of Defense and an enormous risk to the number of jobs,” Mnuchin said.
But Mr Mnuchin has been pressured about whether political bias was involved and whether YRC was getting such a big loan anytime soon because its biggest backer is Apollo Global Management, a private equity firm with White House ties. Apollo, who spent nearly $ 1 million this year lobbying lawmakers for coronavirus aid funds, loaned $ 184 million in 2017 to the Kushner Companies, a real estate company owned by the family of Jared Kushner, son-in-law and senior adviser to Trump. The loan was used to refinance the mortgage on a Chicago skyscraper.
Mr Mnuchin said Mr Kushner had no control over the loan but said lawmakers from both parties had asked him to find a way to help YRC which he believed would file for bankruptcy and lay off thousands of workers would have if it hadn’t been for the government.
A new report from the Government Accountability Office The YRC loan is the only one of the 11 national security loans granted by the Treasury Department that has been “expedited” even though other companies have faced similar financial circumstances.
Defense Department officials who confirmed that YRC is vital to national security declined to attend the hearing and were criticized by Mr Toomey. The Department of Defense, which has been bogged down for weeks to give the commission a written answer to its questions about the loan, will hold a separate conference call with the commission on the loan program, but Mr Toomey said the agency refuses to keep the minutes of it Conference call public.
Mr Mnuchin also parried more criticism of his decision to end five Fed loan programs. On Thursday he again insisted that he was following the law’s intention to end the year-end programs and reclaim billions from the Fed. This position runs counter to what many legal experts and Democrats in Congress actually believe is necessary.
On November 19, Mr. Mnuchin said he believed all along that the programs could not continue beyond the end of the year and urged the Federal Reserve to return the unused investments.
Mr. Toomey had the legal justification that Mr. Mnuchin ultimately cited in terminating the programs – the idea that Congress intended that they should close by the end of the year – before Mr. Mnuchin publicly adopted them. He did so at a time when a senior Treasurer told the New York Times that the department was still considering expanding some of the programs.
Mr. Toomey’s reminder of the intentions of Congress contrasts with that of Senator Chuck Schumer, Democrat of New York, who also helped draft the bill. Mr Schumer believes that it was absolutely not the intention of Congress to end the facilities in December, his spokesman said, adding that they should exist through the crisis, which is clearly not over.
“We have some people who feel that these facilities should be used as a means of subsidizing preferred borrowers – maybe communities that have been irresponsible,” Toomey said Thursday. “This is absolutely not what these programs were designed for – they were designed to restore a functioning market, so the law required them to end.” And that’s why the secretary did just the right thing in finishing it. “
Mr Toomey added that it would be “outrageous” for a future Treasury Secretary to restart them – something Democratic Senators have suggested that Janet L. Yellen, Mr Biden’s election for Treasury Secretary, should do if and when it is confirmed. He suggested that a lawsuit would ensue if Ms. Yellen tried to restart the programs without the approval of Congress.
“We’d be involved in litigation, who knows how long it would be before someone would go that route,” Toomey said.