Why Washington's COVID-19 Relief Package Must Be Stopped! | MIKE WHITNEY
The Senate’s $2 Trillion Coronavirus Relief
Package is not fiscal stimulus and it’s not a lifeline for the tens of millions
of working people who have suddenly lost their jobs.It’s a fundamental
restructuring of the US economy designed to strengthen the grip of the corrupt
corporate-banking oligarchy while creating a permanent underclass that will be
forced to work for slave wages. This isn’t stimulus, it’s shock therapy.
survive on $1,200 for one, two or three months time? And what happens to the
millions of people who paid no taxes last year? Are they supposed to scrape by
on nothing? Congress knows that most households live paycheck to paycheck. With
no savings how will they pay the rent, the electric bill, the phone and the
cable? Congress is quibbling over an extra $600 per month unemployment for
those who are lucky enough to get it, when most people are just trying to
figure out how they’re going to survive, how they’re going to pay the mortgage,
when they’ll be able to go back to work, and whether their job will still be
there when this nightmare is finally over?
Did you know that “if you don’t
already have direct-deposit information on file with the IRS from previous tax
returns, you won’t get the emergency funds for up to 4 months”? That
means millions of people will have zero income for 4 months! What will become
of them? Where will they go? Who will provide them with shelter and food?
Shouldn’t congress be asking these questions?
happens to the 50% of the American people who had less than $400 saved before
the crisis hit? What happens to them when they fall between the cracks and lose
their apartments, lose their jobs, and lose their ability to maintain their
tenuous standard of living? These people will never regain their financial
footing. Never. It’s a death sentence. We’re going to see an explosion of
homelessness, drug addiction, depression, alcoholism, suicide and crime unlike
anything this country has ever seen before. Are the imbeciles in congress so
blind that they can’t see that they’re condemning a large part of the
population to permanent, inescapable, grinding poverty and desperation? Can’t
they see that?
Do you understand why this bill is
being rushed through congress?
It has a lot to do with the falling stock market but more precisely with
the hundreds of corporations that have been hawking bonds to gullible investors
who thought they were buying the debt of responsible, well-managed companies
that used the money to improve their product-line, train workers, or build new
factories. But instead, greedy CEOs have been using the money to buy shares in
their own companies to boost executive compensation and reward shareholders.
It’s a multi-trillion dollar scam that blew up in their faces causing a
complete freeze-over in the corporate bond market. That’s what’s really going
on, there’s a massive credit crunch that has a stranglehold on the bond market
and there are only two ways to fix the problem:
failing corporations default and pick up the pieces after the dust settles or…
major $4.5 trillion bailout for busted corporations that drove their companies
off a cliff.
Those are the two choices. Naturally
Treasury Secretary Mnuchin chose the latter which suggests that the real motive
for giving working people the $1,200 checks was simply to divert attention from
the massive trillion dollar bailout to teetering corporations. That’s the real
objective of the so-called fiscal stimulus bill. It’s another giant welfare
check for the plutocrats.
centerpiece of the new legislation is a provision for $425 billion giveaway to
big business. The New York Times explains what is going on in a recent article.
Here’s an excerpt:
senators have suggested creating a fund of $425 billion at the
Treasury Department that the Fed could use to back emergency lending
facilities — which would enable such programs to grow far beyond that scale.
Because the Fed cannot take on
substantial credit risk itself, the Treasury Department backs its emergency
lending, using money from a fund that contains just $95 billion.
Treasury Secretary Steven Mnuchin on Sunday suggested that the new money in the
Republican bill could be leveraged by the Fed to back some $4 trillion in
have limited amounts of money we’re using before Congress passes this bill, so
we’re not waiting on Congress,” Mr. Mnuchin said in an interview on CNBC on
Monday. “As Congress gives us the authority, we’ll be increasing the facilities
substantially.” (“The Fed Goes All In With Unlimited
Bond-Buying Plan”, New York Times)
What does it mean?
It means that Mnuchin is transforming the US Treasury into a hedge fund.That’s
what it means. It means that the Treasury is going to use the $450 billion that
is obliquely allocated in the emergency bill, to create a Special
Purpose Vehicle (SPV)–which is a sleazy, off-balance sheet operation that is
used to conceal underhanded bookkeeping, that will leverage up by 10x (which
means that the Fed will use the $450 billion to borrow tens times more than the
original amount or $4.5 trillion) that will be stealthily used to bail out underwater
corporations, financial institutions and, yes, banks. (Note–The
fairy-tale about “well capitalized banks” is pure bunkum. These guys have
serious exposure through “sponsored repo” which is lending to hedge funds via
the repo market.) The Fed has already created one SPV for the Commercial Paper
market under the Treasury’s Exchange Stabilization Fund (ESF) which is supposed
to be used to mitigate volatility in global currency markets, not for bailing
out failing corporations. It’s a complete misuse of funds. Unfortunately,
targeted suspension of the Sunshine Act will prevent the public from figuring
out who is getting money in what amount and for what purpose. This whole scam
has been carefully worked out right down to legal provisions preventing
way, Mnuchin’s personal bio is worth reviewing. According to Senator Ron Wyden:
Mnuchin’s career began in trading the financial products that brought on the
housing crash and the Great Recession. After nearly two decades at Goldman
Sachs, he left in 2002 and joined a hedge fund….
“In early 2009, Mr. Mnuchin led
a group of investors that purchased a bank called IndyMac, renaming it OneWest.
OneWest was truly unique. While Mr. Mnuchin was CEO, the bank proved it could
put more vulnerable people on the street faster than just about anybody else
was CEO, a OneWest vice president admitted in a court proceeding to
‘robo-signing’ upward of 750 foreclosure documents a week…between 2009 and
2014, a period during which the bank foreclosed on more than 35,000 homes.
‘Widow foreclosures’ on reverse mortgages – OneWest did more of those than
anybody else. The bank defends its record on loan modifications, but it was
found guilty of an illegal practice known as ‘dual tracking.’ One bank
department tells homeowners to stop making payments so they can pursue
modification, while another department presses on and hurtles them into
foreclosure anyway.” (“Stimulus Bill: The Fed and
Treasury’s Slush Fund Is Actually $4 Trillion”, Wall Street on
sound like someone who can be trusted in the distribution of $4.5 trillion in
The media is not even trying to hide the
sordid details of what’s going on behind the scenes. Take a look at this
excerpt from an article at Bloomberg:
Federal Reserve could now have as much as $4.5 trillion to keep credit flowing
and make direct loans to U.S. businesses through the massive coronavirus
stimulus bill being considered by U.S. lawmakers. The bipartisan agreement,
which still needs to be passed by the Senate and House and signed into law by
President Donald Trump, will include $454 billion in funds for the Treasury to
backstop emergency actions by the Fed to support the U.S. economy, Senator
Patrick Toomey said on Wednesday.
central bank will work with the U.S. Treasury to use that money as a backstop
against credit risk as it supports markets for corporate and short-term state
and local debt, while also loaning directly to large and medium-sized
“It is a
very, very big thing; it is unprecedented,” the Pennsylvania Republican told
reporters Wednesday on a conference call, adding it was an opportunity to lever
up “the unlimited balance sheet of the Fed.”
Toomey’s comments suggest Fed
facilities could be expanded with the new funds, in effect doubling the Fed’s
current $4.7 trillion balance sheet if necessary. On
Sunday, Treasury Secretary Steven Mnuchin said the bill would provide up to $4
trillion in liquidity through broad-based lending programs operated by the
Fed.” (“Fed’s Anti-Virus Lending Firepower Could Reach $4.5 Trillion”,
Toomey is an idiot! Can’t he see what’s
going on? Why does he say: “This is a very, very big thing.”… “an opportunity
to lever up “the unlimited balance sheet of the Fed”??? Doesn’t he know
that the US Treasury has now
accepted full liability and credit risk for the Fed’s emergency bailout
operations. Does he like the idea that
the American people will now be on the hook for the CEOs who blew up their own
companies to fatten their own bank accounts?? That’s what this means. Readers
should parse these articles very carefully, word by word, phrase by phrase. The
ugly truth is spelled out in black and white. Here’s the key phrase in the
the Fed cannot take on substantial credit risk itself, the Treasury Department
backs its emergency lending.”
here’s the key phrase in the Bloomberg article: “The central bank will work
with the U.S. Treasury to use that money as a backstop against credit risk as
it supports markets for corporate and short-term state and local debt, while
also loaning directly to large and medium-sized businesses.”
There it is: Credit risk,
credit risk, credit risk. Who assumes the credit risk for this $4.5 trillion
The American taxpayer. Look:
The Fed has always had the ability to print as much money as it chooses.
(Remember: “Unlimited QE”??) So why did the Fed need to link-up with the
Treasury for this operation?
Because the Fed is unwilling to accept
the credit risk. Who will ultimately be accountable for all the bad bets and
worthless bonds that are being downgraded as we speak? Who is going to mop up
the trillions in red ink created by crooked, scheming, cutthroat corporations
(and their financial counter-party accomplices) who plundered their companies
for the sole objective of enriching themselves and their shareholders?
The US Treasury backed by the American
This is really the endgame. Wall Street has
subsumed the US Treasury and turned it into a massively leveraged hedge fund
that is controlled by an unscrupulous charlatan who made his bones evicting
families from their homes during the worse economic slump since the Great
this was being written, stocks were shooting higher for a third consecutive day
due, in large part, to the easing of credit spreads in the corporate bond
market. According to Matt Maley, chief market strategist at Miller
Tabak, “They’ve been able to come into the credit markets and stabilize that
area; we see credit spreads starting to tighten up a little bit…..The fact that
they’re starting to stabilize gives people the kind of confidence they need to
be able to dip their toes back into the market at a time when we absolutely
words, the bailout appears to be working for the investor class. Yipee.