FOR IMMEDIATE RELEASE
March 26, 2020
Further Action Needed to Protect People from Coronavirus Fallout
Stimulus package insufficient, contains big bailouts with inadequate accountability
Statement from Lisa Donner, executive director, Americans for Financial Reform:
Corporate and Wall Street titans have used the coronavirus crisis to grab windfalls as a price for putting desperately needed resources into health care and helping people facing acute distress after losing jobs and income. The Trump administration and too many members of Congress actively promoted this terribly unbalanced approach to a public health emergency. The federal government – Congress and the executive branch – must move swiftly beyond what is in this legislation to help struggling people, families and communities in a just and inclusive manner. More needs to be done to respond to this crisis.
The money it includes for health care and to replace lost income is urgently needed. But this legislation fails to protect vulnerable communities most hurt by this crisis in many ways. A moratorium on foreclosures and evictions, and broadly available forbearance for mortgage payments, are necessary measures to protect people’s ability to stay in their homes. But the provisions in the bill largely repeat steps already taken by regulators and will be unwieldy because they require borrowers to contact their mortgage company to receive a forbearance at a time when call centers are being overwhelmed. They do not cover all loans, nor do they address borrower needs for flexible and affordable payment options after the health crisis abates and the forbearance period comes to an end.
The legislation provides no protection from garnishments, car repossessions, or debt collectors. There are also no protections from predatory lenders seeking to take advantage of the crisis. The bill only allows relief from negative credit reporting when a consumer reaches a separate agreement with their lender, a significant and unnecessary hurdle that will have repercussions for years if not removed.
The provisions on student loans are weak. (See separate statement here.) The suspension of payments will leave borrowers in the same hole once it lifts, and it excludes borrowers who do not have federally held loans, which will lead to confusion and frustration at a time when student loan servicers are shutting call centers that could provide clarification.
The bill lacks any requirement for direct lending to front line states and localities for emerging crisis-related needs. Given the massive credit assistance to business, and the importance of state and local leadership in crisis response, the absence of a forceful mandate for support of municipal borrowing is disturbing.
At the same time, the Trump administration will now control a fund worth $500 billion that the Federal Reserve can leverage into $5 trillion in lending, a figure equal to a quarter of normal U.S. economic output. The legislation includes few real restrictions on most of this fund, leaving the door open for this massive amount of money to inflate corporate bottom lines without benefiting ordinary people hurt by the pandemic.
Excepting airlines, big businesses benefiting from this funding do not even have to commit to retaining their workers. Prohibitions on lobbying, stock buybacks, executive bonuses and “golden parachutes,” and requirements for worker representation on boards of bailed-out companies range from weak to nonexistent. The measure requires an inspector general, appointed by Trump, and a congressional oversight body whose tools for the job are not sufficient.
The Fed and the Treasury will use, or are already using, Wall Street behemoths as their agents in administering assistance programs, which will give the industry strong influence over how money is distributed and create serious conflicts of interest. Policymakers need to remember the lessons of the failed response to the 2008 financial crisis. Without further action that puts people, families, and communities first, ordinary people will continue to pay the price.