Washington, D.C. May 19, 2020 -Treasury Secretary Steven Mnuchin indicated that he will refuse to use his authority under the CARES Act to require companies that receive taxpayer bailout money to keep workers on payroll after questioning from United States Senator Elizabeth Warren (D-Mass.) in a Senate Banking Committee hearing this morning.
Senator Warren also called for criminal and civil penalties for CEOs whose companies misuse funds and Secretary Mnuchin said he will “review that”. Before the hearing, she wrote to Federal Reserve officials urging them to hold CEOs personally accountable and subject to criminal penalties if companies’ do not comply with CARES Act bailout terms.
The full transcript and video of her exchange with Secretary Mnuchin is available below.
Transcript: Warren Questions Secretary Mnuchin on Oversight of Corporate Bailout Money
Tuesday, May 19, 2020
U.S. Senate Committee on Banking, Housing, and Urban Affairs
SENATOR WARREN: Thank you, Mr. Chairman.
Today’s hearing takes place in the worst economic crisis of our lifetimes. Unemployment is now at Great Depression levels. Nearly 40% of people making less than $40,000 dollars lost their jobs in March alone. Businesses are shuttered, and they may never reopen.
Congress passed the CARES Act and put nearly half a trillion dollars’ worth of taxpayer money in corporate bailout money in your hands. This is not the PPP or the Small Business Fund but half a trillion dollars for mid-sized and giant corporations. So I want to talk a little bit about where that money is going. The law gives Treasury and Federal Reserve the authority to write detailed rules determining which companies get taxpayer relief – and how they can spend that money. And over the past few weeks, the Fed has been putting out these rules in the form of what you call “term sheets.”
So Secretary Mnuchin, you’ve said that the jobs numbers will improve. In fact on Fox News, you said, quote, “we will have a better third quarter, we will have a better fourth quarter, and next year is going to be a great year.” Now, to make that happen, people are going to need jobs. So does this mean that you will require companies that receive bailout money from the taxpayers to keep their workers on payroll?
MNUCHIN: So let me just comment, I have said publicly, and I’ll say again, I think the job numbers will get worse before they get better. So I just want to be very clear that I think that June will be a very difficult quarter. As it relates to the CARES Act, I take great pride in the bipartisan support on these bills and these specifics were negotiated on a bipartisan basis, very clearly in each one of these programs and it is our intent in the 13(3) facilities to fulfill both the spirit and the details of the law. So different facilities have different requirements.
SENATOR WARREN: So I’m sorry, Secretary Mnuchin. That’s not quite right. What the law specifically does is gives you the specific authority to determine the terms on which these loans are made and who’s going to be able to get them for these mid-sized and giant corporations. And so I had a very simple question for you. You say the economy is going to recover. It’s going to take jobs in order for that to happen, so what I want to know is are you going to require companies that receive money from this half a trillion dollar slush fund to have to keep people on payroll? It’s a simple question. Yes or no. Are you going to require that?
MNUCHIN: First let me say our number one objective is keeping people employed.
SENATOR WARREN: Good, so are you going–
MNUCHIN: I want to be very clear on that.
SENATOR WARREN: –to require that for people who are getting taxpayer money. That’s my question.
MNUCHIN: Again, we negotiated very significant restrictions on employee compensation, on dividends, on buybacks, and in the Main Street facility we have put in a provision that we expect people to use their best efforts to support jobs.
SENATOR WARREN: So. But–
MNUCHIN: As Chairman Powell–
SENATOR WARREN: I’m sorry. I’m sorry. I have very limited time here, Mr. Secretary. Let me understand what you’re saying. In all the facilities that are not the Main Street facility, you’re not putting in any requirement for payroll, and the Main Street facility is something about commercial reasonable effort to be able to maintain jobs. In other words, if somebody fires, if a corporation fires a bunch of people then gets federal taxpayer money, you’re fine with that, or if they take a bunch of federal taxpayer money and they say, well, didn’t work out commercially for us, then they can fire people. So I take it your answer to my question that whether or not you’re going to require as part of the terms of the loan that people be kept on payroll is no? Is that right, Secretary Mnuchin?
MNUCHIN: That was discussed with people on both sides of the aisle.
SENATOR WARREN: No. We’re talking about your term sheets.
SENATOR WARREN: I’m sorry Secretary Mnuchin. I’m talking about your term sheets that you’re putting out and you’re telling me you’re not going to require any payroll here.
Let me ask you one more question. Taxpayers are on the hook here for nearly half a trillion dollars. You’re not going to require that they keep a single person on payroll. There are some rules, though, in the term sheet as you identified earlier, like prohibiting companies from getting bailout money, from double-dipping in other CARES programs. And by law, companies that get this money are going to have to sign agreements certifying that they are in compliance. So Secretary Mnuchin, here’s what I want to know. Will you create a certification process that ensures that executives are held personally liable and are subject to criminal penalties if they provide false information or misuse bailout funds?
SENATOR MIKE CRAPO: And if you could be brief, Mr. Secretary.
SENATOR WARREN: Please.
MNUCHIN: We will review that. And I will just comment on programs like the airline programs had very specific requirements to keep jobs, which was the intent of Congress.
SENATOR WARREN: That’s right. And the rest was left up to you and what you’re saying is that you won’t do it. You know, we’re in a situation where 35 million Americans have filed for unemployment. You’re in charge of nearly half a trillion dollars. You’re boosting your Wall Street buddies and you are leaving the American people behind. I think that’s–
MNUCHIN: Senator. Senator Warren. I think that’s a very unfair characterization. And these issues were discussed with both Republicans and Democrats at the time. You were not necessarily part of those discussions but these were completely discussed.
SENATOR WARREN: You were given the authority to determine the terms. You’ve said it yourself. You’re putting out term sheets. And those term sheets do not require that a single corporation getting trillions of dollars in taxpayer money retain one job.