Friday, April 17, 2020
'Victory': After Outrage Over Seizure of Coronavirus Relief Payments From Veterans, USAA Reverses Course
The move by USAA, while welcomed, only makes the case for more oversight.
by
Jake Johnson, staff writer, Eoin Higgins, staff writer
https://www.commondreams.org/news/2020/04/16/victory-after-outrage-over-seizure-coronavirus-relief-payments-veterans-usaa
Update...
Hours after David Dayen reported Thursday at The American Prospect that USAA was seizing coronavirus stimulus money from veterans with accounts at the financial institution, the bank reversed course, telling Dayen in a statement that the money seized would returned.
"For members with negative deposit account balances, USAA will pause the collection of a negative account balance existing at the time their stimulus payment was deposited for 90 days," USAA spokesman Matthew Hartwig told Dayen. "This will allow members access to their full stimulus payment to help cover the costs of rent, food and other important necessities."
As Dayen reported Thursday, while USAA's decision is welcomed, it's ultimately just one bank of many with the technical ability to seize the funds.
"Only a global solution by Treasury can ensure that the payments get into the hands of individuals struggling to make ends meet and afford basic necessities," Dayen wrote. "A bank-by-bank or state-by-state solution will ultimately not protect everyone in time."
Original story below...
The Treasury Department last week gave U.S. financial institutions the go-ahead to seize coronavirus stimulus payments to pay off individuals' outstanding debts, and one of the nation's largest banks is reportedly already taking advantage of the green light.
"USAA, the veteran-serving financial institution, took $3,400 in CARES Act payments from the family of a disabled veteran to offset an existing debt, denying the family emergency funds during a time of personal economic stress," David Dayen, executive editor of The American Prospect, reported Thursday.
Headquartered in San Antonio, USAA has a membership of around 13 million that is comprised largely of current and former members of the military and their families.
The New York Times on Thursday also reported that USAA and other institutions are garnishing stimulus payments."Text messages from USAA customers show that this is not an isolated incident," Dayen noted. "In fact, USAA is using a boilerplate statement to respond to customer complaints about taking their payments."
Consumer advocates warned about this possibility after Dayen revealed Tuesday that Ronda Kent, chief disbursing officer at the Treasury Department's Bureau of the Fiscal Service, told bankers in a webinar last week that "there's nothing in the law that precludes" financial institutions from seizing stimulus payments to pay off a person's existing debts.
The law Kent referenced was the CARES Act, a multi-trillion-dollar stimulus package President Donald Trump signed last month. The CARES Act authorized one-time $1,200 payments to adults who earn less than $75,000 a year. The law also approved an additional $500 for each child under the age of 17.
Carrie, a 22-year-old mother of two from Minnesota whose husband was injured while serving in the military, told the Prospect that she doesn't "know where rent is going to come from" now that USAA has seized her family's $3,400 payment.
"It was going to help my 18-month-old get her meds," Carrie said. "I'm at a loss for words, they don't care."
Common Defense, an advocacy group that represents veterans, called USAA's seizure of stimulus payments "absolutely unacceptable" and urged Congress to "make it illegal."
The CARES Act explicitly gives Treasury Secretary Steve Mnuchin the authority to exempt the coronavirus relief payments from debt collection by banks, but Mnuchin—a former Goldman Sachs executive—has yet to exercise that authority despite pressure from Democrats in Congress and state attorneys general.
Carrie provided the Prospect with a text exchange she had with a representative of USAA, who explained that Carrie's coronavirus payment "will be used to offset the amount owed" on a USAA account she abandoned last year. Because the IRS still had Carrie's USAA account on file, the agency sent the direct deposit there rather than to her new bank account at a different institution.
Dayen reported that Carrie said "her family did run up some debt and get overdrawn after her husband was injured. But they also experienced fraudulent use of the USAA account. The bank concluded that the family did not have sufficient proof of fraud claims, and would be liable for $8,000 in charges."
Adam Weinstein, a Navy veteran and national security editor at The New Republic, tweeted that he will cancel his USAA membership and urge his friends to do the same if the bank doesn't reverse its seizure of coronavirus payments. USAA, which is headquartered in San Antonio, has over 13 million members.
As the Times reported:
The phenomenon is swiftly becoming a political issue, with Treasury Secretary Steven Mnuchin fielding calls from senators urging him to ensure that relief money isn't garnished. Banks are legally allowed to withhold funds that go into accounts that have negative balances, and no specific provision in the CARES Act, the $2 trillion relief package that authorized the stimulus payments, prevents banks from taking customers' stimulus money to cover debts.
In a statement to the Prospect, Rep. Ilhan Omar (D-Minn.) called USAA's behavior "shameful" and urged the Treasury Department to act.
"This money was supposed to go to Minnesotans who are struggling and instead the administration is using it to help big banks who don't need the cash," said Omar. "I, along with my colleagues in Congress, are doing everything we can to put an end to this. The Treasury Department and the IRS have the authority to prohibit this cruelty, and they should."
'The Public Deserves to Know': Lone Watchdog Demands Federal Reserve Release Names of Corporations Receiving Taxpayer Bailouts
"The Fed will soon lend trillions to companies. But it has not committed to disclosing which private companies are getting taxpayer-backed support. That's wrong."
by
Jake Johnson, staff writer
https://www.commondreams.org/news/2020/04/16/public-deserves-know-lone-watchdog-demands-federal-reserve-release-names
The lone watchdog on a congressional committee formed to oversee the Trump administration's handling of a multi-trillion-dollar coronavirus bailout package demanded Wednesday that the Federal Reserve release to the public both the names of corporations receiving taxpayer bailout money and details on how the funds are being used.
"The public deserves to know which companies are receiving taxpayer-backed lending through the Fed and on what terms, and to be able to monitor what those companies do after receiving taxpayer support," Bharat Ramamurti, thus far the only person who has been appointed to the newly created Congressional Oversight Commission, wrote in a letter to Federal Reserve Chair Jerome Powell and Treasury Secretary Steve Mnuchin.
The commission is supposed to have five members chosen by congressional leaders of both parties, but the other slots have not yet been filled even as taxpayer money flies out the door.
Under the CARES Act—a nearly 900-page stimulus package President Donald Trump signed into law last month—the Fed was given sweeping control over hundreds of billions of dollars in taxpayer money, which the central bank can leverage into trillions of dollars in funds to prop up large corporations.
Ramamurti, a former economic adviser to Sen. Elizabeth Warren (D-Mass.), expressed concern that the Fed has not committed to releasing key details about transactions involving such an enormous pot of taxpayer money.
"The public deserves a full documentation of how the Fed uses this money—who gets or doesn't, and on what terms and conditions—to assess whether the Fed is using public money wisely and in accordance with Congress' goals in the CARES Act," Ramamurti wrote in his letter, which can be read in full at the bottom of this story.
"It would undermine public confidence in the Fed for it to provide taxpayer-backed support to a company without the public ever finding out who that company is and what exactly the company received," Ramamurti added.
Ramamurti's demands come as watchdog groups continue to raise alarm about the lack of oversight measures in place to prevent Trump and members of his administration from using coronavirus stimulus money for political purposes or personal enrichment.
As Common Dreams reported, Trump last week abruptly fired an official who was appointed by a group of U.S. inspectors general to head the Pandemic Response Accountability Committee (PRAC), another oversight panel established by the CARES Act.
"Clearly he's planning to corrupt the $2 trillion in spending Congress just approved, whether it's by steering the money to political favorites, negotiating more favorable terms with certain parties or punishing his enemies with a failure to provide aid," Bartlett Naylor, financial policy advocate with Public Citizen, said of the president in a statement last week. "Who could have seen this coming? Literally everyone."
Critics have also pointed to an "extremely alarming" provision in the CARES Act that allows the Fed to avoid longstanding transparency requirements as it conducts meetings and makes decisions about corporate bailouts amid the ongoing pandemic.
In an interview on MSNBC Wednesday night, Ramamurti—who was appointed to the Congressional Oversight Commission by Senate Minority Leader Chuck Schumer (D-N.Y.)—warned that the CARES Act imposes "more onerous" restrictions on small businesses seeking taxpayer bailout money than large corporations.
"I think it's particularly disturbing because we've seen over the last eight or 10 years that corporate America tends to look out for shareholders and executives first," said Ramamurti. "We've seen an incredible amount of money go into stock buybacks and dividends, and at the same time we've seen wages for workers basically stagnate. So I don't think we're in a position where we can just trust corporations to do the right thing with this money."
Watch:
Read Ramamurti's full letter:
Dear Chairman Powell:
The Federal Reserve has already announced plans for more than $2 trillion in emergency lending, with potentially trillions more to come. Yet it has not announced what information it will publicly release about individual transactions with private companies through taxpayer-backed lending facilities—including whether it will even release the names of individual beneficiaries.
I write to respectfully request that the Federal Reserve publicly release detailed and timely information about each individual transaction. The public deserves to know which companies are receiving taxpayer-backed lending through the Fed and on what terms, and to be able to monitor what those companies do after receiving taxpayer support.
As you know, Section 4003 of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") authorizes the Treasury Secretary to "make loans, loan guarantees, and other investments in support of eligible businesses, States, and municipalities that do not, in the aggregate, exceed $500,000,000,000." The Treasury can use as much as $500 billion "to make loans and loan guarantees to, and other investments in programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, States, or municipalities."
The $500 billion from the CARES Act supplements billions in taxpayer money that was already at the Treasury Department's disposal in the Exchange Stabilization Fund.
In recent weeks, the Treasury Department has used taxpayer money from the Exchange Stabilization Fund and from the CARES Act to support several Fed lending facilities for businesses. Specifically:
Primary Market Corporate Credit Facility: The Fed, through a special-purpose vehicle ("SPV"), will purchase bonds and syndicated loans, at issuance, from corporations rated investment grade as of March 22, 2020. The Treasury is contributing $50 billion.
Secondary Market Corporate Credit Facility: The Fed, through a SPV, will purchase corporate debt issued by corporations rated investment-grade as of March 22, 2020, on the secondary market, as well as purchase U.S.-listed ETFs that provide exposure to investment-grade corporate bonds. The Treasury is contributing $25 billion. The Primary and Secondary Market Facilities will provide up to $750 billion in total lending.
Term Asset-Backed Securities Loan Facility: The Fed, through its SPV, will make loans of up to three years, fully secured by eligible asset-backed securities. The Treasury is contributing $10 billion to support lending of up to $100 billion.
Money Market Mutual Fund Liquidity Facility: The Fed will lend to U.S. depository institutions, U.S. bank holding companies, or U.S. branches of foreign banks in exchange for collateral that the borrowers purchase from money market mutual funds. The Treasury is contributing $10 billion.
Commercial Paper Funding Facility: The Fed, through its SPV, will purchase three-month, dollar-denominated commercial paper, included asset-backed commercial paper, that is highly rated and issued by any U.S. issuer. The Treasury is contributing $10 billion.
Main Street New Loan Facility and Expanded Loan Facility: The Fed, through its SPV, will purchase 95% participation in new and pre-existing four-year loans make by banks and other lenders to businesses with up to 10,000 employees or up to $2.5 billion in annual revenues. The Treasury is contributing $75 billion to support up to $600 billion in lending.
Collectively, these facilities could pump trillions of dollars into the economy through tens of thousands of individual transactions.
The public deserves a full documentation of how the Fed uses this money—who gets or doesn't, and on what terms and conditions—to assess whether the Fed is using public money wisely and in accordance with Congress' goals in the CARES Act. It would undermine public confidence in the Fed for it to provide taxpayer-backed support to a company without the public ever finding out who that company is and what exactly the company received.
Accordingly, I respectfully request that the Fed provide regular public reports (no more than 30 days apart) that provide at least the following information on individual transactions through each taxpayer-backed facility that supports businesses:
The identity of the borrower, including the name of the legal entity and any information the Fed collects about the beneficial owners of that entity
The loan terms, including interest rate, covenants, repayment provisions, and time period
The stated or intended use of the proceeds
The amount of supporting equity behind the deal
The full deal documents
If applicable, any supporting information offered to demonstrate that the beneficiary complies with the CARES Acts' prohibition on Fed lending to foreign businesses and to companies controlled by top Executive Branch officials, Members of Congress, and their families.
In addition, I request that the Fed provide the following information for transactions under specific facilities:
Primary Market and Secondary Market Credit Facilities
The CUSIP
The bond rating and the identity of the ratings agency providing the rating
For purchases of shares in a syndicated loan, the identities of other syndicated loan participants
For ETF purchases, the underlying portfolio holdings of the ETF
Main Street New Loan and Expanded Loan Facilities
The identity of the "Eligible Lender" (the bank that makes the initial loan)
The text of the attestations offered by both the Eligible Lender and the Eligible Borrower
Term Asset-Backed Securities Loan Facility
The total collateral amount for the entire securitization
The underlying loan data for the securitization (the loan collateral supporting the securitization), including the identity of the borrowers in the case of corporate and commercial real estate loans
The supporting credit ratings and the identity of the rating agencies
The identities of the securitization issuers and arrangers, and the total fees they get from selling the entire securitization (including the junior tranches not bought by the Fed)
Money Market Mutual Fund Liquidity Facility
The specific collateral supporting the loan
The latest Form N-MFP for the borrower at the time of the loan
Thank you for your prompt consideration.
Sincerely,
Bharat Ramamurti
Member, Congressional Oversight Commission
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