WASHINGTON _ The panel charged with overseeing the Treasury Department and Federal Reserve's management of coronavirus-related business loans said it would delve into the transparency of what are expected to be trillions of dollars of loans.
In its first report, the Congressional Oversight Commission posed more than 50 questions for the agencies, including how they would oversee BlackRock Financial Markets, which was recently chosen as the investment adviser of the Secondary Market Corporate Credit Facility, one of a trio of Fed entities that could pump up to $850 billion in loans into markets for corporate debt securities.
The commission, created by the roughly $2 trillion relief package in March, is charged with submitting monthly reports to Congress about the impact, effectiveness and transparency of loans and loan guarantees backed by Treasury and the Fed authorized by the law.
Those programs include $454 billion to back lending through Federal Reserve credit facilities for hard-hit sectors as well as state and local governments, plus an additional $29 billion specifically for the airline industry and $17 billion for companies considered "critical to maintaining national security."
This first report, with six pages of detailed "preliminary questions" concerning the programs, is likely to be fodder for senators at the Senate Banking Committee's hearing Tuesday on the March law. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell are set to testify.
The long list of queries may provide particular insight into the questions and concerns of Sen. Patrick J. Toomey, R-Pa., who is a member of the Congressional Oversight Commission and signed off on Monday's report. Another member of the panel, Bharat Ramamurti, is a former senior aide to Sen. Elizabeth Warren, D-Mass., who also sits on the Banking Committee.
The five-seat commission released its first report despite not yet having a chairperson. Four of the members were picked by the "big four" House and Senate leaders: Toomey was Senate Majority Leader Mitch McConnell's choice; Rep. Donna E. Shalala, D-Fla., was selected by Speaker Nancy Pelosi; Ramamurti was selected by Senate Minority Leader Charles E. Schumer; and Rep. French Hill, R-Ark., was named by House Minority Leader Kevin McCarthy.
The fifth seat goes to the chairperson, who is to be chosen jointly by Pelosi and McConnell. But the commission has been waiting for those two to fill the post for more than a month. The last of the four other panel seats were filled by Toomey and Shalala on April 17.
In its report, the panel noted that to date the only spending from the $500 billion allocation was done on May 11, when Treasury invested $37.5 billion in the Fed's Secondary Market Corporate Credit Facility on May 11. This fund was created to provide liquidity to the secondary market that buys and sells corporate debt securities.
Among the panel's questions are when all of the lending facilities, empowered to make up to $2.6 trillion in loans, will be up and running.
The other funds are the Main Street Lending Program, expected to make $600 billion in loans directly to businesses; the Municipal Liquidity Facility, expected to make $500 billion in loans to assist municipal securities markets; and the Primary Market Corporate Credit Facility, which can make $850 billion in loans along with the already functioning Secondary Market facility and the Term Asset-Backed Securities Loan Facility, a fund created in 2008 during the financial crisis. Those amounts are subject to change depending on demand and the effectiveness of each program.
The panel also oversees the lending facility that will provide liquidity to banks participating in the $670 billion Paycheck Protection Program.
The report's other questions include the following: How will the Treasury and the Fed assess the success or failure of this program? How should the agencies balance the trade-offs between getting money to borrowers quickly and the fraud and abuse that may result by doing so? Do the agencies agree with the Congressional Budget Office's estimate that the income and costs of these programs will "roughly" offset each other?
Despite the long list of questions, the commission said its responsibilities boil down to answering just two questions: "What are the Treasury and the Fed doing with $500 billion of taxpayer money?" and "Who is that money helping?"
Hill had argued that since the Fed announced April 9 that it would be creating the four new lending facilities, and since the new law required the commission to report within 30 days of an initial use of the new loan facilities, the first report was due May 9.
On May 8, the four members put out a statement saying that even though it had no chairperson, no budget and no staff, it intended to publish a report "soon."
