Pelosi: Oversight commission chief selection coming ‘soon’
Two top leaders on Capitol Hill haven’t yet agreed on who will lead the panel, charged with reporting on aid to industries hurt by COVID-19
Speaker Nancy Pelosi said she and Senate Majority Leader Mitch McConnell are in talks to name the chairperson of the new Congressional Oversight Commission, a five-member panel created to watch over $500 billion in lending to distressed industries backed by the Treasury Department and Federal Reserve.
The other four members of the panel have been named, but Pelosi and McConnell must agree on the fifth, who will head a panel similar in structure and powers to one that monitored the $700 billion Troubled Asset Relief Program established in late 2008 to rescue the nation’s banking system.
“I’m waiting to hear back from [McConnell],” Pelosi told reporters Tuesday. “We’re having conversations. We’re going back and forth, and hopefully we’ll have a decision soon.”
McConnell’s office did not respond to a request for comment on when the pick is expected.
The leaders are under pressure to act soon. One of the four panel members, Rep. French Hill, R-Ark., pointed out that the commission’s first deadline, a report to Congress on the lending programs, is coming up as early as this weekend.
“Once the leaders of the House and Senate have filled the commission chair — the final appointment — we need to go to work,” Hill wrote in an Arkansas Democrat-Gazette column published Monday.
The $2 trillion economic rescue package enacted last month, which created the oversight panel, set a deadline of 30 days after the first use by Treasury and the Fed of its new authorities under the law to submit the first report.
Hill calculates that date as May 9, or a month after the establishment of several new credit facilities and Treasury pumping in equity to leverage up to 10 times that amount of financing for businesses, states and municipalities.
The total Treasury has put into the programs so far is $215 billion, the agency said Monday, out of a total $454 billion authorized under the March rescue package.
These credit programs are administered by the Fed, while Treasury has direct authority over another $46 billion available for loans, loan guarantees or other investments in passenger airlines and cargo carriers, as well as companies considered “critical to maintaining national security.”
The oversight panel’s reports to Congress on the emergency loan programs are expected to discuss the measures’ impact “on the financial well-being of the people of the United States and the United States economy, financial markets, and financial institutions.”
The panel is also charged with detailing the transparency of loans and other transactions entered into, as well as their effectiveness in “minimizing long-term costs to the taxpayers and maximizing the benefits for taxpayers.”
As of the end of April, the Fed hadn’t yet disbursed any of the funds within its purview, however, making it difficult for the new commission to report much of substance, even if it were up and running.
Waiting is the hardest part
Former Federal Deposit Insurance Corporation Chairwoman Sheila Bair has been in the running to lead the new oversight panel, VICE News reported last week.
Bair is a Republican who has served in administrations headed by both parties. She oversaw the FDIC during the height of the financial crisis.
Bair sounded early warnings about the dangers posed by the subprime mortgage market, which later suffered a meltdown and prompted the Great Recession. As head of the federal agency that insures bank deposits, she oversaw the takeovers and sales of crumbling mortgage giants IndyMac, Wachovia and Washington Mutual.
IndyMac was salvaged by a group of private investors headed by now Treasury Secretary Steven Mnuchin, Wachovia was taken over by Wells Fargo & Co., and Washington Mutual was acquired by JPMorgan Chase & Co.
But it’s not clear where Bair currently stands in the discussions between Pelosi and McConnell. Conservative media latched on to the trial balloon last week, lambasting Bair’s support of Democrats like Massachusetts Sen. Elizabeth Warren and her prior service on the board of a Chinese state-owned bank.
She’s also been critical of President Donald Trump. In January, Bair wrote in The Washington Post that she was looking to support a Democratic presidential candidate in November rather than her own party’s incumbent.
“Over the past 40 years — about as long as I’ve been of age to vote — the country has seen a downward spiral in the qualifications of the individuals we have elected as president,” Bair wrote. “We arguably hit a new low with Donald Trump, who had zero years experience in public service.”
Bair later endorsed Warren, with whom she worked on banking oversight and regulatory issues during the financial crisis, in a Wall Street Journal op-ed entitled “The Republican case for Elizabeth Warren.”
Warren subsequently dropped out of the race and endorsed Biden.
Other commission members, picked by the “big four” House and Senate leaders individually, include Sen Patrick J. Toomey, R-Pa., McConnell’s choice; Rep. Donna E. Shalala, D-Fla., selected by Pelosi; Hill, chosen by House Minority Leader Kevin McCarthy; and Bharat R. Ramamurti, a former senior aide to Warren, who was selected by Senate Minority Leader Charles E. Schumer.
TARP as precedent?
According to the Congressional Research Service, the new commission is similar in structure to the panel that oversaw implementation of the $700 billion TARP.
The Congressional Budget Office estimated in 2009 that taxpayers could wind up having to eat just over half that cost, but the oversight panel’s final report in 2011 concluded that most of the emergency lending made under the program was recouped.
That’s partially due to total TARP authority being slashed under the 2010 Dodd-Frank financial regulatory law, but also because Treasury made money on many of its investments.
The CBO now estimates that the total deficit impact of TARP was about $31 billion, due to losses on aid to automakers, insurer American International Group Inc. and mortgage assistance programs to help homeowners avoid foreclosure.
The CBO earlier this month estimated that the $500 billion in pandemic-related loan programs enacted in March likely will have a negligible fiscal impact as income earned on federal investments roughly offsets expected defaults.
The total net cost is estimated at $1 billion, the agency said, driven by expected losses on credit extended to air carriers and others involved in national security. That net figure includes returns on equity stakes that Treasury will take in companies that receive aid.
However, the agency wrote in its analysis of the relief legislation that the new lending facilities will result in “substantial additional credit risk for the government,” including a “small probability that the provisions could result in a very large loss — an outcome that would significantly increase the deficit.”