Last week, the Congressional Oversight Commission — charged with overseeing $500 billion in federal coronavirus aid — finally published its fifth report. Disagreements between Republican and Democratic commissioners delayed its release. The Commission described in detail the blatant prioritization of Wall Street over everyday Americans of Jerome Powell’s Fed. Here’s what we learned:
- The Fed’s policies prioritized Wall Street and big corporations, leaving states and municipalities to fend for themselves. From the beginning, the Fed, led by Powell, took swift, aggressive action to bail out the corporate sector. It’s purchase of corporate bonds through both primary and secondary market liquidity facilities have lowered rates to below pre-pandemic levels. Yet the Fed has not been nearly as generous to states and municipalities, who continue to face devastating losses in tax revenues leading to layoffs and budget cuts. Since March, the Fed has only set up one credit facility to purchase newly-issued municipal bonds, despite establishing several facilities to purchase both newly-issued and previously-issued corporate bonds in the same time period. And that singular municipal facility is charging higher prices and imposing stricter requirements than its many corporate facilities. Commissioner Bharat Ramamurt perfectly captures these inequities in the report: Despite both entities having the same exact credit rating, the Fed gave Chevron a rate of 0.9 percent over more than four and a half years, while offering the state of Wisconsin a rate of 1.28 percent over three years. All of this is to say that the Fed is making it much easier for big corporations to borrow money than states and municipalities who provide vital public health, educational, and social services to the American public.
- The Fed’s pro-corporate policies have disproportionately affected minority communities and tribal governments. As Commissioner Ramamurti pointed out, a laid-off public sector worker is more likely to be Black than a laid-off private sector worker. The Fed’s prioritization of private sector jobs has therefore likely contributed to the disproportionately high rate of Black unemployment compared to white unemployment during the pandemic. The Fed’s spending on corporate bonds has helped individuals with stock holdings, but Black families only own 1.5 percent of stocks, despite representing over 13 percent of the U.S. population. Additionally, the Fed’s Municipal Liquidity Facility is only open to 250 state and local governments. This exclusionary regulation has completely shut out smaller municipalities and territories including Puerto Rico, Guam, and tribal governments.
- The Fed’s passivity has threatened the functioning of our elections. The Fed’s inaction could lead to disastrous consequences in November. As state and local governments continue to face falling tax revenues and record budget shortfalls, the demand for additional election security measures and protective gear for poll workers has overwhelmed election boards. And while states struggle to prepare for the upcoming election, the rich have gotten richer thanks to the Fed’s spending spree on corporate bonds.
Defenders of the Fed’s actions claim the institution is not responsible for the financial stability of state and local governments, and should therefore not be expected to take such drastic steps. While it may be true that the Fed has not historically intervened in fiscal policy, it is also true that we are facing a novel crisis. The institution that traditionally does provide this relief (i.e. Congress) has been stonewalled by a reckless Senate majority. If the Powell’s Fed can take unprecedented steps to save Wall Street, it can take those same steps to ensure the public doesn’t lose access to vital public programs and countless municipal workers don’t lose their jobs. If the Fed doesn’t act, we can expect to see up to $650 billion in shortfalls and 3 million in job losses.
While this should be expected from Powell, who has proved himself to be a strong Wall Street ally, it is surprising that the sole Democratic Fed Governor, Lael Brainard, has not used her vote to dissent. The Fed’s troubled response to the pandemic should immediately call into question the reappointment of Powell and the appointment of Brainard to Treasury Secretary.
The Fed’s pro-corporate coronavirus policies are a microcosm of an administration that has favored the wealthy and well-connected for four years, leaving low-income and rural communities to suffer while helping CEOs turn a profit during a devastating pandemic. Biden should commit to appointing individuals to the Fed and Treasury who will work to protect state and municipalities just as much, and more, than the corporate sector.