Stimulus a 'failure' so far; used to 'prop up the stock market': Congressional Oversight Commission Member

Bharat Ramamurti, Managing Director of the Corporate Power program at the Roosevelt Institute & Member of the Congressional Oversight Commission joins Yahoo Finance’s On The Move panel to break down the importance of the CARES ACT.

Video Transcript

ADAM SHAPIRO: And a sound of normalcy-- that would be leaf blowing-- that sound you might hear in our next discussion is actually leaf blowing taking place outside the window of Bharat Ramamurti. He's the managing director of the Corporate Power Program at the Roosevelt Institute, also a member of the Congressional Oversight Commission.

You worked for years on Capitol Hill for Senator Elizabeth Warren. We're going to talk about all of this. And we really don't mind the leaf blowing. A little bit of normalcy in the area in which we live is welcome.

I want to ask you, what does congressional oversight-- the congressional oversight commission do? Because a lot of what we're going to talk about is the CARES Act and oversight. And I should point out, Jessica Smith is here as well, because she covers this, of course, in Washington.

But very quickly, Congressional Oversight Commission-- what do you guys do?

BHARAT RAMAMURTI: Sure. As part of the CARES Act, there was $500 billion set aside for the Treasury and the Federal Reserve to work together to loan to small, medium, and large businesses, and kind of created the Oversight Commission to monitor the decision that the Fed and the Treasury were making with that large pot of money, and to ultimately assess how that program is affecting the financial well-being of American families.

JESSICA SMITH: Hi, Jessica Smith here. I wanted to ask a question about a concern that you've raised before about the requirements, or maybe the lack thereof, for big businesses who are receiving government relief. Can you talk about what you'd like to see put in place for these big businesses?

BHARAT RAMAMURTI: Yeah, at the moment, there are no strings attached to literally hundreds of billions of dollars of support that the Fed and the Treasury are ticketing for large business, including, for example, through the purchase of newly-issued corporate bonds. What I'd like this see is that the goal of this program is to create jobs, to protect jobs, to stop the incredible unemployment, and reduce the unemployment numbers that we're seeing right now, to see that the Fed and the Treasury attach some conditions to their support to these big firms.

And frankly, they're already doing that for mid-sized companies. For mid-sized companies that get support through these Federal Reserve programs, they have to make efforts to retain payroll, to keep workers on payroll. They're prevented from issuing dividends for the term of the loan and the year after that. They are prevented from doing stock buybacks. They have to reduce or limit executive compensation during that period.

None of those limitations apply to larger companies. And I think that that's concerning, because we've seen historically these really big American companies, oftentimes their first priority is to take care of shareholders and executives, and their last priority is to take care of workers. And what we need to see right now is the opposite.

BRIAN CHEUNG: I'm wondering if you've had conversations, then, with the Federal Reserve on just that point. I've even seen on Twitter that you've even called on maybe a Canadian-style situation, where in their capacity as lender of last resort, they've actually even required disclosures on protecting pension plans or collective bargaining deals, things like that. Have you gotten any sort of reception from the Fed on maybe them doing that? And if not, what's been the rationale?

BHARAT RAMAMURTI: Well, in our first oversight report, which we issued about a week ago, the Oversight Commission asked the Fed and the Treasury that exact question-- why haven't you included limitations on the use of the funds that the Fed is providing to larger companies? What concerns do you have about including those conditions? At the moment, we haven't gotten a response from the Fed and the Treasury yet. We expect one relatively soon.

And I think we'll have to evaluate the response after we get it. But I noticed the other day, Chair Powell was speaking to some students at Princeton. And he was asked what's the point of this program?

And that's another question we asked in the oversight report. What is the goal of this program? How will you measure its success or failure? And he said at the end of the day, this is all about jobs.

And so my question is, if it's all about jobs, why are you handing money to companies without requiring them to protect jobs, to keep workers on payroll? To me, it seems like a relatively straightforward thing for the Fed to do. It's already doing it for mid-sized businesses. Why not do it for larger ones too?

- As it relates to the CARES Act, though, I mean, how do you do that? How do you put the conditions on the money that's already been handed out?

BHARAT RAMAMURTI: Well, so far, the Fed has not purchased a single new bond through what is called the Primary Market Corporate Credit Facility. It's announced how it plans to use the money, but it hasn't actually sent any money out the door through that program. So there's still plenty of time for the Fed to say actually, we're changing the terms of this program. And now if we're going to issue-- if we're going to purchase a bond that you issue, you're going to have to agree to do certain things when it comes to job retention, when it comes to dividends and buybacks.

The Fed and the Treasury have that ability. There's nothing that stops them from doing it right now.

JESSICA SMITH: I'm curious how you and the other members of the team are working right now. Obviously you have the pandemic. I'm sure that's limiting how much you can work together. You don't have a chairperson at this point. So can you talk about the work that you're doing and how you're operating right now?

BHARAT RAMAMURTI: Sure, well, I would love to see a chair named soon. It's been nine weeks since the CARES Act was passed. And I think we would all benefit from having a chair and having a full commission in place.

That said, we are still continuing to do our work. We issued the report that we are required by law to issue a couple of weeks ago. We're working on the next report, which is due in mid-June. At the moment, we don't have staff for the commission. But we are all-- each member of the commission so far is working together and working hard to do what we can with the resources that we have available.

I don't think we're making any excuses. But I would like to see a chair. And I would like to see the commission fully staffed up so we can continue to dig into the details of this program.

BRIAN CHEUNG: And I know only about half of the $454 billion has been planned by the Fed and the Treasury for these types of programs that they've announced. But maybe a progress report, if you will. If you had to give the Fed and the Treasury a letter grade in their response so far, what would you give them? And where do you think they should be going with the other half of that money?

BHARAT RAMAMURTI: Well, I think they probably have earned an incomplete so far, because they've only allocated about 40% of the $500 billion that they're supposed to spend. I think it's a legitimate question to ask. Nine weeks ago, the Fed-- the Congress gave the Fed and the Treasury $500 billion to stabilize the economy. Since that time, we've seen millions and millions of job losses.

And to date, the Fed and the Treasury have only actually used about $37 billion of that $500 billion. So if this was an emergency, why is it taking so long to get this money in place? Why is it that as of today, not a single dollar has gone to support mid-sized companies through loans? Why is it that as of today, not a single dollar has gone to loans to state and local governments that are already suffering through huge budget crunches, and that are already laying off workers? I think it is a significant concern that it's taking the Fed and the Treasury so long to get the money out the door to those entities that need it.

But on the flip side, the mere announcement of their program and how they plan to use the money has provided real assurance to corporate bond markets and to investors. And so what we've seen is that the Fed the Treasury program so far has been very successful if the goal of the program is to prop up the stock market and the corporate bond market. If the goal of the program is to protect jobs and to help state and local governments and mid-sized companies too, then I think it's been a failure.

ADAM SHAPIRO: And that's why we're going to invite you back, because we want to keep gauging what is going on with this program, with 40 million Americans out of work. Bharat Ramamurti, you're always welcome, with or without the noise of the leaf blower. You are the managing director of the Corporate Power Program at the Roosevelt Institute, also a member of the Congressional Oversight Commission.