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Why Did Democrats Nominate Donna Shalala to the Bailout Oversight Panel?
With the Congressional Oversight Committee, Democrats had a rare opportunity to reverse public perception about the party’s closeness to Wall Street. Instead, they punted again
At roughly 6 p.m. last Thursday, Nancy Pelosi held a meeting with Democratic caucus members and explained she was still considering whom to put on the Congressional Oversight Committee (COC), one of three enforcement bodies charged with watching hundreds of billions of bailout dollars go out the door toward Wall Street.
Pelosi addressedDemocrats who’d submitted names – the implication was many names had been submitted – that she needed to weigh “multiple considerations” in making the choice. Some assumed this meant she would be picking a woman of color for the job.
Late the next day, Pelosi announced her choice: Donna Shalala, Florida congresswoman and former Health and Human Services Secretary under Bill Clinton.
Phones buzzed. WTF? I heard a variety of confused exclamations over Shalala’s appointment this weekend, ranging from “baffling” to “curious” to “fucking absurd.” The popular choice among lobbyists and staffers was financial services and oversight committee member Katie Porter (D-CA), who had actually sought the job.
If it was not to be Porter, it was assumed the choice would be someone with with expertise in banking, derivatives, or financial investigation. “You have to really know your shit to have a chance at doing anything here,” is how it was put to me.
Pelosi’s appointment lauded Shalala as a “highly accomplished leader… who has for decades led the fight to defend the health and economic security of the American people.” Apparently there was some thought that health expertise was good in a pandemic relief oversight panel. But the Congressional Oversight Committee is not about health, but high finance, and Shalala appears to know nothing about that.
She holds shares in Boeing, as well as Alaska Airlines and Spirit Aerosystems, which builds a lot of pieces of Boeing aircraft. She owns Chevron, ConocoPhillips, Royal Dutch Shell, and Occidental Petroleum at a time of a historic crash in oil price… She owns retailers and retail producers Ralph Lauren, L Brands, Burlington Stores, and Five Below… She owns big banks JPMorgan Chase, Wells Fargo, Bank of New York Mellon, BBVA Compass, and HSBC…
Shalala owns between $301,000 and $615,000 in UnitedHealth, suggesting she wasn’t much troubled by the suit accusing the firm of overbilling Medicare for billions – not a great look for someone now charged with watching for the same kind of behavior with significantly larger stakes.
Worse, Shalala has between $202,000 and $550,000 in a series of iShares exchange-traded funds. These are BlackRock funds, at the center of the Fed’s new bond-buying programs already discussed at length in this space.
Two years ago, Shalala’s net worth was somewhere between $4.6 million and $13.5 million. Her chief of staff is Jessica Killin, who spent a decade at USAA – the military bank now in trouble for snarfing bailout checks from families in debt (not that this is her fault). Killin’s husband is Raj Date, who has a background at the Consumer Financial Protection Bureau, but also worked at Deutsche Bank Securities and was Senior VP for Corporate Strategy and development at Capital One.
Meanwhile, Republican choice Pat Toomey is not only a Pennsylvania Senator, but a longtime Wall Street banker and Club for Growth President who traded currency swaps in his youth. Arkansas congressman French Hill founded an Arkansas Bank and sits on the financial services committee. They both fit the profile of ace double-agent types who’ll advocate aggressively from the inside for laissez-faire oversight, i.e. traditional Republican optics.
The enormous $2 trillion Covid-19 rescue envisages three enforcement mechanisms. One is a Special Inspector General for Pandemic Recovery, within the Treasury and appointed by the president. Donald Trump has already named Brian Miller, a member of his legal team, to that position.
Democrats like Chris Van Hollen have publicly criticized that appointment, but others have noted Miller has done solid work as an Inspector General in the past (Miller led a high-profile probe of General Services Administration officials who among other things spent $136,000 on food over 4 days, plus $75,000 on a team-building exercise in Las Vegas that included building bicycles and blowing bubbles). How how hard he’ll push oversight here is still obviously in question given that he’s overseeing a program his client Donald Trump has invested a ton in politically.
The second prong of enforcement is a panel of Inspectors General called the PRAC, or Pandemic Response Accountability Committee. Trump has already fired the ostensible committee head, acting Pentagon IG Glenn Fine.
That leaves the Congressional Oversight Commission as the only non-Executive Branch body where the Democrats will have any kind of say in watching the roaring Nile of cash now rushing toward Wall Street.
The COC consists of two Dems, two Republicans, and one chair yet to be picked by the leadership of both parties. The first Democratic nominee, picked by Chuck Schumer of New York, was Bharat Ramamurti, a staffer to Elizabeth Warren who gets high marks from a lot of financial regulatory activists – terms like “good guy” and “smart” come up in interviews.
Still, Ramamurti is young and has little experience outside of his work advising Warren on economic issues, both in the Senate and in her presidential campaign. One source I spoke with ventured that maybe Pelosi’s thinking was that Ramamurti would [to paraphrase] guide Shalala through the difficult material.
Others suggested the Shalala pick was just a placeholder, and that the real heavy hitters would be saved for Pelosi’s own, separate oversight panel, headed by Jim Clyburn, which she announced two weeks ago. This second panel would theoretically investigate "waste, fraud and abuse" and "protect against price-gouging, profiteering and political favoritism."
However, that announcement was made two weeks ago, and there’s been no news since. Until that announcement is made, we’re left with two executive branch IG panels, plus the one congressional committee whose Democratic members are Ramamurti and Shalala.
There are theoretical protections in place that should at least provide the public some information about who is receiving the monster amounts of money via the CARES Act and the attendant Fed purchasing programs. The law requires the PRAC to make data about aid recipients publicly available on a website. which shall:
…provide detailed data on any Federal Government awards that expend covered funds, including a unique trackable identification number for each project, information about the process that was used to award the covered funds, and for any covered funds over $150,000…
We’ll see how this looks in practice, but just to be clear: the law says we’re supposed to eventually get granular detail about even relatively small expenditures.
The Fed, however, has an atrocious record of delivering information upon request, even to congress. In a few cases it has complied with information requests from bodies like the Permanent Subcommittee on Investigations, but recall that it took an act of congress before we got even a snapshot look at emergency lending after the last bailout. That’s why political heft and a willingness to be aggressive in putting pressure on bailout officials is going to be paramount. It will require a boat-rocker, underscoring again the oddness of the Shalala decision.
As one other Democratic-friendly lobbyist complained, this feeds into “the politics on this, which suck for us.”
Democrats in 2016 ceded a lot of populist anger over Wall Street by nominating a candidate, Hillary Clinton, who’d taken millions in speaking fees from Wall Street banks and deflected criticisms on major financial issues with absurd non-sequiturs like, “If we broke up the banks tomorrow, would that end racism?”
With the massive Trump tax breaks of two years ago and now a CARES Act rescue package that appears designed to repeat the 2008 pattern of saving the economy by hurling money indiscriminately at Wall Street, Democrats had an opening to turn the tables. The COC could have been a prime perch to lament the use of public treasure to rescue the financial markets at the expense of main street.
Thus putting a big-name Clinton apparatchik with millions invested in the very financial markets that stand to rise from bailout programs seems like a major unforced error, to put it mildly. Even if Democrats just wanted to ineffectually complain about the unequal distribution of bailout funds, they’ll have a harder time doing even that now, with a millionaire BlackRock customer leading the minority review team. It’s a weird, bad look. Again.