theintercept--2020-05-27--How the Fed Bailed Out the Investor Class Without Spending a Cent

M arch 23 , 2020 was a critical day in U.S. history , though at the time it felt like another 24 hours on the road to pandemic apocalypse .
Over 47,000 Americans had contracted the coronavirus by official count , and hundreds of thousands more were walking around with it undiagnosed .
Deaths were just starting to spike .
Historic job losses had commenced , as lockdowns cascaded across America with no end in sight .
The stock market closed more than 35 percent off its peak , continuing an epic slide that had started a month earlier .
@ @ @ @ @ @ @ swing investors from despair to relief , and reveal who really matters in America .
That morning , the Federal Reserve announced the deployment of additional “ tools to support households , businesses , and the U.S. economy overall in this challenging time.
” The measures included many actions taken during the 2008 financial crisis , with one new wrinkle : Direct purchases of corporate debt — the first nongovernment bond-buying in the Fed ’ s history — would now be allowed .
Companies have swelled their borrowing in recent years , and @ @ @ @ @ @ @ of serious economic risk .
A sudden shock like the pandemic that wiped out revenues would not only cause bankruptcies , but also accelerate bond defaults , broadening stress throughout the financial system .
Backstopping corporate bond markets would support investors and capital owners .
By the evening of March 23 , investor confidence was lifted even further ; reports announced progress on a record $ 2.2 trillion congressional rescue package , a large chunk of which would go to support the Fed ’ s interventions in corporate bond and other markets .
@ @ @ @ @ @ @ Act became law on March 27 , and the investor class has never looked back .
While Americans struggle to file unemployment claims and extract stimulus checks from their banks , while small businesses face extinction amid a meager and under-baked federal grant program , the Fed has , at least temporarily , propped up every equity and credit market in America .
And in a testament to its strength , it did so without spending a single cent .
The mere announcement of future spending heartened investors , who have relied on @ @ @ @ @ @ @ .
This explains the shocking dissonance between collapsing economic conditions and the relative comfort on Wall Street .
Between March 23 and April 30 , the Dow Jones Industrial Average rocketed nearly 6,000 points , a jump of nearly 31 percent , creating over $ 7 trillion in capital wealth .
The April gains were the biggest in one month since 1987 .
The same month , 20.5 million Americans lost their jobs .
Similarly , the Fed ’ s promises to purchase corporate and municipal bonds and asset-backed securities and really anything @ @ @ @ @ @ @ borrowing cheaper , a tangible subsidy for large companies .
March ended up setting a record for issuance of investment-grade corporate debt — the safest kind of corporate debt .
Two hundred and sixty eight billion dollars traded hands that month , according to a Moody ’ s Analytics study , and April surpassed it , at $ 296 billion .
Overall , $ 1 trillion in investment-grade bonds have been issued this year , nearly as much as all of 2019 , along with tens of billions more in junk bonds from @ @ @ @ @ @ @ also signaled that it would purchase .
Unlike in 2008 , the large corporate entities in line for a bailout didn ’ t create the crisis in the first place .
The Fed ’ s actions to save corporations from instant bankruptcy , simply by nodding in their direction , beats the alternative .
The problem is that this same level of thunderous rescue hasn ’ t been extended beyond the biggest firms , which could lead to an economic landscape where they dominate society in the very near future .
We have @ @ @ @ @ @ @ a life preserver to any large corporation , while everyone else must swim several miles to shore themselves .
Congress made the choice to empower the Fed , rather than figure out how to adequately support the rest of the economy and its citizens .
And it gave the central bank wide discretion over the process , absolving members of Congress from blame but introducing the Fed ’ s bias toward large corporations and banks into who gets saved and who doesn ’ t .
In short , while activists nitpicked about which @ @ @ @ @ @ @ 10 million , the real bailout , with trillions on the line rather than millions , was happening , quietly , at the Fed .
Investors are supposed to be risk-takers , who earn outsized returns because they put their money on the line .
The Fed ’ s extraordinary support completely flips that , giving a safety net to those who don ’ t need it and making a mockery of the alleged virtues of free-market capitalism .
If nothing the wealthy ventures can be lost , the only people who bear @ @ @ @ @ @ @ don ’ t have any money to begin with .
That ’ s a recipe for soaring sales in pitchforks .
But what the Fed is doing may not even be sufficient to protect capital .
The week of May 11 saw the biggest percentage drop in the stock market in nearly two months .
As the Fed actually starts to actually outlay money , even it recognizes that not every crisis can necessarily be solved by lending gobs of money to General Electric .
Not only is it socially unsustainable to protect @ @ @ @ @ @ @ this magnitude , it may not even work .
A mong other measures , the CARES Act appropriated $ 454 billion to the Treasury Department ’ s Exchange Stabilization Fund to be used as an equity stake in a series of Fed “ credit facilities.
” You can think of this as similar to a big bank .
The ESF stake represents the deposit base , which can absorb any losses from Fed lending .
( In reality , the Fed is perfectly able to take losses through various accounting gimmicks , but @ @ @ @ @ @ @ this fashion . )
The Fed can then lever those deposits up 10 to 1 , the same way a bank loans well above its deposits .
That created a $ 4.5 trillion — trillion with a T — money cannon to back up the promises .
As soon as it became clear that a $ 4.5 trillion slush fund would be created , equity markets ballooned .
The total value of the stock market cratered to 103 percent of GDP , about $ 21.8 trillion , on March 23 .
By April @ @ @ @ @ @ @ of GDP , or $ 28.9 trillion .
By that metric , $ 7.1 trillion in stock market wealth has been created in that period .
It ’ s not like there were any other positive stories in the economy in late March and April , so we can attribute most of this uplift to the establishment of Fed facilities .
“ The Fed is the action , it ’ s the only real action , ” Marcus Stanley , policy director with the coalition Americans for Financial Reform , told me .
@ @ @ @ @ @ @ the wealthy : A 2017 report showed that about 10 percent of Americans own 84 percent of all stocks .
More critical was the rescue of the credit markets .
By March 23 , investors had spent a few weeks engaged in fire sales of corporate debt .
Cash was fleeing to the safety of Treasury bonds .
Reluctance to take on corporate debt triggered higher borrowing costs everywhere , and while bond-buying was still going on , many companies found themselves stuck .
“ There was like 10 or 15 days , @ @ @ @ @ @ @ said V. Prem Watsa , CEO of Fairfax Financial Holdings , in a May 1 earnings call .
“ No one could do a bond issue .
The AAA company couldn ’ t do a bond issue.
” C arnival Cruise Lines is nobody ’ s idea of a sustainable business at the moment .
Reeling from a Covid-19 outbreak on its Diamond Princess ship and shut down thereafter , in mid-March , Carnival was flirting with a consortium of hedge funds on a high-interest loan above 15 percent .
These vulture funds @ @ @ @ @ @ @ Management , specialize in distressed debt , squeezing governments and businesses with no alternatives .
If Carnival couldn ’ t repay the loan , the hedge funds would be primed to take ownership .
But the March 23 announcement , signaling a Fed backstop to all comers , suddenly gave Carnival new options .
Within days , it had secured $ 5.75 billion in loans , including a $ 4 billion bond issuance at 11.5 percent interest , and a $ 1.75 billion bond at an even smaller 5.75 percent rate that could @ @ @ @ @ @ @ we know the alternative was a loan with 15 percent interest , we can calculate the value to Carnival .
The difference in interest on the $ 4 billion loan is at least $ 140 million , and on the overall package , closer to $ 310 million .
Carnival also sold equity stakes of $ 500 million after March 23 ( including 8 percent of the company to Saudi Arabia ’ s sovereign wealth fund ) , less than the $ 1.25 billion the vulture funds were seeking .
That ’ s @ @ @ @ @ @ @ .
Keeping more of the company in shareholders ’ hands gives them a subsidy as well .
In addition , Carnival ’ s market capitalization grew by $ 3.5 billion from March 23 to the end of April .
So one company with essentially no social or economic function currently benefited from billions in Fed-induced support .
Another good example is Boeing , the basket-case aircraft maker with a sketchy record of keeping planes in the sky .
The firm “ rejected ” a federal bailout after issuing $ 25 billion in bonds @ @ @ @ @ @ @ made possible by the Fed ’ s implicit guarantee of corporate bond markets .
Boeing ’ s Chief Financial Officer Greg Smith admitted on March 24 , a day after the Fed announcement , that credit markets were “ essentially closed.
” A month later , it made the sixth-largest bond issuance in U.S. history that left investors clamoring for more ; over 600 investors were willing to take up to $ 70 billion in Boeing debt at the auction .
So Boeing didn ’ t avoid a bailout ; it got one @ @ @ @ @ @ @ .
And the company knows it : Smith thanked the Trump administration after securing the loan , “ for the actions they have taken to support our economy and the credit markets.
” Boeing ’ s bond rescue had a secondary benefit .
The CARES Act set aside $ 17 billion in a Treasury-led bailout for firms “ critical to national security , ” which everyone recognized as code for Boeing .
That money would have come with significant strings attached , like equity stakes for the government .
By the Fed reopening @ @ @ @ @ @ @ sidestepped that condition and kept its investors whole .
“ Without the Fed action , Boeing would be significantly owned by the U.S. taxpayer , ” said Dennis Kelleher of the Wall Street watchdog Better Markets .
That ’ s an implicit subsidy to Boeing and its shareholders .
The lack of conditions had a human cost .
Aviation-related grants that the Treasury supplied came with a requirement to keep workers on the payroll for six months .
Freed from any restrictions , Boeing almost immediately announced that it would cut 16,000 jobs @ @ @ @ @ @ @ company that spurned a direct bailout and floated $ 6 billion in bonds , cut 13,000 jobs in its aviation unit shortly thereafter .
Within weeks of the March 23 announcement , many large companies had wandered over to the corporate bond trough and taken a sip .
Issuance of corporate bonds in April alone jumped to three times as much as the year before .
The three largest weeks in the history of corporate debt offerings were two weeks in April and the first week of May .
Delta Airlines managed a @ @ @ @ @ @ @ few flights in the air ; Southwest raised $ 6 billion .
Norwegian Cruise Lines , in the same boat as Carnival , secured $ 2.2 billion .
Six Flags Entertainment , shuttered due to lockdowns , got $ 725 million .
MGM Resorts , a luxury series of hotels and casinos , took in $ 500 million .
No AMC movie theater was open , but AMC floated $ 500 million in debt anyway .
Despite housing few travelers , Airbnb took $ 1 billion .
Investors deemed just one major company @ @ @ @ @ @ @ , which begged off a $ 2.25 billion bond deal on May 12 because investors wanted more protections attached to the loan and a higher interest rate than United sought .
But despite the fact that banks and investors are in position to demand better terms , interest rates are correspondingly lower than what these companies would have been forced to agree to before the Fed ’ s intervention .
It was also significantly cheaper for companies to borrow money at the beginning of May than it was in late March .
The @ @ @ @ @ @ @ interest-rate yield between the corporate bond and Treasury bonds ) for BBB-rated firms , just above investment grade , soared throughout February and March and peaked on , you guessed it , March 23 , at 4.88 percent .
By May 1 , it was down to 2.83 percent .
The high-yield corporate bond spread looks the same , peaking at 10.87 percent on March 23 and settling at 7.7 percent on May 1 .
Those spreads have continued to drop .
A lower spread equates to tangibly lower borrowing costs for large @ @ @ @ @ @ @ Prospect and The Intercept found published reports of bond sales for 49 companies , a total of at least $ 190.3 billion .
Some bond amounts were undisclosed , like for General Mills , CVS , and Kroger , so the number is likely higher .
The interest savings on those bond issuances due to Fed intervention is hard to calculate , but using Credit Flow Research ’ s post-announcement bond issuance estimate of $ 575 billion , and the changes in spreads after March 23 , it ’ s clearly tens of @ @ @ @ @ @ @ that one part of the credit hierarchy gives the rest a boost , the market uplift to investors in the $ 10 trillion corporate debt market would be calculated in the hundreds of billions .
Combined with ETF and stock market uplift , the trillions in relief absolutely dwarfs what regular Americans got to tide them over during the crisis .
But to properly assess the virtues of the rescue , you have to set it in context .
The unemployment rate is 14.7 percent and rising .
Car lines for food banks @ @ @ @ @ @ @ to struggle and lose ground , the nation ’ s investment elite have been thus far saved from any downside of the coronavirus crisis .
Beneficiaries are largely confined to stockholders , bondholders , and corporate executives ( who are often major stockholders ) .
Workers are not only not protected , they ’ re paying for the rescue , with taxpayer money propping up the Fed actions .
“ This is a massive wealth transfer to owners of financial assets , ” said Lev Menand , a former Treasury official who now @ @ @ @ @ @ @ rules of the game are supposed to be that equities take the loss , high-yield debt holders take the loss .
We ’ re watching this new hierarchy being created by the government .
It ’ s a bizarre form of socialism for capitalists.
” It would perhaps be more tolerable if anyone other than the rich shared in the gains of this corporate rescue .
But the Fed ’ s bond-buying program , unlike the Paycheck Protection Program , has no requirements on companies to retain workers .
The Fed changed the @ @ @ @ @ @ @ 9 , eliminating any such requirements .
Apple ’ s recent debt issuance , which could later be purchased directly or indirectly by the Fed , explicitly states that it will be used for , among other things , “ share buybacks and dividends ” — forms of leaking money to investors rather than keeping workers on payroll .
In addition , the Fed has essentially outsourced its bond-buying and loan-making authority to big money managers and banks , heightening the need for connections with these giants to get relief .
Smaller companies @ @ @ @ @ @ @ revenue or technical know-how to issue bonds into public markets , will find it more difficult to get in line for relief .
Meanwhile , lending to small businesses and individuals has slowed as banks pull back during the crisis ; by one count , interest rates charged to small businesses are now double the rates for large firms .
Running bailouts through the Fed necessarily enhances the survival of large financial players and big corporations ; everyone else must fight for crumbs .
Treasury Secretary Steven Mnuchin responded to this charge of @ @ @ @ @ @ @ Senate Banking Committee hearing on May 19 , essentially calling the stealth bailout a good thing .
“ The announcement of the corporate bond facility without putting up $ 1 of taxpayer money unlocked the entire primary and secondary market for corporate bonds , ” Mnuchin said .
“ Companies that I had expected would need to borrow from us were able to borrow $ 25 billion in the primary markets ” — a reference to Boeing .
Congress didn ’ t have to cede authority to the Fed and carp about it @ @ @ @ @ @ @ decided the parameters of any economic rescue .
But that would involve making actual governing decisions , which Congress would rather defer to others .
You can argue that , in the absence of state functionality , the Fed had to step in .
But we ’ re living with the unequal consequences of a central bank that can only solve problems for one set of powerful interests .
And perversely , rescuing investors — rich people like members of Congress and the donors they listen to — makes it easier for Congress @ @ @ @ @ @ @ else .
Even the Fed understands this at some level .
On May 13 , Powell pleaded with Congress to pass stronger fiscal aid to prevent a multiyear economic malaise .
“ Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy , ” he said .
O n May 12 , the Fed finally kicked off its corporate bond-buying program , 50 days after the fateful March 23 announcement .
It was confined to purchasing corporate bond ETFs of once investment-grade “ fallen angel ” companies @ @ @ @ @ @ @ two days , $ 305 billion had been purchased .
But while the purchases sent corporate bonds up in value , by and large the promise of bond-buying had already produced the desired effect .
The Fed completed the bailout before ever administering it .
Some market watchers see the runaway rally in capital markets as irrational .
“ People that manage large portfolios and assets spent 10 years in a bull market fed by Federal Reserve intervention , ” said Menand .
“ Their frame of reference is that something goes wrong @ @ @ @ @ @ @ ’ s a market opportunity.
” Menand believes that the Fed won ’ t be able to sustain such valuations amid mass bankruptcies and high unemployment .
With the hope of a V-shaped economic recovery now completely dead , at some point the markets will have to take notice , and the sugar high from the Fed aiming its money cannon will wear off .
Stocks fell modestly in May , and Goldman Sachs analysts have predicted a 20 percent drop in the next three months .
Noted hedge fund manager David Tepper @ @ @ @ @ @ @ half of May the second-most overvalued market in his career , rivaled only by the dot-com boom .
And in raw numbers , the valuation increase has gone well beyond the amounts the Fed has promised .
That ’ s what you get when you send the Fed in to handle a problem in the real economy .
The Fed is ill-suited as a crisis manager ; it sees its job as mainly to boost liquidity and keep assets strong .
“ You can get loans , but loans don ’ t replace @ @ @ @ @ @ @ research director at the Modern Money Network .
Menand likened the moment to August 2007 , when the Fed provided enough liquidity to avert crisis for a while .
Eventually , there was a reckoning when asset prices declined and losses hit the system .
“ This is more like August 2007 than September 2009 , ” he said .
“ The idea that we won ’ t have massive insolvency at big companies is crazy .
And the Fed will not be there.
” The Fed-induced rush into corporate bonds , in @ @ @ @ @ @ @ unstable asset , creating the type of financial crisis it seeks to stamp out .
Companies with functionally no revenue path in the near future taking on mounds of additional debt could set the stage for a series of defaults , which rose in April .
Zombie companies being kept alive by debt markets eventually run up against the fundamentals of operating amid an economic depression .
And indebted companies stave off liquidation by firing workers , as Hertz did last month to avoid bankruptcy .
It didn ’ t help ; Hertz @ @ @ @ @ @ @ .
The very knowledge that the Fed will save investors from trouble is likely to accelerate risk throughout the market .
“ If you told a family you can get a credit card at 18 percent [ interest ] , but in a downturn we will give you an opportunity to get a 3 percent card , that would incentivize them to spend a lot of money , ” Bharat Ramamurti , one of the members of the Congressional Oversight Commission , told me .
The Fed itself has called out this possibility @ @ @ @ @ @ @ 13 were accompanied by a May 15 financial stability report , warning that the financial system had “ amplified the shock ” of the coronavirus crisis .
It raised concerns about debt defaults as its actions persuaded investors to buy up more debt .
It warned that asset prices had “ room to fall , ” when the announcement effect created more of that room .
It worried of defaults among high-risk “ leveraged loans , ” when these are precisely the kind of loans it ’ s vowed to buy through purchases @ @ @ @ @ @ @ does the Fed have its fingers in the dough of the economy ?
Recent job growth numbers reflect what you ’ d guess — that the most rapid job creation is happening at general merchandise stores like Walmart and Costco .
Right behind them are “ monetary authorities-central banks .
”

M arch 23, 2020 was a critical day in U.S. history, though at the time it felt like another 24 hours on the road to pandemic apocalypse. Over 47,000 Americans had contracted the coronavirus by official count, and hundreds of thousands more were walking around with it undiagnosed. Deaths were just starting to spike. Historic job losses had commenced, as lockdowns cascaded across America with no end in sight. The stock market closed more than 35 percent off its peak, continuing an epic slide that had started a month earlier.
But two actions on March 23 would swing investors from despair to relief, and reveal who really matters in America.
That morning, the Federal Reserve announced the deployment of additional “tools to support households, businesses, and the U.S. economy overall in this challenging time.” The measures included many actions taken during the 2008 financial crisis, with one new wrinkle: Direct purchases of corporate debt — the first nongovernment bond-buying in the Fed’s history — would now be allowed. Companies have swelled their borrowing in recent years, and experts have identified this as a source of serious economic risk. A sudden shock like the pandemic that wiped out revenues would not only cause bankruptcies, but also accelerate bond defaults, broadening stress throughout the financial system.
Backstopping corporate bond markets would support investors and capital owners. By the evening of March 23, investor confidence was lifted even further; reports announced progress on a record $2.2 trillion congressional rescue package, a large chunk of which would go to support the Fed’s interventions in corporate bond and other markets.
Key Takeaways The Federal Reserve announced on March 23 that it would start direct purchases of corporate debt — an unprecedented rescue of corporate America.
Since then, the stock market has risen over 30 percent, corporate bond funds have recovered, and companies have saved tens of billions in borrowing costs.
Thanks to this massive government subsidy, large companies like Boeing and Carnival Cruises were able to avoid taking money directly — and sidestep requirements to keep employees on — by instead issuing bonds.
What would become known as the CARES Act became law on March 27, and the investor class has never looked back. While Americans struggle to file unemployment claims and extract stimulus checks from their banks, while small businesses face extinction amid a meager and under-baked federal grant program, the Fed has, at least temporarily, propped up every equity and credit market in America. And in a testament to its strength, it did so without spending a single cent.
The mere announcement of future spending heartened investors, who have relied on Fed support since the last financial crisis. This explains the shocking dissonance between collapsing economic conditions and the relative comfort on Wall Street. Between March 23 and April 30, the Dow Jones Industrial Average rocketed nearly 6,000 points, a jump of nearly 31 percent, creating over $7 trillion in capital wealth. The April gains were the biggest in one month since 1987.
The same month, 20.5 million Americans lost their jobs.
Similarly, the Fed’s promises to purchase corporate and municipal bonds and asset-backed securities and really anything else uplifted credit markets and made corporate borrowing cheaper, a tangible subsidy for large companies. March ended up setting a record for issuance of investment-grade corporate debt — the safest kind of corporate debt. Two hundred and sixty eight billion dollars traded hands that month, according to a Moody’s Analytics study, and April surpassed it, at $296 billion. Overall, $1 trillion in investment-grade bonds have been issued this year, nearly as much as all of 2019, along with tens of billions more in junk bonds from risky companies, which the Fed has also signaled that it would purchase.
Dozens of companies, from troubled aircraft maker Boeing to airline Delta, from Exxon Mobil to T-Mobile, have been tapping credit markets they might never have been able to access, at lower rates than previously offered. The American Prospect and The Intercept have identified at least 49 large companies that have issued corporate bonds since the Federal Reserve announced that it would purchase them. For some, the benefit of cheaper borrowing was worth hundreds of millions of dollars.
“It is meaningfully changing the way investors are evaluating the risks for a swath of companies,” said Kathryn Judge, a law professor at Columbia University and expert in financial markets and regulations. The Fed’s support disproportionately flows to large corporations with access to credit markets, Joyce pointed out. “Small and midsized businesses with much more need are more likely to struggle.”
The Intercept and The American Prospect have identified 49 companies that issued corporate debt since March 23, adding up to hundreds of billions they otherwise couldn’t have secured so cheaply — providing a safety net to the investor class and making a mockery of the alleged virtues of free-market capitalism.
This sets the stage for companies with functionally no revenue path in the near future to take on mounds of additional debt – and could set the stage for a series of defaults.
Unlike in 2008, the large corporate entities in line for a bailout didn’t create the crisis in the first place. The Fed’s actions to save corporations from instant bankruptcy, simply by nodding in their direction, beats the alternative. The problem is that this same level of thunderous rescue hasn’t been extended beyond the biggest firms, which could lead to an economic landscape where they dominate society in the very near future. We have a system for central bankers to throw a life preserver to any large corporation, while everyone else must swim several miles to shore themselves.
Congress made the choice to empower the Fed, rather than figure out how to adequately support the rest of the economy and its citizens. And it gave the central bank wide discretion over the process, absolving members of Congress from blame but introducing the Fed’s bias toward large corporations and banks into who gets saved and who doesn’t.
In short, while activists nitpicked about which companies got small business grants worth $10 million, the real bailout, with trillions on the line rather than millions, was happening, quietly, at the Fed.
Investors are supposed to be risk-takers, who earn outsized returns because they put their money on the line. The Fed’s extraordinary support completely flips that, giving a safety net to those who don’t need it and making a mockery of the alleged virtues of free-market capitalism. If nothing the wealthy ventures can be lost, the only people who bear risks in our society are those who don’t have any money to begin with. That’s a recipe for soaring sales in pitchforks.
But what the Fed is doing may not even be sufficient to protect capital. The week of May 11 saw the biggest percentage drop in the stock market in nearly two months. As the Fed actually starts to actually outlay money, even it recognizes that not every crisis can necessarily be solved by lending gobs of money to General Electric. Not only is it socially unsustainable to protect just the rich from a crisis of this magnitude, it may not even work.
Treasury Secretary Steven Mnuchin, center, leaves the offices of Senate Minority Leader Charles Schumer, D-N.Y., as negotiations continue into the night on a $2 trillion economic stimulus in response to the coronavirus pandemic at the U.S. Capitol on March 24, 2020, in Washington, D.C. Photo: Chip Somodevilla/Getty Images
A mong other measures, the CARES Act appropriated $454 billion to the Treasury Department’s Exchange Stabilization Fund to be used as an equity stake in a series of Fed “credit facilities.” You can think of this as similar to a big bank. The ESF stake represents the deposit base, which can absorb any losses from Fed lending. (In reality, the Fed is perfectly able to take losses through various accounting gimmicks, but it has chosen to limit itself in this fashion.) The Fed can then lever those deposits up 10 to 1, the same way a bank loans well above its deposits. That created a $4.5 trillion — trillion with a T — money cannon to back up the promises.
As soon as it became clear that a $4.5 trillion slush fund would be created, equity markets ballooned. The total value of the stock market cratered to 103 percent of GDP, about $21.8 trillion, on March 23. By April 30 it was back to 136.3 percent of GDP, or $28.9 trillion. By that metric, $7.1 trillion in stock market wealth has been created in that period.
Not only is it socially unsustainable to protect just the rich from a crisis of this magnitude, it may not even work.
It’s not like there were any other positive stories in the economy in late March and April, so we can attribute most of this uplift to the establishment of Fed facilities. “The Fed is the action, it’s the only real action,” Marcus Stanley, policy director with the coalition Americans for Financial Reform, told me. Almost all of that benefit goes to the wealthy: A 2017 report showed that about 10 percent of Americans own 84 percent of all stocks.
More critical was the rescue of the credit markets. By March 23, investors had spent a few weeks engaged in fire sales of corporate debt. Cash was fleeing to the safety of Treasury bonds. Reluctance to take on corporate debt triggered higher borrowing costs everywhere, and while bond-buying was still going on, many companies found themselves stuck. “There was like 10 or 15 days, there was no bond issue,” said V. Prem Watsa, CEO of Fairfax Financial Holdings, in a May 1 earnings call. “No one could do a bond issue. The AAA company couldn’t do a bond issue.”
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The Fed’s announcement changed the picture. “It’s signaling, ‘We will not let the bond market go low,’” Stanley said. “’We’ll put a floor under the bond market in an aggressive and historically unprecedented way.’”
You can best see this through an array of exchange-traded funds, or ETFs: investment funds traded on stock exchanges made up of securities in a particular economic sector or asset class. There are dozens of ETFs linked to corporate debt, and their charts around this period all resemble a panoramic view of the Grand Canyon, hitting a low point on March 23, before shooting back up.
Graphic: Soohee Cho/The Intercept
On March 23, the BlackRock iShares ETF of investment-grade corporate bonds went up 7.39 percent. The iShares AAA-rated corporate bond ETF: up 7.52 percent. Vanguard’s intermediate-term corporate bond ETF: up 5.43 percent. Pimco’s investment-grade corporate bond ETF: up 7.06 percent.
Graphic: Soohee Cho/The Intercept
Even “high-yield” corporate bond ETFs, which hold debt in riskier companies imperiled by the crisis, have this same shape. The effect is often delayed until April 9, when the Fed announced that it would actually buy high-yield ETFs, in an indirect bid to reach so-called junk bonds that highly leveraged and risky corporations issue to investors. The iShares iBoxx high-yield ETF saw its biggest move upward that day since 2008. Other high-yield ETFs like Deutsche X-trackers and the S&P high-yield bond index show a similar spike. Junk bond issuance similarly spiked.
The Fed announcements included intentions to buy municipal bonds, as well as securities backed by student loans, auto loans, credit card debt, and commercial real estate loans; to make direct loans to large and midsized businesses; and to guarantee the entire trillion-dollar money market fund industry. It sent the message that essentially every credit market in existence would get some form of assistance. “They consider themselves a lender of last resort,” Peter Boockvar of Bleakley Advisory Group told CNBC. “They’re now the lender of all resorts.”
But the corporate bond rescue was particularly useful to companies sinking under the weight of the economic crash.
A Diamond Princess cruise ship leaves Daikoku Futo Wharf in Yokohama, Japan, after being disinfected on March 25, 2020, amid the outbreak of a coronavirus. Photo: The Yomiuri Shimbun via AP
C arnival Cruise Lines is nobody’s idea of a sustainable business at the moment. Reeling from a Covid-19 outbreak on its Diamond Princess ship and shut down thereafter, in mid-March, Carnival was flirting with a consortium of hedge funds on a high-interest loan above 15 percent. These vulture funds, including Apollo Global Management and Elliott Management, specialize in distressed debt, squeezing governments and businesses with no alternatives. If Carnival couldn’t repay the loan, the hedge funds would be primed to take ownership.
But the March 23 announcement, signaling a Fed backstop to all comers, suddenly gave Carnival new options. Within days, it had secured $5.75 billion in loans, including a $4 billion bond issuance at 11.5 percent interest, and a $1.75 billion bond at an even smaller 5.75 percent rate that could be converted into Carnival stock. Because we know the alternative was a loan with 15 percent interest, we can calculate the value to Carnival. The difference in interest on the $4 billion loan is at least $140 million, and on the overall package, closer to $310 million.
Carnival also sold equity stakes of $500 million after March 23 (including 8 percent of the company to Saudi Arabia’s sovereign wealth fund), less than the $1.25 billion the vulture funds were seeking. That’s an implicit subsidy of $750 million. Keeping more of the company in shareholders’ hands gives them a subsidy as well. In addition, Carnival’s market capitalization grew by $3.5 billion from March 23 to the end of April. So one company with essentially no social or economic function currently benefited from billions in Fed-induced support.
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Another good example is Boeing, the basket-case aircraft maker with a sketchy record of keeping planes in the sky. The firm “rejected” a federal bailout after issuing $25 billion in bonds. But that bond issuance was entirely made possible by the Fed’s implicit guarantee of corporate bond markets. Boeing’s Chief Financial Officer Greg Smith admitted on March 24, a day after the Fed announcement, that credit markets were “essentially closed.” A month later, it made the sixth-largest bond issuance in U.S. history that left investors clamoring for more; over 600 investors were willing to take up to $70 billion in Boeing debt at the auction.
So Boeing didn’t avoid a bailout; it got one through the side door from the Fed. And the company knows it: Smith thanked the Trump administration after securing the loan, “for the actions they have taken to support our economy and the credit markets.”
Boeing’s bond rescue had a secondary benefit. The CARES Act set aside $17 billion in a Treasury-led bailout for firms “critical to national security,” which everyone recognized as code for Boeing. That money would have come with significant strings attached, like equity stakes for the government. By the Fed reopening credit markets to Boeing, the company sidestepped that condition and kept its investors whole. “Without the Fed action, Boeing would be significantly owned by the U.S. taxpayer,” said Dennis Kelleher of the Wall Street watchdog Better Markets. That’s an implicit subsidy to Boeing and its shareholders.
The lack of conditions had a human cost. Aviation-related grants that the Treasury supplied came with a requirement to keep workers on the payroll for six months. Freed from any restrictions, Boeing almost immediately announced that it would cut 16,000 jobs. Similarly, General Electric, another company that spurned a direct bailout and floated $6 billion in bonds, cut 13,000 jobs in its aviation unit shortly thereafter.
Within weeks of the March 23 announcement, many large companies had wandered over to the corporate bond trough and taken a sip. Issuance of corporate bonds in April alone jumped to three times as much as the year before. The three largest weeks in the history of corporate debt offerings were two weeks in April and the first week of May.
Graphic: Soohee Cho/The Intercept
Exxon Mobil took $9.5 billion. Nike was good for $6 billion, with $5 billion for Procter & Gamble and $6.5 billion for McDonald’s. Apple grabbed $8.5 billion. There was $11 billion for Disney and $6.5 billion for Coca-Cola. Silicon Valley stalwart Oracle trumped them all with a $20 billion debt offering. And Fairfax Financial Holdings, whose CEO, Watsa, was complaining that nobody could get a bond, secured $650 million at the end of April. “The bond market opened up,” Watsa told analysts on the earnings call. “Federal Reserve has been fantastic. The CARES Act has been huge.”
Bond recipients included companies battered by the coronavirus crisis. “April’s worst month for U.S. business activity in perhaps more than 85 years did not prevent high-yield bond issuance from topping its year earlier pace by 19 percent,” Moody’s noted. That included an $8 billion high-yield bond for Ford, the largest speculative bond sale in history.
“They consider themselves a lender of last resort. They’re now the lender of all resorts.”
Delta Airlines managed a $5 billion bond issue, despite few flights in the air; Southwest raised $6 billion. Norwegian Cruise Lines, in the same boat as Carnival, secured $2.2 billion. Six Flags Entertainment, shuttered due to lockdowns, got $725 million. MGM Resorts, a luxury series of hotels and casinos, took in $500 million. No AMC movie theater was open, but AMC floated $500 million in debt anyway. Despite housing few travelers, Airbnb took $1 billion.
Investors deemed just one major company too risky for bonds: United Airlines, which begged off a $2.25 billion bond deal on May 12 because investors wanted more protections attached to the loan and a higher interest rate than United sought. But despite the fact that banks and investors are in position to demand better terms, interest rates are correspondingly lower than what these companies would have been forced to agree to before the Fed’s intervention.
It was also significantly cheaper for companies to borrow money at the beginning of May than it was in late March. The corporate bond spread (the difference in interest-rate yield between the corporate bond and Treasury bonds) for BBB-rated firms, just above investment grade, soared throughout February and March and peaked on, you guessed it, March 23, at 4.88 percent. By May 1, it was down to 2.83 percent. The high-yield corporate bond spread looks the same, peaking at 10.87 percent on March 23 and settling at 7.7 percent on May 1. Those spreads have continued to drop. A lower spread equates to tangibly lower borrowing costs for large firms.
In all, The American Prospect and The Intercept found published reports of bond sales for 49 companies, a total of at least $190.3 billion. Some bond amounts were undisclosed, like for General Mills, CVS, and Kroger, so the number is likely higher. The interest savings on those bond issuances due to Fed intervention is hard to calculate, but using Credit Flow Research’s post-announcement bond issuance estimate of $575 billion, and the changes in spreads after March 23, it’s clearly tens of billions of dollars.
And, given that one part of the credit hierarchy gives the rest a boost, the market uplift to investors in the $10 trillion corporate debt market would be calculated in the hundreds of billions. Combined with ETF and stock market uplift, the trillions in relief absolutely dwarfs what regular Americans got to tide them over during the crisis.
In this screenshot taken from the Federal Reserve website, Federal Reserve Chair Jerome Powell issues the Federal Open Market Committee statement on April 29, 2020, in Washington, D.C. Photo: Federal Reserve via Getty Images
T his unprecedented rescue of corporate America, done without the outlay of a single U.S. dollar, was described by Fed Chair Jerome Powell in an April 29 news conference as not only necessary, but positive. “Many companies that would’ve had to come to the Fed have now been able to finance themselves privately … and that’s a good thing,” Powell explained. It is somewhat positive that distressed companies could turn to regular credit markets instead of bottom feeders like private equity vultures or Warren Buffett. And because of the existing connections to flood the financial system with money, bailouts are almost literally as simple as turning on a light switch.
Congress didn’t have to cede authority to the Fed and carp about it after the fact.
But to properly assess the virtues of the rescue, you have to set it in context. The unemployment rate is 14.7 percent and rising. Car lines for food banks stretch for miles. As Americans continue to struggle and lose ground, the nation’s investment elite have been thus far saved from any downside of the coronavirus crisis. Beneficiaries are largely confined to stockholders, bondholders, and corporate executives (who are often major stockholders). Workers are not only not protected, they’re paying for the rescue, with taxpayer money propping up the Fed actions.
“This is a massive wealth transfer to owners of financial assets,” said Lev Menand, a former Treasury official who now teaches at Columbia University. “The rules of the game are supposed to be that equities take the loss, high-yield debt holders take the loss.” Allowing them to instead bear no burden is a form of socialism for capitalists.
It would perhaps be more tolerable if anyone other than the rich shared in the gains of this corporate rescue. But the Fed’s bond-buying program, unlike the Paycheck Protection Program, has no requirements on companies to retain workers. The Fed changed the term sheets between March 23 and April 9, eliminating any such requirements. Apple’s recent debt issuance, which could later be purchased directly or indirectly by the Fed, explicitly states that it will be used for, among other things, “share buybacks and dividends” — forms of leaking money to investors rather than keeping workers on payroll.
In addition, the Fed has essentially outsourced its bond-buying and loan-making authority to big money managers and banks, heightening the need for connections with these giants to get relief. Smaller companies, who don’t have the revenue or technical know-how to issue bonds into public markets, will find it more difficult to get in line for relief. Meanwhile, lending to small businesses and individuals has slowed as banks pull back during the crisis; by one count, interest rates charged to small businesses are now double the rates for large firms. Running bailouts through the Fed necessarily enhances the survival of large financial players and big corporations; everyone else must fight for crumbs.
Treasury Secretary Steven Mnuchin responded to this charge of special benefits for large corporations at a Senate Banking Committee hearing on May 19, essentially calling the stealth bailout a good thing. “The announcement of the corporate bond facility without putting up $1 of taxpayer money unlocked the entire primary and secondary market for corporate bonds,” Mnuchin said. “Companies that I had expected would need to borrow from us were able to borrow $25 billion in the primary markets” — a reference to Boeing.
Congress didn’t have to cede authority to the Fed and carp about it after the fact. It could have decided the parameters of any economic rescue. But that would involve making actual governing decisions, which Congress would rather defer to others. You can argue that, in the absence of state functionality, the Fed had to step in. But we’re living with the unequal consequences of a central bank that can only solve problems for one set of powerful interests. And perversely, rescuing investors — rich people like members of Congress and the donors they listen to — makes it easier for Congress to keep ignoring the needs of everyone else.
Even the Fed understands this at some level. On May 13, Powell pleaded with Congress to pass stronger fiscal aid to prevent a multiyear economic malaise. “Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” he said.
O n May 12, the Fed finally kicked off its corporate bond-buying program, 50 days after the fateful March 23 announcement. It was confined to purchasing corporate bond ETFs of once investment-grade “fallen angel” companies that had gone to junk. Within two days, $305 billion had been purchased. But while the purchases sent corporate bonds up in value, by and large the promise of bond-buying had already produced the desired effect. The Fed completed the bailout before ever administering it.
“This is more like August 2007 than September 2009.”
Some market watchers see the runaway rally in capital markets as irrational. “People that manage large portfolios and assets spent 10 years in a bull market fed by Federal Reserve intervention,” said Menand. “Their frame of reference is that something goes wrong and the Fed comes in, that’s a market opportunity.” Menand believes that the Fed won’t be able to sustain such valuations amid mass bankruptcies and high unemployment.
With the hope of a V-shaped economic recovery now completely dead, at some point the markets will have to take notice, and the sugar high from the Fed aiming its money cannon will wear off. Stocks fell modestly in May, and Goldman Sachs analysts have predicted a 20 percent drop in the next three months. Noted hedge fund manager David Tepper called the stock market in the first half of May the second-most overvalued market in his career, rivaled only by the dot-com boom. And in raw numbers, the valuation increase has gone well beyond the amounts the Fed has promised.
That’s what you get when you send the Fed in to handle a problem in the real economy. The Fed is ill-suited as a crisis manager; it sees its job as mainly to boost liquidity and keep assets strong.
“You can get loans, but loans don’t replace income,” said Nathan Tankus, research director at the Modern Money Network. Menand likened the moment to August 2007, when the Fed provided enough liquidity to avert crisis for a while. Eventually, there was a reckoning when asset prices declined and losses hit the system. “This is more like August 2007 than September 2009,” he said. “The idea that we won’t have massive insolvency at big companies is crazy. And the Fed will not be there.”
The Fed-induced rush into corporate bonds, in other words, pools risk in an unstable asset, creating the type of financial crisis it seeks to stamp out. Companies with functionally no revenue path in the near future taking on mounds of additional debt could set the stage for a series of defaults, which rose in April. Zombie companies being kept alive by debt markets eventually run up against the fundamentals of operating amid an economic depression. And indebted companies stave off liquidation by firing workers, as Hertz did last month to avoid bankruptcy. It didn’t help; Hertz filed for Chapter 11 on May 22.
The very knowledge that the Fed will save investors from trouble is likely to accelerate risk throughout the market. “If you told a family you can get a credit card at 18 percent [interest], but in a downturn we will give you an opportunity to get a 3 percent card, that would incentivize them to spend a lot of money,” Bharat Ramamurti, one of the members of the Congressional Oversight Commission, told me.
The Fed itself has called out this possibility. Powell’s comments on May 13 were accompanied by a May 15 financial stability report, warning that the financial system had “amplified the shock” of the coronavirus crisis. It raised concerns about debt defaults as its actions persuaded investors to buy up more debt. It warned that asset prices had “room to fall,” when the announcement effect created more of that room. It worried of defaults among high-risk “leveraged loans,” when these are precisely the kind of loans it’s vowed to buy through purchases of high-yield ETFs.
Just how deeply does the Fed have its fingers in the dough of the economy? Recent job growth numbers reflect what you’d guess — that the most rapid job creation is happening at general merchandise stores like Walmart and Costco. Right behind them are “monetary authorities-central banks.”


theintercept--2020-05-28--Left-Right Alliance Takes Aim At Surveillance Bill

President Donald Trump on Wednesday issued a rare veto threat , promising to reject a renewal of his surveillance authorities if approved by the House of Representatives .
If the FISA Bill is passed tonight on the House floor , I will quickly VETO it .
Our Country has just suffered through the greatest political crime in its history .
The massive abuse of FISA was a big part of it !
Civil libertarians , led by Rep. Zoe Lofgren , D-Calif. , pushed House Speaker Nancy Pelosi to allow an up-or-down vote on that amendment , then send it @ @ @ @ @ @ @ could pass with all senators voting .
Pelosi instead told Lofgren to negotiate with Intelligence Chair Adam Schiff , the New York Times reported , and Schiff watered down the legislation .
The result drew criticism from the left and right — and Trump ’ s attention to the fight .
The Senate had previously approved the renewal through 2023 , and it had been expected to become law with little controversy .
But earlier this month , the Republican-led Senate failed to pass a measure that would limit the FBI ’ s @ @ @ @ @ @ @ other online activity without a warrant by a single vote — a vote that Sen. Bernie Sanders missed .
Had Pelosi simply agreed to a simple up-or-down vote on the Senate amendment , it likely would have passed easily , and reauthorization of the broad surveillance authorities , along with some real reforms , would be on their way to becoming law .
The House is scheduled to vote late Wednesday evening , and leaders from both the Republican minority and the Congressional Progressive Caucus said they were whipping members to vote no @ @ @ @ @ @ @ has promised to veto it .
Trump , of course , has been known to break promises , so Pelosi ’ s gamble may still pay off .
For the first time in the history of the House , the lower chamber allowed for remote proxy voting , as dozens of members of Congress stayed away from the floor amid the unfolding pandemic .
The vote is expected to be close , the result of furious last-minute lobbying by civil libertarians on both the left and right , as well as opposition from @ @ @ @ @ @ @ .
The politics of surveillance , even in normal times , scramble the typical partisan tendencies , with Senate Majority Leader Mitch McConnell , R-Ky. , Pelosi , and Schiff often aligning on questions about the breadth and depth of state power to surveil and track Americans .
Opposing those congressional leaders is the civil liberties community , which includes both progressives and conservatives with libertarian leanings , but which rarely can muster a majority in Congress for its defense of the Bill of Rights .
argument has gained new traction in recent @ @ @ @ @ @ @ over the U.S. Foreign Intelligence Surveillance , or FISA , Court ’ s handling of surveillance of his campaign , particularly the deeply flawed application for a warrant to surveil Carter Page .
Although it was initially designed to review intelligence surveillance applications for suspected agents of a foreign power , after 9/11 the secretive FISA court signed off on expansive interpretations of surveillance law .
Now , as Trump feels victimized by it , he and his allies have found religion on the question .
Rep. Louie Gohmert , R-Texas , a @ @ @ @ @ @ @ remarked at a Rules Committee hearing Wednesday morning on the oddity of House Democrats fighting to give Trump surveillance powers he wasn ’ t asking for , despite his clear determination to use law enforcement for his own political ends .
“ It sure seems strange to me .
For Democrats to vote for this reauthorization , even with these amendments , would have to be sort of saying , we have so much trust in Donald Trump and the people he ’ s appointed that they would never lie to a FISA @ @ @ @ @ @ @ after their enemies .
We feel like he can be trusted and so can all the people he ’ s appointed , ” he said .
“ We know he ’ s cleaned out some folks at the Justice Department , FBI , I mean , think about it.
” The unlikely coalition of Trump and the civil libertarians was enough to stall the legal reauthorization of the FBI ’ s “ call detail records ” program — an amended version of the Patriot Act that allowed federal law enforcement to collect phone @ @ @ @ @ @ @ after McConnell was unable to force through an unamended reauthorization .
Earlier this month , the Senate reauthorized those programs with additional restrictions , but an amendment that would limit the government ’ s ability to collect internet browsing history without a warrant fell one vote short of the 60 votes it needed to pass .
Pelosi then instructed Schiff to come up with a compromise version with Lofgren , rather than allow an up-or-down vote on the Senate language .
The result of those negotiations was an amendment , introduced by Lofgren @ @ @ @ @ @ @ that reintroduced the restriction on collecting browsing history , but applies it only to U.S. persons .
However , Lofgren ’ s and Davidson ’ s amendment leaves up to interpretation what federal agents should do when they don ’ t know ahead of time whether U.S. persons ’ information would be swept up in information requests — giving the secretive FISA court room to allow bulk collection and task the FBI with purging U.S. person information afterward .
The agreement broke down when Schiff and Lofgren offered different interpretations of their measure @ @ @ @ @ @ @ use a dragnet and order a service provider to produce a list of everyone who has visited a particular website , watched a particular YouTube video , or made a particular search query , it can not seek that order unless it can guarantee that the business records returned will contain no U.S. person IP addresses , or other U.S. person identifiers , ” Lofgren said at a Rules Committee hearing Wednesday morning .
That interpretation was enough to win the backing of Sen. Ron Wyden .
In a statement , Schiff said @ @ @ @ @ @ @ to seek to obtain ” U.S. persons ’ browsing information , leaving open the possibility that the FBI could seek to collect visitor logs from a website that contained Americans , as long as that was not their primary purpose .
Statements like that , noted Charlie Savage in the New York Times , can be used by judges to determine legislative intent , and confounded what had appeared to be a settled issue .
That led to pushback from both the left and right , and the renewed attention not only risked @ @ @ @ @ @ @ Senate , and failed to win support for the amendment Schiff advocated for , it drew a veto threat from Trump .
Wyden , who co-sponsored the failed amendment in the Senate , withdrew his support , saying in a statement that it “ flatly contradicted the intent ” of his amendment in the Senate , and urged the House to consider his version .
The Rules Committee adjourned Wednesday morning without advancing the amendment , meaning the House will vote on the version that passed the Senate .
Lofgren said that she @ @ @ @ @ @ @ limited to U.S. persons , but that it was necessary in order to secure a vote from House leadership on the motion .
“ I know concerns have been raised about limiting this to U.S. persons , ” Lofgren said Wednesday .
“ In my ideal amendment , I would not have included this limitation , but I was led to understand that a compromise might be necessary in order to get a vote.
” David Segal , executive director of Demand Progress , which lobbied against the legislation , said that Pelosi @ @ @ @ @ @ @ from too close of an alliance with the national security establishment , which , he argued , “ has led them to line up against reforms that could have passed , and in support of a bill that harms Americans , might not pass , and would likely be vetoed.
” Trump , too , trashed the compromise , which led House Republican leadership to urge its members Wednesday morning to oppose the bill en masse .
If roughly one in five go along , Pelosi has no path to passage without Republican @ @ @ @ @ @ @ majority of Republicans gifted the CPC a fresh opportunity to flex its muscles in the House , after a disappointing effort to influence coronavirus relief packages .
Trump ’ s turn against surveillance authorities has produced enough Republican opposition that a concerted effort by progressives could block passage .
Rep. Mark Pocan , D-Wisc , a CPC co-chair , told The Intercept that the caucus was urging its 92 members to vote no .
“ We have grave concerns that this legislation does not protect people in the United States from warrantless surveillance @ @ @ @ @ @ @ browsing and internet searches , ” said Pocan and fellow co-chair Pramila Jayapal , D-Wash. , in a statement later on Wednesday afternoon .
“ Despite some positive reforms , the legislation is far too narrow in scope and would still leave the public vulnerable to invasive online spying and data collection.
” On Wednesday , Pelosi was insistent the vote should go forward .
“ With an intelligence bill , with a FISA bill , no one is ever really that happy , ” Pelosi said .
“ But in all humility @ @ @ @ @ @ @ .
”

President Donald Trump on Wednesday issued a rare veto threat, promising to reject a renewal of his surveillance authorities if approved by the House of Representatives.
If the FISA Bill is passed tonight on the House floor, I will quickly VETO it. Our Country has just suffered through the greatest political crime in its history. The massive abuse of FISA was a big part of it! — Donald J. Trump (@realDonaldTrump) May 27, 2020
The Senate had previously approved the renewal through 2023, and it had been expected to become law with little controversy. But earlier this month, the Republican-led Senate failed to pass a measure that would limit the FBI’s ability to access web-browsing history and other online activity without a warrant by a single vote — a vote that Sens. Bernie Sanders and Patty Murray missed.
Civil libertarians, led by Rep. Zoe Lofgren, D-Calif., pushed House Speaker Nancy Pelosi to allow an up-or-down vote on that amendment, then send it back to the Senate, where it could pass with all senators voting. Pelosi instead told Lofgren to negotiate with House Intelligence Committee Chair Adam Schiff, D-Calif., the New York Times reported, and Schiff watered down the legislation. The result drew criticism from the left and right — and Trump’s attention to the fight.
Had Pelosi agreed to a simple up-or-down vote on the Senate amendment, it likely would have passed easily, and reauthorization of the broad surveillance authorities, along with some real reforms, would be on their way to becoming law.
The House was initially scheduled to vote late Wednesday evening, but postponed the vote. Leaders from both the Republican minority and the Congressional Progressive Caucus said they were whipping members to vote no. Even if it passes, Trump has promised to veto it. Trump, of course, has been known to break promises, so Pelosi’s gamble may still pay off.
For the first time in the history of the House, the lower chamber allowed for remote proxy voting, as dozens of members of Congress stayed away from the floor amid the coronavirus pandemic. The vote is expected to be close, the result of furious last-minute lobbying by civil libertarians on both the left and right, as well as opposition from Trump and House Minority Leader Kevin McCarthy, R-Calif.
The politics of surveillance, even in normal times, scramble the typical partisan tendencies, with Senate Majority Leader Mitch McConnell, R-Ky., Pelosi, and Schiff often aligning on questions about the breadth and depth of state power to surveil and track Americans. Opposing those congressional leaders is the civil liberties community, which includes both progressives and conservatives with libertarian leanings, but which rarely can muster a majority in Congress for its defense of the Bill of Rights.
The civil liberties argument has gained new traction in recent months, with Trump’s outrage over the U.S. Foreign Intelligence Surveillance, or FISA, court’s handling of surveillance of his campaign, particularly the deeply flawed application for a warrant to surveil former adviser Carter Page. Although it was initially designed to review intelligence surveillance applications for suspected agents of a foreign power, after 9/11 the secretive FISA court signed off on expansive interpretations of surveillance law. Now, as Trump feels victimized by it, he and his allies have found religion on the question.
Rep. Louie Gohmert, R-Texas, a famously eccentric conservative in the House, remarked at a Rules Committee hearing Wednesday morning on the oddity of House Democrats fighting to give Trump surveillance powers he wasn’t asking for, despite his clear determination to use law enforcement for his own political ends.
“It sure seems strange to me. For Democrats to vote for this reauthorization, even with these amendments, would have to be sort of saying, we have so much trust in Donald Trump and the people he’s appointed that they would never lie to a FISA court. They would never just go after their enemies. We feel like he can be trusted and so can all the people he’s appointed,” he said. “We know he’s cleaned out some folks at the Justice Department, FBI, I mean, think about it.”
The unlikely coalition of Trump and the civil libertarians was enough to stall the legal reauthorization of the FBI’s “call detail records” program, an amended version of the Patriot Act that allowed federal law enforcement to collect phone records. The authority lapsed in March after McConnell was unable to force through an unamended reauthorization.
Earlier this month, the Senate reauthorized those programs with additional restrictions, but an amendment that would limit the government’s ability to collect internet browsing history without a warrant fell one vote short of the 60 votes it needed to pass.
Pelosi then instructed Schiff to come up with a compromise version with Lofgren, rather than allow an up-or-down vote on the Senate language. The result of those negotiations was an amendment, introduced by Lofgren and Rep. Warren Davidson, R-Ohio, that reintroduced the restriction on collecting browsing history, but applies it only to U.S. persons.
However, Lofgren’s and Davidson’s amendment leaves up to interpretation what federal agents should do when they don’t know ahead of time whether U.S. persons’ information would be swept up in information requests — giving the secretive FISA court room to allow bulk collection and task the FBI with purging U.S. person information afterward. The agreement broke down when Schiff and Lofgren offered different interpretations of their measure.
“If the government wants to use a dragnet and order a service provider to produce a list of everyone who has visited a particular website, watched a particular YouTube video, or made a particular search query, it cannot seek that order unless it can guarantee that the business records returned will contain no U.S. person IP addresses, or other U.S. person identifiers,” Lofgren said at a Rules Committee hearing Wednesday morning. That interpretation was enough to win the backing of Sen. Ron Wyden, D-Ore.
In a statement, Schiff said that the amendment prohibited orders that “to seek to obtain” U.S. persons’ browsing information, leaving open the possibility that the FBI could seek to collect visitor logs from a website that contained Americans, as long as that was not their primary purpose.
Statements like that, noted Charlie Savage in the Times, can be used by judges to determine legislative intent and confounded what had appeared to be a settled issue.
That led to pushback from both the left and right, and the renewed attention not only risked reforms that had been won in the Senate and failed to win support for the amendment Schiff advocated for, but it also drew a veto threat from Trump. Wyden, who co-sponsored the failed amendment in the Senate, withdrew his support, saying in a statement that it “flatly contradicted the intent” of his amendment in the Senate, and urged the House to consider his version.
The Rules Committee adjourned Wednesday morning without advancing the amendment, meaning that the House will vote on the version that passed the Senate.
Lofgren said that she would have preferred an amendment not be limited to U.S. persons, but that it was necessary in order to secure a vote from House leadership on the motion. “I know concerns have been raised about limiting this to U.S. persons,” Lofgren said Wednesday. “In my ideal amendment, I would not have included this limitation, but I was led to understand that a compromise might be necessary in order to get a vote.”
David Segal, executive director of Demand Progress, which lobbied against the legislation, said that Pelosi and Schiff’s apparent own goal came from too close of an alliance with the national security establishment, which, he argued, “has led them to line up against reforms that could have passed, and in support of a bill that harms Americans, might not pass, and would likely be vetoed.”
Trump, too, trashed the compromise, which led House Republican leadership to urge its members Wednesday morning to oppose the bill en masse. If roughly 1 in 5 go along, Pelosi has no path to passage without Republican support.
The opposition of a vast majority of Republicans gifted the CPC a fresh opportunity to flex its muscles in the House, after a disappointing effort to influence coronavirus relief packages. Trump’s turn against surveillance authorities has produced enough Republican opposition that a concerted effort by progressives could block passage.
Rep. Mark Pocan, D-Wisc., a CPC co-chair, told The Intercept that the caucus was urging its 92 members to vote no.
“We have grave concerns that this legislation does not protect people in the United States from warrantless surveillance, especially their online activity including web browsing and internet searches,” said Pocan and fellow co-chair Pramila Jayapal, D-Wash., in a statement later on Wednesday afternoon. “Despite some positive reforms, the legislation is far too narrow in scope and would still leave the public vulnerable to invasive online spying and data collection.”
On Wednesday, Pelosi was insistent the vote should go forward. “With an intelligence bill, with a FISA bill, no one is ever really that happy,” Pelosi said. “But in all humility, we have to have a bill.” By late Wednesday evening, the vote was postponed.
Update: May 27, 2020, 9:40 p.m. ET
This piece has been updated to reflect that the House’s vote, scheduled for Wednesday evening, has been postponed.


theintercept--2020-05-27--It’s Official: 100,000 Are Dead of Covid-19 in America, and Their Blood Is on Trump’s Hands

It did not have to be this way — because the vast majority of these deaths were preventable Don ’ t believe me ?
In the United States , the first confirmed case of Covid-19 was on January 20 .
Three days later , Vietnam confirmed its first case of Covid-19 .
Today , the death toll in the United States has crossed 100,000 .
The number of deaths in Vietnam ?
How about South Korea , which confirmed its first case on the exact same day as the United States ?
Less than 300 deaths so far .
According @ @ @ @ @ @ @ P. Jewell , “ an estimated 90 percent of the cumulative deaths in the United States from Covid-19 … might have been prevented by putting social distancing policies into effect two weeks earlier , on March 2 , when there were only 11 deaths in the entire country.
” Putting those policies into effect even a week earlier , they say , would have resulted in “ approximately a 60-percent reduction in deaths.
” Think about that : tens of thousands of Americans would be alive today had Trump take action sooner .
@ @ @ @ @ @ @ misinformation .
Blame China !
Blame the World Health Organization !
Blame Barack Obama !
As the media critic Jay Rosen , a professor of journalism at New York University , has argued , Trump ’ s plan “ is to have no plan , to let daily deaths between one and three thousand become a normal thing , and then to create massive confusion about who is responsible … by ‘ flooding the zone with shit , ’ Steve Bannon ’ s phrase for overwhelming the system with disinformation , distraction , @ @ @ @ @ @ @ , there is the well-documented “ human tendency to turn away from mass suffering , ” the way in which our sympathy levels go down as the number of deaths go up .
“ One death is a tragedy , ” goes the old saying attributed to Joseph Stalin , “ a million deaths is a statistic.
” In fact , Stalin never said it .
Trump , however , has gone out of his way to callously minimize and dismiss the rising U.S. death toll .
When it stood at 86,607 deaths @ @ @ @ @ @ @ s a very , very small percentage .
I say it all the time — it ’ s a tiny percentage.
” One hundred thousand men , women , and children can not be reduced to a “ tiny percentage.
” Nor should we forget their names , their faces , their legacies .
Philip Kahn , 100 , a veteran of World War II .
Margit Buchhalter Feldman , 90 , a survivor of the Holocaust .
Jorge Ortiz-Garay , 49 , a Catholic priest .
Dez-Ann Romain , 36 , a @ @ @ @ @ @ @ 5 , a kindergartener .
I could go on and on and on .
Yet Trump doesn ’ t seem to give a damn .
Having slammed Obama for golfing during the 2014 Ebola outbreak , which killed only two people in the U.S. , Trump spent the past weekend back at his own golf course , as deaths from Covid-19 approached the 100,000 mark .
There has been no remorse , no regret , and few condolences for the families of the dead .
Shamelessly , the commander-in-chief has preferred to take @ @ @ @ @ @ @ pile up .
This is sociopathy on steroids .
So let us not be complicit in this malign madness , in this slow-motion normalization of mass deaths .
Be upset .
Get mad .
Speak out .
As Catherine Lutz and Anne Lutz Fernandez pointed out in a recent essay for the Watson Institute for International and Public Affairs at Brown University , “ The problem with normalizing deaths ” is that “ it allows more deaths ” and “ makes it easier for the horrors of virus deaths to fall off the @ @ @ @ @ @ @ away from public health and for future politicians to treat the next pandemic even more glibly.
” In recent weeks , Trump ’ s normalization strategy has involved deliberately and disingenuously moving the goalposts over and over again : He predicted “ 50 to 60 ” thousand deaths ; then “ 60,000 to 70,000 “ ; then “ 75 , 80 to 100,000 people.
” But as we remember and mourn the 100,000 victims of Covid-19 here in the United States , I can ’ t and won ’ t forget his worst @ @ @ @ @ @ @ , from February 26 : “ When you have 15 people , and the 15 within a couple of days is going to be down to close to zero , that ’ s a pretty good job we ’ ve done .
”

Photo: Misha Friedman/Getty Images
It’s official: Donald Trump now has the blood of 100,000 people on his tiny hands.
On Wednesday, the coronavirus death toll in the United States crossed the 100,000 mark, according to Johns Hopkins University data.
One. Hundred. Thousand.
It’s difficult to comprehend the enormity, the sheer horror, of that six-figure number. For context, that’s more people than “ever died in a single year from HIV/AIDS, drug overdoses, gun violence, or car crashes in the US.” That’s more Americans than “died over seven decades in the Korean, Vietnam, Persian Gulf, Afghanistan, and Iraq wars.” That’s more than 33 times the number of people who died on 9/11.
Next up, the World War I milestone. Within a matter of days, the number of deaths from the coronavirus will surpass the number of U.S. military fatalities (116,516) from the Great War. Those lives were lost over the course of more than 19 months — compared to less than four months now.
It did not have to be this way — because the vast majority of these deaths were preventable
Don’t believe me? In the United States, the first confirmed case of Covid-19 was on January 20. Three days later, Vietnam confirmed its first case of Covid-19. Today, the death toll in the United States has crossed 100,000. The number of deaths in Vietnam?
Zero.
How about South Korea, which confirmed its first case on the exact same day as the United States?
Less than 300 deaths so far.
According to epidemiologists Britta L. Jewell and Nicholas P. Jewell, “an estimated 90 percent of the cumulative deaths in the United States from Covid-19 … might have been prevented by putting social distancing policies into effect two weeks earlier, on March 2, when there were only 11 deaths in the entire country.”
Ninety. Percent.
Putting those policies into effect even a week earlier, they say, would have resulted in “approximately a 60-percent reduction in deaths.”
Think about that: tens of thousands of Americans would be alive today had Trump take action sooner.
But he didn’t. He was off playing golf and holding rallies, while denouncing Democrats for “politicizing” the coronavirus and calling it their “new hoax.” He was comparing it to the seasonal flu and claiming that it would “miraculously” disappear, while opposing the testing of sick Americans on a cruise ship because he liked “the numbers being where they are.” He was praising the Chinese government for its handling of the coronavirus, while silencing a Centers for Disease Control and Prevention official who was trying to sound the alarm bell. (She hasn’t been heard from since.)
The New York Times, the Washington Post, the Associated Press, and The Guardian, among many others, have published deep dives on Trump’s botched response to this pandemic. “Lives were endangered and I believe lives were lost,” whistleblower and vaccine expert Dr. Rick Bright told Congress earlier this month. Even Dr. Anthony Fauci, the nation’s top infectious disease expert, conceded in an interview with CNN’s Jake Tapper in April that there was “a lot of pushback” within the administration to social distancing and lockdown measures early on in the crisis: “I mean, obviously, you could logically say that if you had a process that was ongoing and you started mitigation earlier, you could have saved lives.”
So what now? Will we solemnly if briefly mark this latest grisly milestone and then… move on?
We have normalized a multiplicity of Trumpian excesses, abuses, and crimes over the past three and a half years. Will we now normalize mass deaths too?
How did Americans who “lost our shit when 3,000 people were killed on 9/11,” to quote journalist Julia Ioffe, and launched multiple wars, drone strikes, and torture programs in response, become inured to 100,000 deaths at home? And what happened to the shock and outrage that we saw at the start of this crisis? Are we suffering from pandemic fatigue?
Perhaps racism is behind our seeming indifference. Deaths from Covid-19 have been disproportionately black and brown. “When you start seeing where the cases are coming from and the demographics — I’m not worried,” said a member of the public who was interviewed by the Washington Post while out and about in a wealthy, white suburb of Georgia. Got that? The demographics. “Unfortunately the American population is … very diverse,” Health and Human Services Secretary Alex Azar told CNN, while trying to defend the record U.S. death toll. Got that? Very diverse.
Then there is the thick fog of misinformation. Blame China! Blame the World Health Organization! Blame Barack Obama! As the media critic Jay Rosen, a professor of journalism at New York University, has argued, Trump’s plan “is to have no plan, to let daily deaths between one and three thousand become a normal thing, and then to create massive confusion about who is responsible … by ‘flooding the zone with shit,’ Steve Bannon’s phrase for overwhelming the system with disinformation, distraction, and denial.”
And, of course, there is the well-documented “human tendency to turn away from mass suffering,” the way in which our sympathy levels go down as the number of deaths go up. “One death is a tragedy,” goes the old saying attributed to Joseph Stalin, “a million deaths is a statistic.”
In fact, Stalin never said it. Trump, however, has gone out of his way to callously minimize and dismiss the rising U.S. death toll. When it stood at 86,607 deaths, he declaimed: “It’s a very, very small percentage. I say it all the time — it’s a tiny percentage.”
One hundred thousand men, women, and children cannot be reduced to a “tiny percentage.” Nor should we forget their names, their faces, their legacies. Philip Kahn, 100, a veteran of World War II. Margit Buchhalter Feldman, 90, a survivor of the Holocaust. Jorge Ortiz-Garay, 49, a Catholic priest. Dez-Ann Romain, 36, a high school principal. Skylar Herbert, 5, a kindergartener. I could go on and on and on.
Yet Trump doesn’t seem to give a damn. Having slammed Obama for golfing during the 2014 Ebola outbreak, which killed only two people in the U.S., Trump spent the past weekend back at his own golf course, as deaths from Covid-19 approached the 100,000 mark. There has been no remorse, no regret, and few condolences for the families of the dead. Shamelessly, the commander-in-chief has preferred to take a victory lap as the bodies literally pile up.
This is sociopathy on steroids. So let us not be complicit in this malign madness, in this slow-motion normalization of mass deaths. Be upset. Get mad. Speak out.
As Catherine Lutz and Anne Lutz Fernandez pointed out in a recent essay for the Watson Institute for International and Public Affairs at Brown University, “The problem with normalizing deaths” is that “it allows more deaths” and “makes it easier for the horrors of virus deaths to fall off the broadcast news chyron, to divert resources away from public health and for future politicians to treat the next pandemic even more glibly.”
In recent weeks, Trump’s normalization strategy has involved deliberately and disingenuously moving the goalposts over and over again: He predicted “50 to 60” thousand deaths; then “60,000 to 70,000“; then “75, 80 to 100,000 people.”
But as we remember and mourn the 100,000 victims of Covid-19 here in the United States, I can’t and won’t forget his worst prediction of all, his biggest lie, from February 26: “When you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that’s a pretty good job we’ve done.”
Trump lied. One hundred thousand people died.


theintercept--2020-05-27--Tlaib Opponent Brenda Jones Collected Campaign Contributions From Quicken Loans Executives as Public

Tlaib Opponent Brenda Jones Collected Campaign Contributions From Quicken Loans Executives as Public Subsidies Flowed

leading up to Brenda Jones ’ s vote in November 2017 to award $ 250 million in taxpayer funds to billionaire Dan Gilbert and his Quicken Loans empire , the Detroit City Council president cashed $ 8,000 in campaign checks from current and former executives at Gilbert ’ s companies .
In total , Jones has received nearly $ 25,000 in campaign contributions from the executives , their spouses , and Quicken ’ s political action committee , while Gilbert , Michigan ’ s richest man , has accumulated over half a billion in public subsidies .
The $ 250 @ @ @ @ @ @ @ , the owner and co-founder of Quicken Loans , to continue an ambitious redevelopment of downtown Detroit through his real estate company , Bedrock .
In the years that followed — and as Jones collected more Gilbert-linked campaign contributions — the relationship between Jones and Gilbert has only tightened .
Jones is one of just two elected officials , alongside her ally , Detroit Mayor Mike Duggan , on the board of the Detroit Economic Growth Corporation .
One section of the Trump tax cuts included the bipartisan Opportunity Zone program , which @ @ @ @ @ @ @ breaks .
The DEGC helped to craft Michigan ’ s recommendations to the Treasury Department for Opportunity Zone designations that benefited Gilbert .
A ProPublica investigation revealed Gilbert ’ s role in lobbying for the census tract designations , which sparked outrage in Detroit , including a call for a congressional investigation from first-term Rep. Rashida Tlaib , who represents the city in Congress .
Jones , however , made no public statement as anger rose at Gilbert following the revelations .
Jones also stayed silent as Gilbert attracted criticism for refusing to @ @ @ @ @ @ @ from the new , wealthier residents of Bedrock ’ s luxury apartment buildings .
Jones and Tlaib faced off in two elections in 2018 , one to fill the remainder of former Rep. John Conyers ’ s term , the second for the nomination to succeed him in the next Congress .
Jones won the first , serving for roughly three weeks , while Tlaib won the second , going on to become a high-profile member of the so-called Squad , quickly making headlines declaring that House Democrats would “ go in and @ @ @ @ @ @ @ has been referred to by President Donald Trump as “ a great friend , ” is the most powerful man in Detroit , and owns vast swaths of the city .
But his team responded angrily and attacked Tlaib ’ s demand for an investigation .
“ Rep .
Tlaib would be well served to spend some time at www.oppzonefacts.com learning the truth behind the false ProPublica narrative before advocating that the government spend the public ’ s money chasing a ghost story , ” a Quicken Loans representative told the local press @ @ @ @ @ @ @ help a politician deeply enmeshed in the census tract designation as a board member of a powerful local development agency , as opposed to a member of Congress , Tlaib , who demanded a federal investigation into the controversial tax break .
The Intercept reported last month that Jones had received illegal campaign contributions in her 2017 re-election campaign to the Detroit City Council .
Neither Jones nor Gilbert , through Quicken Loans , responded to requests for comment .
into Detroit began in 2011 when Quicken Loans moved its headquarters to downtown @ @ @ @ @ @ @ In a city that is 84 percent African American , with 35 percent of the city and half of its children in poverty , Gilbert ’ s role in Detroit ’ s politics and development have not come without controversy .
Community discomfort with Gilbert ’ s vaunted new status was encapsulated in 2017 when Bedrock ran an ad campaign titled “ See Detroit As We Do ” featuring overwhelmingly white models .
“ Dan throws a tremendous amount of money around in the city , ” said Maurice BP-Weeks , who lives @ @ @ @ @ @ @ the Action Center on Race and the Economy .
“ He is a political kingmaker .
It ’ s difficult for people to credibly contest him and feel that they can keep their job or their funding because those are the things that are threatened when you take on such a powerful person .
If you ’ re contesting power in Detroit , you ’ re contesting Dan Gilbert.
” Gilbert is the richest man in Michigan , with a net worth of $ 7.3 billion .
“ The risk here is that @ @ @ @ @ @ @ a city council or county board and get overpaid to do something they would have done anyways ” said Greg LeRoy , executive director of Good Jobs First , which advocates for transparent and fair municipal subsidies .
“ For a city like Detroit , it really doesn ’ t have the luxury of wasting any money , ” LeRoy said .
“ Do you want to put all your eggs in one basket , like Dan Gilbert-sized office parks , or do you try to do other things where you ’ re @ @ @ @ @ @ @ basket — where you ’ re doing public transit , public infrastructure , health , and education , all the things that benefit lots of employers and don ’ t put you at risk of any one company ’ s business plan not working out ?
” Between 2011 and 2016 , Gilbert and his affiliated companies spent $ 451 million purchasing parcels of land in downtown Detroit .
Gilbert and his companies employ over 17,000 workers in Detroit , making it the city ’ s largest employer .
Of the five lenders @ @ @ @ @ @ @ in the city in the aftermath of the 2008 financial crisis , only Quicken is still extant .
As of 2015 , half of the properties that Quicken has foreclosed on had become blighted .
Gilbert has been a leading advocate of expanded government funding to tear down blighted structures .
Last June , Quicken Loans paid $ 32 million to settle charges brought by the Justice Department that it had approved hundreds of loans for unqualified borrowers , and then profited when the borrowers defaulted .
“ Dan Gilbert and Brenda Jones @ @ @ @ @ @ @ , ” said Charlevoix VIllage Association President Toyia Watts , a community organization that led the opposition to the 2017 giveaway .
“ They ’ re not putting money in the pots for fixing up homes , give the people that live here the empty lots they ’ ve maintained .
We ’ ve given developers too much power over the community .
They have too much power over our neighborhood .
The way they ’ re making money doesn ’ t work for us.
” BP-Weeks noted the connection between Quicken ’ @ @ @ @ @ @ @ and Gilbert ’ s role in crafting development policy in Detroit today .
“ Quicken is the folks that were responsible for the last housing crisis ” said BP-Weeks .
“ For an executive of Quicken making all those decisions including about housing is ridiculous .
He should not be making those decisions .
”

In the weeks leading up to Brenda Jones’s vote in November 2017 to award $250 million in taxpayer funds to billionaire Dan Gilbert and his Quicken Loans empire, the Detroit City Council president cashed $8,000 in campaign checks from current and former executives at Gilbert’s companies. In total, Jones has received nearly $25,000 in campaign contributions from the executives, their spouses, and Quicken’s political action committee, while Gilbert, Michigan’s richest man, has accumulated over half a billion in public subsidies.
The $250 million from the city council allowed Gilbert, the owner and co-founder of Quicken Loans, to continue an ambitious redevelopment of downtown Detroit through his real estate company, Bedrock. In the years that followed — and as Jones collected more Gilbert-linked campaign contributions — the relationship between Jones and Gilbert has only tightened.
Jones is one of just two elected officials, alongside her ally, Detroit Mayor Mike Duggan, on the board of the Detroit Economic Growth Corporation. One section of the Trump tax cuts included the bipartisan Opportunity Zone program, which selects low-income census tracts for lucrative tax breaks. The DEGC helped to craft Michigan’s recommendations to the Treasury Department for Opportunity Zone designations that benefited Gilbert. A ProPublica investigation revealed Gilbert’s role in lobbying for the census tract designations, which sparked outrage in Detroit, including a call for a congressional investigation from first-term Rep. Rashida Tlaib, who represents the city in Congress.
Jones, however, made no public statement as anger rose at Gilbert following the revelations. Jones also stayed silent as Gilbert attracted criticism for refusing to assist the city in collecting income taxes from the new, wealthier residents of Bedrock’s luxury apartment buildings.
Jones and Tlaib faced off in two elections in 2018, one to fill the remainder of former Rep. John Conyers’s term, the second for the nomination to succeed him in the next Congress. Jones won the first, serving for roughly three weeks, while Tlaib won the second, going on to become a high-profile member of the so-called Squad, quickly making headlines declaring that House Democrats would “go in and impeach the motherfucker.”
Gilbert, who has been referred to by President Donald Trump as “a great friend,” is the most powerful man in Detroit, and owns vast swaths of the city. But his team responded angrily and attacked Tlaib’s demand for an investigation. “Rep. Tlaib would be well served to spend some time at www.oppzonefacts.com learning the truth behind the false ProPublica narrative before advocating that the government spend the public’s money chasing a ghost story,” a Quicken Loans representative told the local press. Now Gilbert has an opportunity to help a politician deeply enmeshed in the census tract designation as a board member of a powerful local development agency, as opposed to a member of Congress, Tlaib, who demanded a federal investigation into the controversial tax break.
Polls for the August 4 Democratic primary show a tight race.
The Intercept reported last month that Jones had received illegal campaign contributions in her 2017 re-election campaign to the Detroit City Council. Neither Jones nor Gilbert, through Quicken Loans, responded to requests for comment.
Gilbert’s entrance into Detroit began in 2011 when Quicken Loans moved its headquarters to downtown from Livonia in the Michigan suburbs. In a city that is 84 percent African American, with 35 percent of the city and half of its children in poverty, Gilbert’s role in Detroit’s politics and development have not come without controversy. Community discomfort with Gilbert’s vaunted new status was encapsulated in 2017 when Bedrock ran an ad campaign titled “See Detroit As We Do” featuring overwhelmingly white models.
“Dan throws a tremendous amount of money around in the city,” said Maurice BP-Weeks, who lives in Detroit and is co-executive director of the Action Center on Race and the Economy. “He is a political kingmaker. It’s difficult for people to credibly contest him and feel that they can keep their job or their funding because those are the things that are threatened when you take on such a powerful person. If you’re contesting power in Detroit, you’re contesting Dan Gilbert.”
Gilbert is the richest man in Michigan, with a net worth of $7.3 billion.
“The risk here is that a small group of developers can capture a city council or county board and get overpaid to do something they would have done anyways” said Greg LeRoy, executive director of Good Jobs First, which advocates for transparent and fair municipal subsidies.
“If you’re contesting power in Detroit, you’re contesting Dan Gilbert.”
“For a city like Detroit, it really doesn’t have the luxury of wasting any money,” LeRoy said. “Do you want to put all your eggs in one basket, like Dan Gilbert-sized office parks, or do you try to do other things where you’re not putting so many eggs in one basket — where you’re doing public transit, public infrastructure, health, and education, all the things that benefit lots of employers and don’t put you at risk of any one company’s business plan not working out?”
Between 2011 and 2016, Gilbert and his affiliated companies spent $451 million purchasing parcels of land in downtown Detroit. Gilbert and his companies employ over 17,000 workers in Detroit, making it the city’s largest employer. Of the five lenders that had the highest percentage of foreclosures in the city in the aftermath of the 2008 financial crisis, only Quicken is still extant. As of 2015, half of the properties that Quicken has foreclosed on had become blighted. Gilbert has been a leading advocate of expanded government funding to tear down blighted structures. Last June, Quicken Loans paid $32 million to settle charges brought by the Justice Department that it had approved hundreds of loans for unqualified borrowers, and then profited when the borrowers defaulted.
“Dan Gilbert and Brenda Jones are not looking out for the residents,” said Charlevoix VIllage Association President Toyia Watts, a community organization that led the opposition to the 2017 giveaway. “They’re not putting money in the pots for fixing up homes, give the people that live here the empty lots they’ve maintained. We’ve given developers too much power over the community. They have too much power over our neighborhood. The way they’re making money doesn’t work for us.”
BP-Weeks noted the connection between Quicken’s role in the subprime lending crisis and Gilbert’s role in crafting development policy in Detroit today. “Quicken is the folks that were responsible for the last housing crisis” said BP-Weeks. “For an executive of Quicken making all those decisions including about housing is ridiculous. He should not be making those decisions.”