× Expand Carolyn Kaster/AP Photo Shalala has scant experience with Federal Reserve and financial matters, and a long stock portfolio that includes companies involved in the bailout.

First Response

For the past week, we’ve watched this absurd spectacle where money is flying out the door of the Federal Reserve bailout programs, and the only person in a position to conduct oversight has nothing more than a Twitter feed. Bharat Ramamurti, the former Elizabeth Warren staffer who I interviewed last week, was until yesterday the only member of the Congressional Oversight Commission, a five-member panel outside of the executive branch (so Donald Trump can’t fire anyone associated with it) charged with monitoring the bailout.

Ramamurti and his tweets have been unusually effective, getting the Fed to agree to publish all transactions that use public funds, and some detailed information. But it’s clear that he needs some help: a staff, an office, and maybe the other four members on the panel to cover what could reach $4.5 trillion in corporate lending.

He got three of them yesterday. Republican leaders in the House and Senate chose nondescript Congressman French Hill (R-AR) and Chamber of Commerce mole Sen. Pat Toomey (R-PA). The pick to watch was the House Democratic seat. There was no obligation to choose a sitting member of Congress, but Katie Porter (D-CA) was actively seeking the job, and really was the only member actively seeking the job. With deep experience in financial services and demonstrated aptitude with oversight, there was really no better person for the job.

House Speaker Nancy Pelosi chose her friend, freshman Congresswoman Donna Shalala (D-FL).

This is a stunning selection. Shalala, according to sources, had no interest in the job. She has no expertise in the financial industry or the Fed. The two committees that would prepare you for this position are Financial Services and Oversight (Porter sits on both). Shalala sits on Education and Labor and Rules. She’s on the early childhood education subcommittee, so if that ever comes up in discussing the Fed’s corporate bond or high-yield ETF purchases we’re in good shape.

Yes, Shalala was Health and Human Services Secretary. In her public statement, Pelosi highlights that, saying Shalala will “ensure that this historic coronavirus relief package is being used wisely and efficiently to protect the lives and livelihoods of the American people, and not be exploited by profiteers and price-gougers.”

But the oversight panel has nothing to do with public health or the pandemic. It’s supposed to examine Federal Reserve lending programs and whether they are assisting the public in economic stabilization and job recovery. These are deliberately complex programs that require for oversight someone with a passing familiarity with the financial system and corporate America. The only expertise Shalala has in all that comes from all the stocks she owns.

In Shalala’s most recent financial disclosure, dated May 2019, she lists share ownership in an array of companies that will be at the front of the line for a bailout. She holds shares in Boeing, as well as Alaska Airlines and Spirit Aerosystems, which builds a lot of pieces of Boeing aircraft. She owns Chevron, ConocoPhillips, Royal Dutch Shell, and Occidental Petroleum at a time of a historic crash in oil prices. She owns entertainment stock in Paramount, Live Nation, and AMC Theaters, the latter almost certainly headed to bankruptcy. She owns Choice Hotels; nobody’s staying in hotels. She owns TripAdvisor; nobody’s taking trips. She owns retailers and retail producers Ralph Lauren, L Brands, Burlington Stores, and Five Below; retail’s in trouble (she’s also got Walmart, so she’s OK there). She owns big banks JPMorgan Chase, Wells Fargo, Bank of New York Mellon, BBVA Compass, and HSBC.

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She owns between $301,000 and $615,000 in UnitedHealth, where she served on the board from 2001-2007, including during part of the time detailed in a 2017 Justice Department complaint accusing the insurer of overbilling Medicare for over $1 billion. That would reflect the very profiteering and price-gouging Pelosi said it was important for Shalala to scrutinize. I guess she has experience after all.

This list of stocks is very partial; the holdings go on for 26 pages. Sources tell me that Pelosi informed House Democrats that Shalala was chosen because she was “someone who reflected the beautiful diversity of our caucus.” I mean, her portfolio is diversified. Is the idea that Shalala will have to recuse herself from discussing any company receiving a bailout in which she has a financial interest?

Two of her holdings are particularly troubling on that front. Shalala owns direct stock in Moelis, one of three banks the Treasury Department has retained to handle aviation-related bailouts (for “no big fees,” Treasury Secretary Mnuchin has assured us). Part of the oversight panel’s job would be determining how Treasury is managing advisory services. This is a direct conflict of interest.

The holding in Moelis is small, no more than $15,000. But Shalala has between $202,000 and $555,000 in a number of iShares exchange-traded funds. Those are part of BlackRock, who is handling numerous bond-buying programs for the Federal Reserve, as an investment adviser and asset manager. One of the Fed’s programs will buy exchange-traded funds, including potentially funds in which Shalala owns shares.

These conflicts don’t even take into account that Shalala ran the Clinton Foundation for two years, giving her access to power at the highest levels. Or that she was the only non-financial member of the Municipal Assistance Corporation, the board that reworked New York City’s finances after the 1975 fiscal crisis, forcing numerous concessions on city unions. Or that she mismanaged the medical school at the University of Miami while serving as president, leading to hundreds of layoffs. Or that she sat on the board of homebuilder Lennar throughout the entire subprime mortgage crisis; Lennar owned a subprime lender.

So if your idea of a member of an oversight panel is someone overmatched, hopelessly compromised and conflicted, and unable to provide decent oversight, then Donna Shalala would be your choice. Draw your own conclusions about what that says about Pelosi’s interest in protecting taxpayers from corporate chicanery.

Odds and Sods

I was on Rising with Krystal Ball and Saagar Enjeti talking about the “banks steal the checks” scandal. We taped it yesterday, it should show up here soon.

I also taped an interview for The Real News Network, that will also show up soon.

Thanks to The Young Turks for discussing my work on the banks steal the checks scandal.

Radius Bank Does the Right Thing

Speaking of the banks steal the checks scandal, I have an update on Radius Bank, the online lender whose policy appeared to be to garnish CARES Act payments if the recipient had a negative balance in their account. I received a note from Christina Shortall, Radius Bank senior vice president of Customer Experience:

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“At Radius Bank we have a history of being consumer friendly and remain dedicated to helping our clients. During this difficult time, especially, we want to make sure they have access to the funds they need. Any Radius clients with a negative balance expecting a stimulus check can reach out to the customer service desk, and they will be granted access to those funds.”

Good for Radius Bank.

I should add for the personal responsibility crowd that most of these negative balances are generated through overdrafts. It’s well-known that banks have in the past illegally structured overdraft fees to maximize profits. And these fees are pretty absurd to begin with—typically around $35 per incident. Overdraft is effectively a loan program with predatory interest rates, and it’s opt-in; most customers don’t even know they have it on their accounts.

Some banks have announced they would eliminate overdraft fees for the duration of the crisis, but depending on the bank, customers have to call to request the fee waiver. Cory Booker (D-NJ), the former presidential candidate, has been attacking overdraft fees as disproportionately harmful to communities of color for a long time. In a letter to a dozen banking CEOs, Booker and Sherrod Brown (D-OH) have asked for a blanket ban on overdraft fees until the crisis lifts, without requiring action on the part of the customer.

As Booker and Brown’s legislation on the subject suggests, these fees should just be banned entirely (their bill only bans them for ATM and debit card transactions). They’re a giant profit center for commercial banks on the backs of poor people. Denying transactions for insufficient funds isn’t great, but it’s better than opting people into a payday-level loan program.

Today I Learned