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In early April, Bharat Ramamurti got a call from U.S. Senate Minority Leader Chuck Schumer's office, informing him that the senator was selecting him as the first member of what would become the five-member Congressional Oversight Commission. The commission, which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, oversees trillions of dollars in federal spending to rescue America from the COVID-19 crisis.
"I hurriedly went and updated my LinkedIn page because it said that I was still a student in law school, which was accurate as of 12 years ago," Ramamurti says. Ramamurti's updated now reflects that he was, until recently, Elizabeth Warren's deputy policy director. It still doesn't mention, however, that his first job out of Yale Law School, in 2007, was an internship with the Boston Red Sox the same year they won the World Series.
Ramamurti's new oversight job was a lonely one at first. Not only was he working from his home in Washington, D.C., but for weeks after his appointment, Ramamurti was also the only official serving on the commission. Holed up in his house with his wife, a 5- and 3-year-old, and an energetic dog, he has been trying to monitor the multitrillion-dollar rescue of the American economy.
Along the way, Ramamurti has grown increasingly worried that small and medium-sized businesses are getting crushed as big corporations make out like bandits.
As Americans shelter in their homes, they're cutting spending at small businesses and sending an even greater share of money to companies like Amazon, Facebook, and Google. It's why Google's former CEO Eric Schmidt predicts the pandemic will cause Big Tech to get even bigger. Gigantic corporations, which have deep pockets, fancy accountants, huge legal teams and access to international financial markets, are also better equipped to weather shocks than your local hardware store or small manufacturing company. For instance, big corporations are more likely to do well in bankruptcy court than small and medium-sized companies, according to a recent Brookings Institution study. This is particularly the case when bankruptcy courts are clogged — as they're expected to be with the COVID-19 crisis.
Congress has tried to help small businesses. The new Payroll Protection Program provides loans to cover up to two months of their operations. It's relatively generous; businesses that keep their employees on the payroll don't have to pay their loan back. Congress has provided $659 billion for the program, but with small businesses across the entire nation in serious distress, observers believe it's not close to enough.
Corporate America, on the other hand, is getting basically an unlimited credit line from the Federal Reserve. The Fed, which is working in conjunction with the Treasury Department, has promised to buy trillions and trillions of dollars in corporate bonds. As small businesses scramble for a limited pot of federal money, big businesses are getting access to the Fed's unlimited money-creating machine. Ramamurti believes that is unfair.
The Fed's lending through corporate bond purchases also doesn't attach strings that limit executive pay, ban stock buybacks or require them to keep people employed — unlike federal lending programs to small and medium-sized businesses. Ramamurti doesn't like this, though U.S. Treasury Secretary Steve Mnuchin defends the difference in treatment.
Unlike the loans to small and medium-sized businesses, the Fed's purchases of corporate bonds are not direct loans. And corporations have to pay this money back, unlike with a lot of PPP lending. But Ramamurti is concerned that without strings, federal assistance to corporations won't serve the most important goal.
"I think that the rationale for providing federal taxpayer support to large companies right now is to make sure that those companies keep workers employed," Ramamurti says. But, without restrictions, he worries corporations will instead juice their stock prices, boost shareholder dividends and shower their executives with big bonuses. "We can't just trust the corporations to do the right thing with the money."
The Fed's mere announcement that it was going to lend all this money sent corporate America's stock prices soaring. Despite the catastrophic collapse of the labor market — the worst monthly job losses in American history — the stock market just got done with its best month in decades.
"I'm worried that after this crisis has passed, you're going to see big businesses that were able to get this Fed backstop in a pretty strong condition overall, and medium-size and small businesses in rough shape overall," Ramamurti says. Powerful companies, he worries, will be in a prime position to buy up little guys, grab market share and increasingly monopolize the economy.
Ramamurti is particularly worried about the fate of midsize companies. "These are some of our biggest employers in the country and, also in many cases, some of our most innovative firms," he says. "A lot of American manufacturing firms fall into this category." Yet, as the rescue package is currently structured, these companies are too big to qualify for generous PPP loans — and they're too small to issue bonds and get assistance from the Fed's endless bond-buying program. They're in the "worst of both worlds," he says.
Neil Barofsky, who was the official watchdog of the government bailout of Wall Street during the financial crisis starting in 2008, is similarly concerned about the current rescue approach. "The reality is that if you backstop and support the biggest players and provide them with access to cheap money, at the same time that you're not providing proportional support for their smaller competitors, then almost by definition, the rich are getting richer, the big are getting bigger," he says.
When we talked, Ramamurti was interrupted a couple times by a screaming child and a barking dog. The Congressional Oversight Commission still doesn't have a chairperson, and, he says, while there are four members now, they haven't even actually all met together on a videoconference yet. In the meantime, the trillions are starting to flow.
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