With Rent Freezes About to Expire, Mnuchin Lobbies for More Wall Street Bailouts
As millions of Americans stand on the brink of economic annihilation, the money keeps flowing to Wall Street thanks to carefully contrived mechanisms to maintain a dying financial system afloat.
December 04th, 2020
By Raul Diego
Many prophetic scenes depicted in a series of Mayan codices written in the early days of the Spanish colony, and translated and compiled in El Libro de los Libros del Chilam Balam, describe a world foreign to its original authors. But, one which was barreling down on them and their civilization even as the Mayan high priests recorded their visions for each stop on their cyclical calendar system.
The metaphors they leaned on to describe these new Western values and systems were accurate, despite having nothing comparable in their own cosmology or parallels in their relationship with the earth. In one of the most striking prophecies, the interpreting shaman warns of the days of “the golden club,” subtly alluding to the new paradigm of wealth and commercial imperatives being imposed on their world.
Over six centuries later, the golden club era has become an epoch. The United States holds the biggest gold stick of them all and today, the descendants of the Maya and other ancestral victims of its inexorable advance find themselves at a potential tipping point, which may finally bring this historical aberration we now call capitalism to its natural end.
With human labor being swapped out for robots and algorithms in our modern-day world, the empire of commerce built over the last five centuries is quickly reaching complete self-sufficiency and discarding any excess human component. This includes the banking and financial sectors, which in some ways, is far ahead of the game.
Money or wealth no longer exclusively requires human labor to generate. The art of creating money out of nothing has been perfected by the financial sector, which has innumerable tools at its disposal to produce enormous wealth in a blink of an eye. An illusion that is kept alive only because they have a limitless pool of taxpayer money to hedge their often risky bets.
The United States Treasury Department keeps a stash of that taxpayer money and uses it for currency speculation. The massive profits from the secret market activities can be used for things like funding foreign governments and many other applications at the discretion of the presiding administration. This slush fund was the central funding vehicle for the multiple economic relief facilities enacted in the CARES Act and is operated by the Federal Reserve on behalf of the U.S. Treasury Department.
The spigot from the money machine was opened briefly for the general public through the emergency legislation. But, Treasury Secretary Steve Mnuchin is getting ready to cut it off even as he opens it even further for Wall Street.
The homeless armies
By January 2021, renters in America will owe $34 billion to their landlords, according to global investment bank and advisory firm, Stout. More than half of the eviction moratoriums enacted to avoid an upsurge in homelessness during Covid lockdowns have been rescinded, including a federal moratorium that expired in July.
Rent and landlord relief programs across the country take up the lion’s share of CARES Act funding allocations, with states like Virginia having already spent over 38% of the money reserved for renters by early November. As the money runs out and the December 31 CARES Act cutoff date approaches, states are fumbling to keep enough cash in their coffers to stem the tidal wave evictions that are at the doorstep and leaking through profusely.
Cases like that of Ricky Johnson, as reported by The Virginian-Pilot, are happening nationwide and show how landlords are getting around moratorium rules and successfully evicting tenants over technicalities and dubious legal maneuvers. It was only through the efforts of a staunch group of friends and housing advocates, that Johnson was able to avoid ending up on the streets with his brother.
With their help, the Johnson brothers convinced a judge to vacate a previous order awarding possession of the property to a management company and managed to extend their stay of execution a paltry few weeks into next year. But, in the rapacious economic climate that characterizes the American real estate market, three months rent free can feel like a gift from the gods.
The gods, in this scenario, is the Department of the Treasury and its current head, Steve Mnuchin, who has formally asked that all but four credit facility programs created by the department to disburse CARES Act funds return any unused monies by the end of 2020 so they can be integrated into the regular federal pipeline, including the $429 billion supposedly leftover from CARES Act. Mnuchin was deliberately misleading about where that money actually goes since it lays bare a massive slush fund called the exchange stabilization fund (ESF) at the heart of these enormous giveaways to the biggest, richest, and most ruthless banks.
Of the total 13 facilities created by Treasury, Secretary Mnuchin had asked to spare only those which pertain to financial institutions like Citigroup and a handful of usual suspects. In a formal letter to Federal Reserve chairman Jerome Powell in late November, Mnuchin instructed the Fed to extend four programs directed at helping Wall Street beyond December, while drawing the curtain down on the remaining facilities and preening about programs like the Main Street Lending Program and their supposed “success” in abating an economic downturn during the pandemic.
Mnuchin’s declaration of victory is at odds with the reality of people like Dana Imus, who lost her job as a forklift operator in March and hasn’t been able to get a job since. Her landlord simply refused to recognize the federal eviction moratorium issued by the CDC in October. Similar problems occur throughout the country as property owners circumvent the laws through intimidation and legislative loopholes to force tenants out.
Tawanda Mormon from Cleveland, Ohio, was thrust into a couch-surfing lifestyle when the 46-year old was hospitalized in August and fell behind on her $500-dollar rent. Despite the CDC moratorium, Mormon was evicted in October and has been staying with friends and family. In Missouri and North Carolina, judges refused to abide by the CDC’s notice and landlords across the nation have been fighting the order in court.
Among the loopholes being used to put people out of their homes that the CDC’s order only applies to nonpayment of rent, which allows landlords to bring an eviction case on virtually any other grounds, such as excessive noise or trash. In addition, the CDC made the process more onerous for tenants seeking to avail themselves of moratorium protections by giving landlords the “right to challenge the veracity” of their claims.
Where’s the ball?
Mnuchin’s request that four credit facilities for the financial sector be spared the December 31 deadline, while pulling the cord on all the relief programs for small businesses and regular Americans included in the CARES Act, feels like politics as an incoming Biden administration is set to use the coming housing crisis a springboard for sweeping legislative action as potentially millions of people start to fall through the cracks come January.
Meanwhile, big banks continue to receive their billion-dollar stipends from Uncle Sam without interruption. Two of the four programs Mnuchin wanted off the chopping block are zombies from the 2008 financial collapse.
The Primary Dealer Credit Facility (PDCF), which targets large banking institutions and back then extended $8.95 trillion in secret, below-market-rate loans to three trading houses, constituting two-thirds of the original program’s total disbursements and The Commercial Paper Funding Facility (CPFF), which makes the Fed the buyer of last resort for loans in the broader economy, thereby providing liquidity in short term funding markets like small business loans. The Money Market Mutual Fund Liquidity Facility (MMFL), directed at hedge funds and non-bank financial entities, and the Paycheck Protection Program Liquidity Facility, which protects PPP loan originators from borrower default, round out the rest.
Financial data for these programs are kept secret by the Fed with the exception of the Paycheck Protection Program Liquidity Facility. According to Mnuchin’s letter, two programs whose data is verboten use “core” EFS funding. In other words, the money comes from a slush fund operated by the Fed on behalf of the Treasury Department and is where the aforementioned $429 billion Mnuchin is disingenuously requesting “back” from the Fed actually is.
The shell game between the Treasury and the Fed keeps the money flowing on Wall Street year-round. In September of 2019, the Fed moved $9 trillion cumulatively into Wall Street’s trading houses via repo loans, whose recipients are hidden from the public by Fed policy on its open market operations, which fund the loans.
By using the ESF to fund the federal relief facilities contained in the CARES Act, the Treasury avails itself of the Fed’s secrecy policy on open market operations, which don’t have to be made public until one year after the facility is terminated at the earliest, as stipulated in section 1103 of the Dodd-Frank financial reform legislation of 2010.
Requesting an extension for the four Wall Street-geared facilities until March 2021 also extends the time it will take for such records to see the light of day. According to Wall Street on Parade, it is likely that once disclosed, the financial data for these secret market operations will include the names of long-standing beneficiaries of government largesse.
The point of the game is to prop up America’s predatory financial sector, which has been going full throttle since the 2008 financial crisis when these types of facilities were created to prevent the country’s biggest financial firms from going into a liquidity crisis as they scour the globe for more markets to squeeze.
Mnuchin’s letter came two weeks after Democratic senators delivered a message of their own to the Secretary of the U.S. Treasury, in which they called for two facilities in the CARES Act meant for the regular citizen– specifically the Main Street Lending Program (MSLP) and the Municipal Liquidity Facility (MLF) – to be kept on and reformed.
Signed by Senators Chuck Schumer, Elizabeth Warren, Mark Warner, and Sherrod Brown, the letter makes a case for the expansion of these financial assistance programs citing statistics, which reflect the permanent closure of thousands of small businesses and declining revenue across the service economy.
The reality of crashing GDP numbers amid the pandemic tells the story, which includes a 41% decrease in the number of self-employed Black business owners between February and April and a litany of cases that show the “disproportionate economic impacts on minorities and women” caused by the pandemic and related restrictions.
The senators shed light on some of the major problems regarding these facilities and how they are set up to bypass the most economically vulnerable populations by requiring applicants to meet an income threshold that leaves out the vast majority of working-class Americans. In addition, they point to the billions of dollars left unused in the relief effort, which Mnuchin wants to keep in the ESF.
Fed Chairman Powell is quoted in the letter acknowledging that the MSLP currently targets “larger [businesses]” rather “than a lot of minority businesses.” The senators called for reforms that would change this by lowering the application threshold from $100,000 to $50,000 and expanding eligibility criteria to open the funds to more than the paltry 250 businesses currently eligible for the MSLP facility.
The fact that Mnuchin ignored the informed pleas of the Democratic senators is immediately chalked up to partisan politics. But, a gesture of goodwill by the outgoing administration does not help cement the division both parties exploit to achieve the aims of the interests that ultimately control them. A Biden administration will most certainly pounce on the morsels left behind by the outgoing Trump show to generate support for sweeping changes to the social contract as defined and imposed by the government through emergency response measures.
End of the katún
A desperate population facing evictions, food shortages, and falling income opportunities will find it difficult to resist any offers of federal help that come their way. It is, however, more important than ever as Americans are sheep herded into a “dark winter,” that they keep their eyes open.
Diane Yentel, president of the National Low-Income Housing Coalition, is sure that a Biden administration will have a historic opportunity to expand government assistance programs in the very first days of his presidency, like the $100 billion emergency fund proposed by advocates to cover renters, landlords, and homeless people. The question is whether there will be real justice behind any new programs or legislation brought forward to deal with a crisis that has been looming for a while.
The Maya prophets saw the unscrupulous nature of their new Western European rulers and the temporary nature of their enterprises, built up only to steal and cheat. Those of the “two-day banks” and “rats” figure prominently in their descriptions of the world they saw unfolding before them. Their advice was patience. The days of the golden club are numbered and will disappear soon enough when the next series of ‘katuns’ rolls around.
Feature photo | Federal Reserve Chairman Jerome Powell fist bumps Treasury Secretary Steven Mnuchin after a House Financial Services Committee hearing on Capitol Hill in Washington, Dec. 2, 2020. Jim Lo Scalzo | Pool via AP
Raul Diego is a MintPress News Staff Writer, independent photojournalist, researcher, writer and documentary filmmaker.