McConnell’s McLoans Are a Back-Door Bailout for Banks with No Limits on Corporate Spending on CEO Pay But New Limits on Paid Leave for Workers

McConnell’s McLoans Are a Back-Door Bailout for Banks with No Limits on Corporate Spending on CEO Pay But New Limits on Paid Leave for Workers

Summary. Senator Mitch McConnell (R-KY) and the Trump White House are pushing a proposal to respond to the COVID-19 crisis that is basically a $500 billion blank check for businesses and a relative pittance to Americans who work. It places no limits on corporations spending that half a trillion dollars on executive pay, golden parachutes, or bonuses. It does not require the bulk of any loans be spent on lower-level corporation employees, and it allows funds to be spent on past corporate debts. It expressly allows taxpayer money to be spent on mortgages to banks, with no restrictions on banks foreclosing on businesses or people. The same goes for utlities getting paid with no limits on cutting off electricity or heat. It also contains new limits on paid leave for American workers, rather than expanding paid leave to reach then 80% of the American workforce left out of the previous package the GOP approved after it failed to eliminate it.

More Bait-and-Switch Trickle Down from the TrumpGOP

Although McConnell named the bill the Senate is debating to create the acronym “CARES,” the details show that what he cares about most is getting $500 billion to corporations and limiting financial help to individuals. 

This “TrumpCares” package would impose even more limits on paid sick days and paid family leave, rather than aiding the nearly 80% of Americans whom the TrumpGOP already excluded from Democratic efforts. This is not the way to empower the richest country on earth to protect millions of vulnerable Americans from an unprecedented public health crisis. See Title 3 of the bill for limitations. 

Instead of more limitations on paid leave, the GOP-controlled Senate should stop being so reckless with paid leave for American workers. Many of these workers are living paycheck to paycheck and need more than $1,200 to pay their bills and need legislation to prevent corporate predators from trying to take their homes. 

But, now more than ever, Americans need protections from people like Steve Mnunchin, Trump’s Treasury Secretary, who got richer foreclosing on Californians and other Americans after the Wall Street crash in 2008.

A real solution would look like the PAID Act, which would provide them with the financial security to get through this crisis.

The paid leave provisions need to be expanded, not limited, to include the caregivers of older Americans and of younger Americans with disabilities, along with tens of millions of other working Americans the GOP blocked from paid leave. Senator Ron Johnson (R-WI) even tried to eliminate the minimal paid leave provisions even though he himself made millions dumping stock before the stock market crash began due to worries about the Coronavirus. 

Continued Limits on Paid Leave = Continued Compromise of Public Health

The current paid sick days exemption will continue to compromise public health until it is fixed. Too many workers are caught in the massive gaps in coverage between limited voluntary plans like Walmart’s and the restrictive federal plan.

As the New York Times editorialized: “Companies that do not pay sick workers to stay home are endangering their workers, their customers and the health of the broader public.” Many of the corporations that have tens of thousands of employees without paid sick leave are in the business of handling our food and feeding our families: McDonald’s, Chick-fil-A, Applebees, Subway, Burger King, Dunkin Donuts, and Wendy’s, plus grocers like Walmart, Publix, and Target (as illustrated in the chart below, prepared by the New York Times).  Americans do not need a flu with that burger, let alone the deadly COVID-19.

McConnell Would Give $500 Billion to Companies, with Few Strings

The proposed one-time payment of $1,200 to some Americans pales in comparison to the millions corporations could get with no strings.

Airlines. The bill would give airlines $50 billion with no requirement that employees get paid first. It includes no protections to ensure that health insurance benefits are not cut. Nor does it limit using funds to pay banks first or restrictions against future stock buybacks or executive bonuses. 

Congress belatedly barred corporations that got TARP bailouts after the 2008 crash, some of the corporations used the money to pay for “golden parachutes” for exiting executives and performances bonuses. But then some unscrupulous corporations used bailout money to pay “retention bonuses,” since that was not expressly banned even though that was just another version of the same greed.

Here’s one very telling example of a member of the Charles Koch network of billionaires, Jockey International’s Debra Waller (the heir to the Jockey fortune), approving retention bonuses for M&I Bank despite the bank’s role in the crisis.

It includes a $150 billion black-box bailout of loans any industry can use.

There’s no limit on the size of other companies that could get these loans or other considerations, such as whether companies have a record of outsourcing American jobs to other countries or have records of wage theft from American workers (i.e., Walmart, Wells Fargo, and Bank of America). Industries going bankrupt for other reasons, like coal, could also potentially access the funds. 

There are legitimate questions about whether millions could go to the Trump Organization and its nearly 500 business entitities, at Mnuchin’s discretion. What about other big GOP donors, like hotel and casino magnates the billionaire Sheldon Adelson? What about the Kushner Companies? 

McConnell’s McLoans would make American taxpayers an “unsecured” lender to these industries, which is a lower priority debt for repayment if they file for bankruptcy. No one knows how much will be paid back.

The “Small” Business McLoans Are Also Deeply Flawed

The bill would allocate nearly $300 billion to “small” businesses that are defined to include businesses that make millions of dollars.

Employees are not prioritized. The bill would allow these loans to be used to pay other loans, like from banks (“other debt obligations that were incurred” beforehand), with no requirement most or even any be used to pay employees.

Executive pay. The bill provides some loan forgiveness if funds are used to pay employees, but it could be used to subsidize pay for executive employees up to $100K per year, even if some employees were laid off.  

Contractors. The bill does not provide any loan forgiveness for paying contract workers, even though many companies have outsourced employee positions to avoid paying benefits by using independent contractors. Self-employed contractors would get a credit to reduce self-employment taxes on any income, which may well be scarce.

Banks protected. The bill would allow the loans to be used to pay business mortgages to banks or rent to rental corporations rather than limiting the foreclosure or eviction of businesses due to this crisis. This constitutes a bailout of big banks despite how they behaved in 2008-10+.  

Utilities protected. The bill would allow loans to be used to pay utility bills, which protects huge energy companies that provide utilities, but it gives no protections against utility companies cutting off individuals. (Learn more about which utilities have/have not suspended disconnects.)

No Protections Against Foreclosures or Evictions of Ordinary Americans

The bill provides no protections against banks foreclosing on, or rental companies evicting, American families–despite what we saw predatory banks do in 2008-2010, pursuing 6.5 million foreclosure proceedings against Americans in the three years following the worst Wall Street crash since the Great Depression. 

When the economy recovered under Obama, many businesses (including banks) paid themselves huge bonuses, while wages stagnated and many Americans never recovered their financial footing after foreclosure. Other corporations used surging profits to make stock buy-backs, like many in the airline industry, instead of investing in their workers or saving for times like these.

“Small Business” has been defined previously by the SBA to include gold mines that have up to 1,500 employees, banks and credit card companies with up to $600 million in assets, and other businesses that are not the kind of mom-and- pop shops that the phrase small business evokes.

Could huge conglomerates that deploy scores of legally separate LLCs like the Trump Organization, Ivanka Trump’s LLCs, or even Koch Industries qualify for such loans despite assets they already own that could be used to pay employees?

McConnell’s Mc-loans would also make American taxpayers an “unsecured” lender to all of these “small” businesses that can get loans of up to $10 million, and these taxpayer loans would be a lower priority debt than mortgages for repayment if any of them file for bankruptcy protections.  

No real limits on non-profits bailed out by McConnell’s McLoans either

Nonprofit groups are also bailed out in the bill, even though some entities with non-profit status have substantial financial reserves and millions in assets, like hte Bradley Foundation.

Nonprofit entities do not pay any taxes by definition, even as some accumulate massive treasuries that have been increasingly deployed to influence who wins elections and who controls the Senate, in the aftermath of Citizens United.

Would these benefits apply to the Charles Koch non-profits that have been deployed to use his vast wealth to advance his personal, political agenda? 

Nonprofits and for-profit corporations, big and “small,” are not required to use any of their cash or investment reserves before they can get McLoans that put American taxpayers on the hook.

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