Warren Brings the Fire: She Wants Criminal Liability for Executives Who Misuse Bailout Funds. Period.

May 20th 2020

By Kerry Eleveld

Massachusetts Sen. Elizabeth Warren is on a mission to put the fear of bejesus in any corporate executives who use bailout funds to enrich themselves or shareholders at the expense of the workers that taxpayer money was intended to help.

Warren wants civil and criminal liability attached to these funds—something she made perfectly clear in a letter to the Federal Reserve and then backed up again during a Senate hearing with Fed Chairman Jerome Powell and Treasury Secretary Steve Mnuchin.

If executives take bailout money and fail to meet the certification requirements, Warren wrote, they should be subject to "civil and criminal penalties, including disgorgement." She also said they should be required to immediately repurchase their bonds for the full amount if they breach the certification criteria.

But Secretary Mnuchin weathered some of Warren's harshest critiques during a Tuesday hearing before the Senate Banking Committee. Warren made it crystal clear that Mnuchin was personally responsible for making certain the $500 billion in funding he was charged with dispersing to mid-sized and big corporations is actually benefitting American workers.

The law, Warren recounted, gives the Treasury Department and the Federal Reserve the ability to write "detailed rules" about which companies get that money and how they can spend it.

Warren then grilled Mnuchin on whether he would "require companies that received the bailout money from the taxpayers to keep their workers on payroll." When Mnuchin declined to respond directly, Warren went right back at him several times. Mnuchin merely offered that keeping people on payroll was "discussed with both sides of the aisle," but he never committed to it.

"I'm talking about your terms sheets," she said, noting that he clearly had no plans of making such a payroll requirement.

Then Warren tried to nail him down on criminal liability, reiterating that taxpayers were "on the hook” for half a trillion dollars.

"If you're not going to require that they keep a single person on payroll," she reiterated, "will you create a certification process that ensures that executives are held personally liable and are subject to criminal penalties if they provide false information or misuse bailout funds?"

"We will review that," Mnuchin offered.

"What you're saying is that you won't do it," Warren clarified. "We're in a situation where 35 million Americans have filed for unemployment," she noted, "you're in charge of half a trillion dollars. You're boosting your Wall Street buddies and you're leaving the American people behind."

Mnuchin objected, calling that an "unfair characterization" and reiterating that the terms were discussed with both Republicans and Democrats at the time. In other words, what you're asking me to do wasn't originally included in the legislation and so, no, I'm not going to require companies getting money to keep a single person on payroll or threaten any type of personal liability for executives cheating the system.

"You were given the authority to determine the terms," Warren responded, "and those term sheets do not require that a single organization getting billions of dollars in taxpayer money retain one job."

That’s about the shape of it, in case anyone wondered whether Mnuchin was holding executives to account.

Here’s some of Warren’s grilling.

Posted with permission