Holding Center: The coronavirus crisis is creating a kleptocracy

Our government’s response to the 2008 recession was something of a travesty. Then-Treasury Secretary Henry Paulson gave $700 billion to big banks, with very little oversight on how those funds should be used. As a result, the banks survived with their executives receiving an enormous bonuses, while 4 million families had their homes foreclosed to recoup the banks’ losses. That’s millions of people dislocated in the trough of a recession.  

Since the beginning of the government’s response to the coronavirus crisis, the process has been similarly corrupt, with senators dumping stocks before the markets tanked. An early version of the Republican bailout even tried to hide the recipients of loans for six months, keeping the flow of money a mystery until it had already been spent. If our government is not already a kleptocracy, then it clearly wants to be one.   

The major mistake in 2008 was letting a single person, the treasury secretary, dispense billions at their discretion, and the mistake has been repeated with current bailouts. Once again, $2 trillion has been entrusted to a single man, with minuscule oversight on his allocations and few rules for how corporations should use the funds. 

The situation becomes downright terrifying when we consider who that man is: Steven Mnuchin, an unelected former Goldman Sachs banker who earned the title “Foreclosure King” during the 2008 recession. He made over $200 million by buying a failing mortgage lender and foreclosing on thousands of people –– including a 90-year-old woman for a 27-cent payment discrepancy. 

This was not just unethical businessmanship: Mnuchin broke the law, racking up 1,000 violations in his time leading OneWest Bank. It is a miracle that he’s not in prison, let alone at the helm of a fund 1/10th the size of the U.S. gross domestic product. 

Like 2008, the treasury secretary has near unmitigated control over the funds. “There’s nobody that Secretary Mnuchin has to ask,” California Rep. Katie Porter has warned. There is little preventing the secretary from, say, directing billions to Trump properties and corporations owned by friends, while hospitals, states and individuals bear the brunt of the crisis. 

The kind of leeway that allowed banks to foreclose on millions in 2008 is no less unchecked this time around. Though there are limits on stock buybacks, bonuses for executives and other means of profiting off the crisis, Mnuchin can waive them as he desires. 

We are already seeing the results of Mnuchin’s carte blanche of the bailout funds. Our response tends to corporate needs first, giving them tax cuts and billions of dollars with few strings attached. 

While corporations are made whole, individual plights are lightly acknowledged with $1,200 bailouts that may take four months to reach people –– and which the Treasury has allowed banks to seize to satisfy outstanding debts.   

The current downturn far outstrips the magnitude of the 2008 recession, with an unprecedented 10 million applicants for unemployment benefits in March. The crisis requires a response that recognizes a struggle felt most desperately on an individual level. Instead, our government is repeating the mistakes of 2008, allocating the people’s money away from the people.    

Dillon Cranston is a sophomore writing about politics. His column, “Holding Center,” ran every other Wednesday.