Rolling Stone's Matt Taibbi is going solo. He sets his sights on the $2 trillion bailout that's rife with opportunities for scams, both large and small. We're offering a selection from his first column here with a link to his new column.
Neil Barofsky, the Special Inspector General for the last bailout, guesses that whoever has his job this time around is going to have a lot of work.
“There will be S&L-type frauds, absolutely ostentatious frauds,” he says, spitballing a list of potential problems in the $2 trillion Covid-19 rescue package. “I’d be looking for tens of billions of loss to fraud.”
This is unavoidable. If the rescue package signed into law by Donald Trump on March 27 had more regulatory controls — “nothing, nada, zero,” oversight is how another economist explains the existing structure — it might defeat the purpose of getting money out into the economy quickly. It seems possible the rescue was designed with such surreal logic in mind. “Fraudsters spend money, too,” is how Barofsky puts it.
A second issue has to do with the structure of the Covid-19 relief plan. It features two main components: rescues of Main Street and Wall Street.
The headline-grabbing frauds will be found in the Main Street side, where crooks will scheme to get their hands on (among other things) $377 billion in relief intended for desperate restaurants, hardware stores, nail salons and other real-world employers.
These will be scams the public can understand, “straight rips,” as Barofsky puts it: insiders creating dummy companies and submitting for loans, employers taking money for payroll and hiding layoffs, con artists Googling their way to successful SBA loan applications, etc.
Nigerian-letter-type scams, in which crooks impersonate bailout agencies asking for bank info before sending relief, are already being reported across the country. Stories range from mass-texts from “CostCo” offering $110 stimulus checks, to a woman who said she was offered a six-figure Covid-19 grant from “Bill Barr” by phone.
Those stories are bad, but the exponentially more serious potential for mischief in this new rescue is on the Wall Street side. “With the [Main Street] relief, you might see $50,000 frauds, $100,000, $4 million,” says Barofsky. “It’ll be billions on the other side.”
There are worries from analysts about the use of bailout funds to manipulate financial markets, finance takeovers and buybacks, subsidize executive bonuses. The crisis will surely be used as a pretext to con the public into taking tens or hundreds of billions in bad investments off the books of dumb companies, in the name of “guaranteeing liquidity.”
A larger issue is conceptual. What’s the consequence of making the maintenance of prices in financial markets a “systemically important” end in itself?
America’s executive class in the last few decades has settled into a Ponzi-like pattern...