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Government Tries To Preserve Both Wall Street Monsters and Human Lives

April 23, 2020 (EIRNS)—While the Trump Administration steadily mobilizes Federal government and military manpower and resources, and some high-technology private industry, to battle the COVID-19 pandemic itself, its response to the economic collapse is to save Wall Street finance and the corporate monsters it has created, at all cost.

The latest monster is the hopelessly overindebted and economically inefficient shale oil/gas drilling industry. On April 22 Energy Secretary Dan Brouillette told the Washington Post that the Federal Reserve’s so-called “Main Street lending program” ($2.3 trillion as announced) could be used to aid oil companies—that is, to make four-year low-interest loans to them. This followed on President Trump’s statement that he had ordered the Administration to provide aid to the oil companies (he had simultaneously tweeted, “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea,” a statement perhaps intended to raise oil prices and thus stock prices, which it did).

This Federal Reserve aid would be a very bad idea. There are many abuses reported in the Treasury-Fed lending and quantitative easing programs, which abuses are lesser problems than the overall policy direction of supporting financial market assets and very large banks. And many of the Fed’s other QE programs already violate even Section 13(3) (“unusual and exigent circumstances”) of the Federal Reserve Act.

But this oil company aid would combine every kind of breach, even violating the Fed’s ten-day-old announcement of the “Main Street lending program” itself. That announcement said the Federal Reserve would lend to companies below 10,000 workers or $2.5 billion annual revenue, only if their creditworthiness were not impaired by other circumstances prior to the coronavirus crisis. Large numbers of the shale drillers have for years been junk-debt and high-yield leveraged-loan companies, paying only interest and having been put through debt reorganizations by their lenders in order to keep drilling. Saving them from bankruptcy now, so that they can continue producing oil for which there is no demand, is a policy which aids nothing but those oil field companies’ bank and shadow bank lenders—recall Capital One Bank, a relatively small oil field lender, but already “excused” by FDIC from paying a $1 billion margin call on oil price derivatives.

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