For many of us following the news, the recent enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Congress’ historic $2.2 trillion aid package, evokes memories of the bailouts and relief packages put through a decade ago in response to the financial meltdown fueled by the subprime mortgage crisis. The first piece of stimulus legislation came in the fall of 2008 when Congress, in an effort to restore confidence in the financial system and reestablish lending activity, passed the Emergency Economic Stabilization Act (EESA). Among other things, the EESA established the Troubled Asset Relief Program (TARP), which authorized a $700 billion buy back of toxic assets and equity from banks and other financial institutions. In early 2009, Congress followed up the EESA with the American Recovery and Reinvestment Act (ARRA), which pumped over $800 billion into the U.S. economy via stimulus checks and tax rebates for families; tax credits, tax deductions, and loan guarantees for small businesses; and large-scale investments in infrastructure, healthcare, education, and scientific research, among others, through contract projects awarded to federal, state, and local programs. In total, the 2008 bailout and 2009 stimulus package came with a hefty price tag of just over $1.4 trillion.
Not surprisingly, these stimulus measures had the unintended consequence of creating ample opportunities for fraud, thus creating the need for robust systems of oversight and control. To this end, the EESA established the Special Inspector General for TARP (SIGTARP), a separate federal law enforcement agency with broad authority to investigate fraud by TARP fund recipients, while the ARRA established a Recovery Accountability and Transparency Board and earmarked tens of millions of dollars to the GAO and agency inspectors general to investigate fraud, waste, and abuse. Such oversight mechanisms were largely successful and led to significant enforcement action. By the close of FY 2019, SIGTARP investigations had resulted in criminal charges against 430 individuals. Of those, 373 were convicted and 291 sentenced to prison. Defendants in TARP prosecutions have included homeowner scammers, borrowers, and bank executives, while charges have included bank fraud, accounting fraud, securities fraud, insider trading, mortgage fraud, public corruption, false statements, obstruction of justice, theft of trade secrets, money laundering, and bankruptcy fraud. And, in the years following passage of the ARRA, the Justice Department opened thousands of investigations into alleged grant fraud and pursued charges against individuals and businesses involving false statements, false claims, bid rigging, corruption, and bribery.
While the CARES Act is similar in several respects to its forebearers, it involves nearly twice as much money, making it the most expensive economic stimulus legislation in the country’s history. Among other things, the Act allocates roughly $600 billion to individuals and families; $377 billion to small businesses; $340 billion to state and local governments; $180 billion to public services; and a staggering $500 billion to large businesses.