The Congressional Oversight Commission questions a $ 700 million loan that Yellow Corp. (then YRC Worldwide) received last year under the Coronavirus Aid, Relief and Economic Security Act, better known as the CARES Act.
A report released on April 30 notes that the role of the commission is to oversee the implementation of parts of the CARES Act by the US Treasury and the Federal Reserve.
Subtitle A provided $ 500 billion to the Treasury for loans and other investments “to provide liquidity to eligible businesses, states and municipalities related to losses suffered as a result of the coronavirus,” according to the report; $ 17 billion was available for businesses “essential to maintaining national security.” “
The Treasury provided national security loans to 11 companies, totaling $ 735.9 million. Yellow represented 95% of total outstanding loans.
It was the 12e commission report, and this is not the first to question the yellow loan. The seventh report focused on this, with the commission expressing concerns about the Treasury’s process to certify Yellow as “essential to maintaining national security” and questioning whether Yellow’s precarious financial situation at the time of the loan exposed taxpayers to a hardship. significant risk of loss.
This last document reports on subsequent communications between the commission, the Treasury and the Ministry of Defense. Among the questions raised by this correspondence, says the commission, did it determine that the carrier of fewer trucks was essential to national security?
TRANSCOM (US Transportation Command) did not ask the military’s main logistics contractor, Crowley Logistics, the commission reports. In fact, TRANSCOM told the commission that YRC’s loss could be easily absorbed by the LTL market, based on analysis provided by Crowley.
The commission also said it was unable to substantiate Treasury and DOD’s claim that Yellow provides 68% of LTL services to DOD.
âThe commission believes that part of the reason for these unsubstantiated numbers, or inconsistencies, is due to the complexity associated with the seven-level chain of command at DOD implemented to designate a company as essential to national securityâ¦ With so many layers, information is doomed to get lost in translation. “
Finally, the commission drew attention to the intensification of Yellow’s lobbying efforts in 2020. Yellow spent $ 570,000 on lobbying efforts in 2020, up from zero in 2019, $ 80,000 in 2018 and $ 75,000 in 2017. The Commission highlighted the correlation between lobbying and Yellow’s ability to secure a loan of $ 700 million. The Treasury confirmed that several senators and members of Congress had sent letters to the Treasury urging them to take out loans from Yellow, according to the report.
He also pointed out that this was not the first time the company had pressured the government to help it out of a difficult financial situation. In 2009, during the financial crisis, Yellow was also on the verge of bankruptcy and planned to seek a $ 1 billion federal government bailout before entering into a debt swap deal with a group of banks. Yellow’s lobbying efforts, in conjunction with intensive political contacts by unions, totaled $ 800,000 for this year.
The Northwest Arkansas Democrat Gazette explored the report in a May 1 article, “The $ 700 million loan from a trucking company in the United States “is a mistake,” says Hill.
U.S. Representative French Hill, R-Ark., Who is part of the three-person commission, told the Democrat-Gazette that the company did not appear to qualify for the narrowly tailored program.
“The $ 700 million taxpayer-guaranteed loan from the Treasury to Yellow, formerly YRC, was a mistake,” Hill said in a written statement, according to the newspaper. “Based on the monitoring work carried out by the commission, there is no evidence to support that Jaune is essential to national security, which means these loans should never have been executed.”
A spokeswoman for Yellow, Heather Nauert, said in a written statement reported by the newspaper: “Our deal with the US Department of the Treasury was mutually beneficial. The department has invested in the future of the company and our 30 000 employees with the conviction that it would be profitable. Today, taxpayers are the beneficiaries of this investment. “
The federal government ended up with an approximate 30% stake in the company.
She also told the newspaper that moving freight for the federal government is very complex and not all carriers can or will.
âWe provide a highly specialized service that allows our equipment to access Ministry of Defense facilities. This requires drivers to have specific credentials and training. In addition, our more than 300 terminals across the United States allow Yellow to quickly and efficiently access distribution centers and Department of Defense bases. We are proud to continue to be essential to the national security of this great nation. “