Banking

After CARES Act clash, Mnuchin and Powell unite over need for more aid

WASHINGTON — Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell have had their disagreements recently about the fate of emergency relief funds mandated by the last big stimulus bill. But on Wednesday they were more united in pushing House lawmakers to pass additional stimulus before the end of the year.

Mnuchin and Powell testified to the House Financial Services Committee, where they were pressed by lawmakers from both parties about how Congress should address the continued economic fallout from the coronavirus pandemic.

Mnuchin urged lawmakers to deploy unused funds for the Paycheck Protection Program to provide loans to small businesses in dire need of assistance. Prior stimulus had earmarked $659 billion for the PPP to offer forgivable loans through third-party banks. But no loans have been made since an Aug. 8 statutory deadline, even though funds are still available.

“My single highest priority would be to activate the $140 billion in PPP funds that are not spent that we could immediately send out to the hardest-hit small businesses whose revenue is down dramatically,” Mnuchin said.

In urging Congress to pass another pandemic relief bill, Fed Chairman Jerome Powell, left, said lawmakers should “start with the labor market.” Treasury Secretary Steven Mnuchin said his “single highest priority would be to activate the $140 billion in PPP funds that are not spent.”

Bloomberg News

Powell added that Congress should extend enhanced unemployment insurance that expires at the end of the year. The previous stimulus package provided unemployed workers an extra $600 a week until July 31, but President Trump signed an executive memo extending the enhanced unemployment benefit at $400 a week through December.

“There are many sectors than can use some help. … I would start with the labor market,” said Powell. “There’s still 10 million people who are out of work because of the pandemic.”

The comments from Mnuchin and Powell came as lawmakers are negotiating additional stimulus legislation months after Congress passed the original Coronavirus Aid, Relief, and Economic Security Act in March. Treasury and the Fed have previously been at odds over CARES Act funds that back some of the Fed’s emergency credit programs, with Mnuchin requesting that the Fed return any unused money in order to shut down the facilities at year-end. The central bank, meanwhile, has said it would prefer to keep the facilities open.

Lawmakers from both parties appeared willing to move forward on passing additional relief.

“Our nation’s hospitals, small businesses, schools, many of our hardest-hit industries, and certainly the continued unemployed cannot continue to wait any longer for relief,” said Rep. Ann Wagner, R-Mo. “We must stop playing partisan politics and come to a bipartisan agreement to provide direct COVID-related stimulus and support now.”

A bipartisan group of senators introduced a stimulus plan on Tuesday that includes roughly $300 billion in funding for the PPP, $180 billion for the extension of pandemic unemployment benefits and set-asides for community development financial institutions and minority depository institutions. However, Senate Majority Leader Mitch McConnell, R-Ky., has poured cold water on the legislation.

Rep. Josh Gottheimer, D-N.J., who said he supports the bipartisan Senate proposal, asked Powell whether state and local governments should receive fiscal relief from Congress.

“Obviously local governments are struggling now through no fault of their own,” Gottheimer said. “It’s putting law enforcement, firefighters and teachers … on the line. What do you think the impact would be if we can’t get extra resources to our state and local governments?”

Powell said that state and local governments are a big source of employment.

“State and local governments live with balanced budget requirements, unlike the federal government,” Powell said. “So what happens when revenues soften and expenses go up, is you see layoffs. … We now have a little more than a million in layoffs so far. State and local governments are one of the very largest employers in the country and they provide those critical services. I think that’s a worthy place for you to look in terms of where support might be appropriate.”

While members of both parties appeared to agree that additional coronavirus stimulus is needed, Mnuchin and Republican lawmakers blamed House Speaker Nancy Pelosi, D-Calif., for failing to produce a bipartisan relief package that can pass both chambers. Democrats, on the other hand, blasted Mnuchin’s request that the Fed terminate CARES Act emergency lending facilities.

“Unfortunately the speaker has wanted a full loaf,” Mnuchin said. “I would encourage Congress, particularly over the next few weeks in the lame duck, let’s try to get something done.”

Rep. Anthony Gonzalez, R-Ohio, urged Democrats to put pressure on Pelosi to pass a bipartisan bill.

“My colleagues on the other side of the aisle are in the majority. … Really the pressure needs to come from them and I hope that they use the leverage that they have to encourage the speaker to put a real, bipartisan bill forward,” Gonzalez said. “It is obvious that we need a bridge here, that there are people struggling, that there are small businesses struggling, that there are people who are unemployed that are struggling.”

Rep. Cindy Axne, D-Iowa, criticized Mnuchin’s request for funds from the Exchange Stabilization Fund to be returned to Treasury, saying he is making it more difficult for the incoming Democratic administration to support the economy in the months ahead.

“Leaving it in the Exchange Stabilization Fund makes it a heck of a lot easier for a future Treasury secretary to use this money quickly to provide for economic support,” Axne said. “Why are you choosing to make it harder to support the economy in the future?”

Mnuchin has consistently stated that his request for the Fed to return unused funds from CARES Act emergency lending facilities was consistent with the law.



 

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