Fed chairman, Treasury secretary push differing priorities to aid economy hit hard by coronavirus pandemic
WASHINGTON — Facing the gravest U.S. economic crisis in decades, Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell offered Congress contrasting views Tuesday of what the government’s most urgent priority should be.
Striking a theme frequently pushed by President Donald Trump, Mnuchin warned that prolonged business shutdowns would pose long-term threats to the economy, from widespread bankruptcies for small businesses to long-term unemployment for millions of Americans.
“There is risk of permanent damage,” Mnuchin said.
Powell, by contrast, stressed, as he has in recent weeks, that the nation is gripped by an economic shock “without modern precedent” and that Congress must consider providing further financial aid soon to support states, localities, businesses and individuals to prevent an even deeper recession.
“What Congress has done to date has been remarkably timely and forceful,” Powell said. “But we need to step back and ask, ‘Is it enough?“
Their points of emphasis reflect the contours of a debate occurring across the country, among individuals, business people and political leaders, about when and under what circumstances the economy should reopen and what further help the government can or should provide.
Mnuchin and Powell offered their views at an oversight hearing of the Senate Banking Committee at which members of both parties questioned them about when their agencies will distribute more of the emergency aid that Congress provided in late March to struggling small businesses and households.
Powell said that a highly anticipated lending program the Fed is creating for small businesses should be operating by the end of the month. And in a turnaround, Mnuchin said the Treasury is now prepared to absorb some losses in that program, which is funded by Treasury. Doing so could enable the Fed to take on further risk with the program and help more struggling companies.
During the hearing, Mnuchin clashed sharply with Democratic Sens. Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts over the administration’s support for a phased reopening of the economy and over its reluctance to require that all companies that receive government aid keep their workers on the payroll.
Brown charged that the Trump administration was risking the lives of lower-income workers by supporting reopening efforts and was doing so simply to boost financial markets. He asserted that the administration hasn’t done enough to protect front-line workers — by, for example, ramping up viral testing — even as most states start allowing restaurants, stores and gyms to reopen.
“The administration wants to put more workers at risk to boost the stock market,” Brown said.
“Your characterization is unfair,” Mnuchin responded.
The hearing was the first in a planned series of quarterly oversight sessions focused on spending programs authorized in the $2 trillion federal relief package that is overseen by the Treasury Department and Fed. They include the $660 billion small business lending facility, known as the Paycheck Protection Program, as well as $46 billion in grants to airlines and $454 billion to support the Fed’s lending.
The Fed announced in March that it would set up the Main Street Lending Program, which will provide up to $600 billion in loans to medium-sized businesses that are too large to participate in the Paycheck Protection Program. The Treasury has provided $75 billion, drawn from the $454 billion set aside by Congress, to cover any losses from the Main Street program.
Mnuchin said that under some scenarios the Treasury could lose some or all of that $75 billion.