WASHINGTON -- Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin urged Congress to approve covid-19 relief funds without further delay, though Democrats continued to attack a decision by Mnuchin to allow five Fed lending programs to expire during the pandemic.
In his most direct comments so far, Powell told the House Financial Services Committee on Wednesday that it's "very important" for Congress to provide economic support.
New funding would serve as a "bridge" for the economy to get from the current environment in which virus infections are spiking, to next year when vaccines should be widely available, Powell said.
"We are trying to get as many people across that bridge as we can," Powell said.
Without more assistance, Powell said, people will lose their homes and small businesses will fail. "You could lose parts of the economy," which would slow any recovery next year, he said.
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"We are hearing from all over that small businesses are really under pressure," Powell told lawmakers.
For a second day a number of Democratic lawmakers on the committee challenged Mnuchin's decision to allow five Fed lending programs to expire at the end of the year, contending that his reading of the law was incorrect. They say it's a political maneuver to hobble the incoming Biden administration financially.
"There is no justifiable reason for taking these tools away," Rep. Maxine Waters, chairwoman of the House panel, told Mnuchin. "It is foolish and reckless."
Shortly after Mnuchin requested that Powell return unspent money in the funds, the Fed released a terse statement saying it wanted "the full suite" of measures to be maintained to support a still-suffering economy.
That message wasn't meant to show division between the Fed and the Treasury Department, Powell said Wednesday in response to a question during testimony before the House Financial Services committee.
"Our thinking is not about the CARES Act money, it's more about the economy," Powell said about the reason for issuing the rare statement last month. "We were concerned that the public would interpret this as the Fed stepping back -- and that's not the case. We needed to send a signal saying this."
Mnuchin has repeatedly insisted that he was just following the Coronavirus Aid, Relief, and Economic Security Act.
When Powell was asked if he agreed with that interpretation, Powell deferred to Mnuchin.
"The Secretary has sole authority over the CARES Act funding under the CARES Act," he said. "His reading of the law thus is the authoritative one and we accept it."
Mnuchin's latest decisions related to the Fed's lending facilities for struggling businesses and local governments prompted strong partisan reactions, showing the charged political atmosphere that his presumed successor, Janet Yellen, will face as she takes over if approved by the Senate next year.
One of her earliest decisions may be what to do with the five lending facilities. Participation in the programs -- which span from helping Main Street businesses to corporate bond programs -- has been underwhelming.
Mnuchin said at the hearing that he has discussed the loan facilities with Yellen.
Mnuchin has said he will put $455 billion of unspent CARES Act money into Treasury's General Fund, where after Dec. 31 the agency would need Congressional approval to tap it.
Powell also urged Congress in the hearings to approve additional stimulus spending as the covid-19 crisis ramps up over the next few months, focusing aid on on unemployed workers, small businesses and state and local governments.
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"There are many sectors that could use some help," Powell said. "I would start with the labor market. I think we ought to remember that despite the rapid progress in getting people back to work, which is so welcome, there is still 10 million people who are out of work because of the pandemic."
Powell and his colleagues at the Fed have been advocating for months for more government stimulus -- noting that monetary policy can only do so much. The central bank slashed its benchmark interest rate in March to near zero and has held it there since.
Proposals emerged this week to break the deadlock over additional aid, reflecting the rising concerns that the economy needs another boost. Covid-19 cases are surging, threatening the fledgling recovery and causing more states to announce restrictions on business activity.
Asked what Congress should put in a relief bill that could pass in the lame-duck session this month, Mnuchin said his priority would be an authorization allowing the Treasury to use $140 billion in left-over funds to provide small businesses with a second round of Paycheck Protection Program loans.
That program allowed businesses to get loans to keep their workers on the payroll with the loan forgiven if the business met certain terms geared at avoiding layoffs.
Information for this article was contributed by Martin Crutsinger of The Associated Press and by Steve Matthews and Saleha Mohsin of Bloomberg News
