FinanceU.S. Republicans seek firm end to Fed's coronavirus loans, complicating aid talks

David Lawder
3 minute read

Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis

A new potential roadblock to a $900 billion coronavirus economic relief bill emerged in the U.S. Congress on Thursday as some Senate Republicans insisted on language ensuring that expiring Federal Reserve lending programs cannot be revived.

One Democratic aide criticized the move by Senator Pat Toomey, a Pennsylvania Republican, saying it would limit President-elect Joe Biden's ability to respond to the heavy economic toll of the pandemic, which in addition to killing more than 300,000 Americans has thrown millions out of work.

"It would tie the hands of the Biden administration to use those tools if needed," a senior House Democratic aide said.

Both parties were scrambling on Thursday to strike a deal on a new compromise aid package. They have set aside Democratic demands for a new funding stream for state and local governments and Republican demands that companies be shielded from coronavirus-related lawsuits. read more

But Toomey wants to ensure that the Fed and Treasury are stripped of the authority to restore pandemic lending facilities that Treasury Secretary Steven Mnuchin will allow to expire on Dec. 31, including the Main Street program for mid-size businesses and facilities for municipal bond issuers and corporate credit and asset backed securities.

Mnuchin is clawing back some $455 billion from the Fed facilities, which would be used to help pay for the new aid package for individuals and small businesses.

But the move limits the options for Biden's Treasury secretary nominee Janet Yellen to backstop financial markets in the event of more turmoil, and his transition team called it "deeply irresponsible."

Toomey told reporters his proposal will prevent the Treasury and Federal Reserve from making "carbon copies" of the loan programs to reconstitute them under new names.

"I think there is very broad support among Republican senators for this approach and it is very important to many of us," Toomey said.

Senator Mike Crapo, the Republican chairman of the Senate Banking Committee, said he supported Toomey's proposal because in COVID-19 legislation passed in March, "We made it very clear that the facility is terminated at the end of this year."

Senator Ron Wyden, a Democrat, said in a statement that with Toomey's proposal, Republicans were "drawing a line in the sand over their ability to sabotage the economy and tie the Biden administration's hands" for political gain.

Toomey, who would chair the banking panel next year if Republicans retain Senate seats in Georgia runoff elections on Jan. 5, said the Fed would still keep its non-pandemic emergency lending powers. The central bank and the Treasury would need to "come to Congress if they believe there is a specific need for any extraordinary programs," he said.

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