Powell faces lawmakers' skepticism on some Fed aid programs

Darnell Taylor
September 27, 2020

Pressed to say what types of aid the Trump administration would support in a new bill, Mnuchin said the administration would favor sending another round of $1,200 in individual payments.

That support totaled a record high of almost $3 trillion and included such measures as economic impact payments of up to $1,200 per individual, enhanced unemployment benefits of $600 per week and a Paycheck Protection Program to encourage small businesses to keep workers on their payrolls.

"It would not cost an extra penny", Mnuchin told members of the Senate Banking Committee in a hearing on Capitol Hill, where he appeared jointly with Powell. You know, I've said on a number of occasions, I think it's likely that we'll need more fiscal support. Under this program, loans can be forgiven if businesses use the money to avoid laying off workers.

The Fed's lending programs got far less use than initially thought, in large part because their very availability helped return disrupted credit and financial markets to more normal functioning.

Mnuchin said he was ready to resume negotiations and said the administration would be willing to support stand-alone legislation to boost support through the Paycheck Protection Program, which benefited small businesses. A faster recovery would require more help from Congress, he said.

With the Treasury committing $1 for every $8 loaned under the program, that would still leave idle $70 billion of the Treasury's backstop.

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Powell, responding during Congressional testimony to a question from Louisiana Republican John Kennedy, said an expansion of the Paycheck Protection Program and "something more" for Americans who have lost their jobs because of the coronavirus pandemic would have the greatest economic impact.

Meanwhile, Bloomberg economist Andrew Husby projects that the lapse in enhanced unemployment benefits and small business assistance will subtract at least 5 percentage points from fourth-quarter growth and that growth over the coming two quarters will be "little better than stall-speed".

"The risk is they will go through that money, ultimately, and have to cut back on spending and maybe lose their home or their lease", Powell said.

The public also wants another aid package: almost 90% of likely voters say the government needs to pass another coronavirus relief package, according to a Financial Times-Peter G. Peterson Foundation poll released Tuesday.

The focus on reallocating unused sums from the earlier relief package has emerged as Congress remains deadlocked over providing new fiscal relief less than six weeks before Election Day. Asked by reporters Thursday if she had heard from Mnuchin, Pelosi said "I spoke to him yesterday".

Prospects for another round of fiscal support have further dimmed amid spiraling partisan tension over the battle to replace Supreme Court Justice Ruth Bader Ginsburg, with just 42 days remaining before the U.S. election.

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