Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell bump elbows as they arrive to testify on Capitol Hill on Tuesday.
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Treasury Secretary Steven Mnuchin drew flak from Democratic senators over his stance on some emergency loan programs, as he and Federal Reserve Chairman Jerome Powell took part in a Tuesday hearing on the federal government’s response to the coronavirus crisis.
The hearing before the Senate Banking Committee reflected how Republicans and Democrats remain divided on relief efforts following last month’s election. It comes amid record hospitalizations due to COVID-19 — and as President-elect Joe Biden rolls out the economic team that will take over next month from President Donald Trump’s team. Biden has picked former Fed chief Janet Yellen to succeed Mnuchin at the Treasury Department.
Mnuchin had been expected to face questions from Democrats about his decision earlier this month not to extend some lending programs set up with the Federal Reserve that are set to expire at the end of the year. Powell’s Fed said that it opposed the Treasury secretary’s decision.
“You appear to be trying to sabotage our economy on the way out the door,” Democratic Sen. Sherrod Brown of Ohio told Mnuchin. “Either you’re purposely trying to stop President-elect Biden and Treasury Secretary–designee Yellen from getting to work for the people we all serve, or you’re delusional.”
“Either way, it’s malpractice,” added Brown, the committee’s top Democrat, as he said the Treasury secretary is following Trump’s lead in thinking that because the stock market is up “everything is fine.”
Mnuchin pushed back after the Ohio lawmaker’s criticism.
“I’d be more than happy, Sen. Brown, to come see you and your staff and walk you through the legal analysis,” Mnuchin said. “I find it implausible that any member of this committee believes that in voting for the CARES Act, you are authorizing me to invest $500 billion to make loans in perpetuity.”
Republican senators came to the Treasury secretary’s defense.
“I’m quite surprised to hear you criticized for following the law in how you have dealt with the return of the CARES Act funds,” GOP Sen. Mike Crapo of Idaho, the committee’s chairman, told Mnuchin. “You and we were accused of creating a big slush fund, and now when we have terminated these funds, as required by the law, so that we can utilize them more effectively in the next act, the criticism is that this fund should not have been terminated.”
Republican Sen. Pat Toomey of Pennsylvania said Mnuchin’s announcement about the programs earlier this month “brought absolutely no disruption to any financial markets that I can tell at all.”
“These facilities were designed for a very specific purpose. They achieved that purpose more successfully than we could have reasonably hoped, and we should not use them to morph into some other purpose,” said Toomey, who is expected to become the Senate Banking Committee’s chairman next year if the GOP retains control of the chamber following Georgia’s Jan. 5 runoff elections.
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During the hearing, Mnuchin and Powell expressed some support for a new bipartisan coronavirus relief proposal with a $908 billion price tag.
“It sounds like you’re hitting a lot of the areas that could definitely benefit from help,” Powell said, when asked about the proposal.
Mnuchin said he looked forward to reviewing the package and believed more fiscal response is needed. The Treasury secretary also said he planned to talk on Tuesday afternoon with House Speaker Nancy Pelosi, the California Democrat, about fresh stimulus and a bill to avoid a government shutdown, adding that he has spoken more than once this week with Senate Majority Leader Mitch McConnell, the Kentucky Republican, and has kept Trump updated.
Henrietta Treyz, director of economic policy at Veda Partners, played down the $908 billion package’s prospects. “While the proposal is generating a lot of enthusiasm today amongst the investment community, we are advised by leadership on both sides of the political aisle and both chambers of Congress, that it is not being considered seriously and is very unlikely to become law,” she said in a note.
In his opening statement, Powell said that the central bank’s actions to backstop a range of credit markets after the coronavirus convulsed Wall Street this past spring had unlocked almost $2 trillion to support businesses, cities and states.
“I strongly encourage Congress to use the $455 billion in unused funds from the CARES Act to pass an additional bill with bipartisan support,” Mnuchin said in his opening statement.
U.S. stocks were advancing Tuesday, with equities SPX, +1.43% DJIA, +0.95% aiming to build on a historic November rally that was fueled in part by optimism over progress on COVID-19 vaccines.
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