Treasury Secretary Steven Mnuchin said Sunday that the Federal Reserve will play a key role in lending funds to businesses hurt by the coronavirus pandemic.
“Working with the Federal Reserve — we’ll have up to $4 trillion of liquidity that we can use to support the economy,” Mnuchin told Fox News on Sunday.
“Those are broad-based lending programs. … We can leverage our equity working with the Federal Reserve,” he said.
The Treasury secretary said the plan is broad-based to help small and large businesses “get through the next 90 to 120 days,” he said.
Bloomberg News Mnuchin said he thought the bill would be finished Sunday and ready for a vote on the Senate floor on Monday.
The bill would also include:
• Small-business retention loans aimed at helping companies keep workers on their payrolls. This will cover about half the workforce, Mnuchin said. Payments will include two weeks’ worth of cash flow and some overhead. The loans will be forgiven if workers are not laid off.
• Checks for Americans. The average check for a family of four will be $3,000, the Treasury secretary said.
• Enhanced unemployment insurance for people who are laid off due to the pandemic.
Some Fed watchers expressed caution about the $4 trillion estimate.
Mnuchin said that if the virtual shutdown of the American economy lasts longer than expected, Congress would pass another rescue package.
Emerging from a meeting with Mnuchin on Saturday, Senate Banking Committee Chairman Mike Crapo, an Idaho Republican, told reporters that Congress would appropriate up to $500 billion to the Treasury Department to provide a capital buffer to the Fed, according to the Hill newspaper.
The central bank would be able to lend multiples of any buffer, with Mnuchin’s having put the estimate at $4 trillion.
The program is similar to the Fed’s recently announced commercial-paper facility, Crapo told reporters.
“So they can do this and get a significant boost of leverage into the marketplace,” he said.
Sen. Pat Toomey, a Republican from Pennsylvania, said the lending under the Fed program would be temporary credit that needs to be paid back. “None of this is free money. This is all going to be liquidity that is provided to fundamentally solvent companies to get them through this time,” Toomey said in an interview on NBC’s “Meet the Press.”
The bill would separately give Mnuchin funds for direct lending to “really seriously distressed and absolutely essential companies” that impact U.S. national security, Toomey said. That is going to be a short list, he added.
U.S. equity benchmarks suffered a bruising week as a near–market panic over the pandemic refused to abate. The Dow Jones Industrial Average DJIA, -4.55% lost 17% on the week.
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