Mnuchin faces closure of CARES law loan programs

The programs will expire at the end of the year.

In a contentious hearing on Capitol Hill, Senate Democrats grilled Treasury Secretary Steven Mnuchin over his decision to end several Federal Reserve emergency loan programs funded by the CARES Act.

In his opening statement, Senator Sherrod Brown, D-Ohio, excoriated Mnuchin, saying it would further hurt the staggering economy.

“As far as I know, Secretary Mnuchin, you are leaving the country worse off than you found it to be,” Brown said. “Aside from using your last months in office to work for the people you have sworn to serve, you seem to be trying to sabotage our economy by going out.”

Democrats called on the central bank to maintain control of the more than $ 400 billion unspent under the CARES Act, paving the way for the new Biden administration to restart lending facilities in 2021.

The Fed publicly broke with Mnuchin last month, signaling disappointment with his move. But Federal Reserve Chairman Jerome Powell, who testified alongside Mnuchin, indicated he would return the money to the Treasury Department, where it could then be reappropriated by Congress.

“Non-CARES Act funds are available to support emergency loan facilities if they are needed,” said Powell. “We are committed to using our full range of tools.”

Mnuchin argued that the programs in question – the Fed’s Business Credit Facilities, the Municipal Loan Facility, and the Main Street Loan Program for Small and Medium Businesses – have served their purpose and are no longer needed. .

Beyond that, he argued that a December 31 end date is prescribed by law.

“I have personally negotiated several of these provisions. I actually brought the CARES Act with me because I reference it and keep it next to my desk, ”Mnuchin said. “The statute was very clear.”

But Democrats see it differently. They say the deadline is for the Treasury to provide more funding for the Fed’s programs after the year-end, but that doesn’t stop the Fed from keeping the money already allocated to run the programs.

Republicans broadly supported Mnuchin’s decision, arguing that Congress should adopt new measures to address future challenges.

“If something terrible were to happen to threaten the viability of our financial markets, then the Treasury and the Fed should come back to Congress and ask for the proper facilities at that time,” said Senator Toomey, R-Pa.

But months of stalled negotiations on another relief bill have fueled concerns that even as the economic situation in the country worsens, lawmakers will still not be able to compromise to allocate even more aid. whether lawmakers on both sides call for legislative action.

“In October, President Trump tweeted ‘Go big or home’ to Congress,” said Senator Chris Van Hollen, D-Md. “We have to get there. We cannot return home until the end of December without addressing the urgent needs and pain facing American households and small businesses.

But Mnuchin said he had spoken to key Republicans on the Hill and the President, and remained in favor of targeted relief measures, while Democrats pushed for a broader spending program with a higher price. A bipartisan group of lawmakers also unveiled a proposal on Tuesday.

Powell testified that now is not the time for frugality.

“I think the risk of doing too much is less than the risk of under-doing,” said Powell. “This is the balance sheet of pandemics and crises. You still think – people are afraid to do too much, and you look back and say we could have done a little more and did it a little earlier.