WASHINGTON – Federal Reserve Chairman Jerome Powell said on Tuesday that the Fed’s loan programs for midsize businesses and state and local governments would start operating by the end of this month.
Powell said that although the Fed has received “great interest” in these programs, if not enough businesses or state and local governments seek to borrow, the Fed will consider modifying them. This could include expanding their eligibility.
The president’s comments were submitted to the Senate Banking, Housing and Urban Affairs Committee, which held a watch hearing on the $ 2 trillion federal relief plan approved in late March.
Treasury Secretary Steven Mnuchin, who also testified, was questioned sharply by Senator Elizabeth Warren, D-Mass., Who accused he was not doing enough to force businesses that receive aid from the joint Fed-Treasury program to keep workers on their wages.
“Will you ask the companies that are getting money from that half a trillion dollar slush fund to keep people on the payroll?” Warren asked the Secretary of the Treasury.
The senator urged Mnuchin to ensure that the loans include this requirement. When Mnuchin refused to commit to this change, Warren said, “You are stimulating your friends on Wall Street.”
Mnuchin told Warren that legislation that provides government assistance includes restrictions on executive compensation and on company dividends and share buybacks.
The Fed’s Main Street Lending program, announced in March, will provide up to $ 600 billion in loans to companies with up to 15,000 employees. The Treasury provided $ 75 billion to offset any loan losses, taken from the $ 454 billion Congress provided to the Treasury to support the Fed’s loans as part of the relief plan.
Mnuchin said his department would accept losses on any Fed loans that would flow from that $ 454 billion. Mnuchin had previously said the administration expected to recover all of these funds. This observation had raised fears that the Fed would take a cautious approach that would provide less financial support.
Subject to serious questioning, Mnuchin also defended administration support for reopening the economy in many states, which he said would be done safely.
Senator Sherrod Brown, a Democrat from Ohio, accused the Trump administration of risking the lives of the poorest workers in its efforts to stimulate the economy and financial markets.
Brown claimed the Trump administration had not done enough to protect the lowest-paid frontline workers – by stepping up viral testing, for example – even as most states begin to allow restaurants to reopen , shops and gyms.
“The administration wants to put more workers at risk to boost the stock market,” Brown said.
“Your characterization is unfair,” replied Mnuchin.
The Treasury Secretary also noted that prolonged shutdowns of the economy would risk causing widespread business bankruptcies and long-term unemployment.
“There is a risk of permanent damage,” Mnuchin said. “We are aware of the health issues and we will do so in a safe manner.”