By Kristina Peterson and Kate Davidson 

WASHINGTON -- Senate Democrats on Thursday proposed spending $350 billion in Black and minority communities over the next five years, citing inequalities highlighted by the coronavirus pandemic, funded in part by tapping uncommitted money tied to the Federal Reserve's emergency lending programs.

With the proposal, Democrats say they aim to blunt the effects of the virus's economic destruction in the communities that have been disproportionately affected by the pandemic. An initial $135 billion infusion is aimed at supporting child care, community health care and jobs, including capital and tax incentives for minority-owned businesses.

Then, over the next five years, Democrats would direct $215 billion to longer-term investments in high-speed internet, affordable housing, tax credits for new homeowners and renters and an expansion of Medicaid.

"Long before the pandemic, long before this recession, long before this year's protests, structural inequalities have persisted in health care and housing, the economy and education," Senate Minority Leader Chuck Schumer (D., N.Y.) said in a statement. "Covid-19 has only magnified these injustices and we must confront them with lasting, meaningful solutions that tear down economic and social barriers, and reinvest in historically underserved communities."

More than 20,000 Black Americans have died of Covid-19, the disease caused by the coronavirus, accounting for 23% of all U.S. deaths, while Black people make up 12.5% of the population, according to government data. Also, their unemployment rate has tripled as a result of the pandemic, outpacing the broader U.S. job slump.

Democrats suggested paying for more than half of the cost by reprogramming roughly $200 billion of the $500 billion initially provided to the Treasury Department under the Cares Act to support the Fed's emergency credit programs and loans to the airline industry. The Cares Act was signed into law in March.

The Treasury has so far committed $195 billion of the funds to cover first losses on the Fed's lending programs. It also announced agreements to lend directly to several major airlines, but most of the money earmarked for the sector hasn't been spent.

The Fed has established nine emergency credit programs, including several to backstop lending to large and small companies, cities and states. Its flagship Main Street Lending program aims to fill a gap in government relief, fitting between the Paycheck Protection Program of forgivable loans for businesses with 500 or fewer employees and a separate Fed program to buy debt issued by large corporations.

Treasury Secretary Steven Mnuchin has said he expects to take losses on the Treasury's investment in the Main Street program, and is prepared to commit the remaining funds Congress authorized if the loan programs see heightened demand.

"Let me be clear, I am prepared to allocate the rest of that," Mr. Mnuchin told lawmakers at a Senate Banking Committee hearing May 20. "The only reason I have not allocated it fully is we are just starting to get these facilities up and running."

Some Republicans have raised concerns about the slow rollout of the Main Street program, which was announced in March but went through multiple revisions before opening for business last week.

"One thing I'm a little concerned about is the lending facility that was supposed to be set up at the Federal Reserve," Sen. John Cornyn (R., Texas) said in June. "That is a lot of money that we've appropriated that if it's not going to be used for that lending facility, or if that's not the most effective use, maybe one thing we need to consider is repurposing that for other things."

Disagreements between leaders at the Fed and Treasury in recent months over how to craft the loan terms slowed the start of the Main Street program, according to current and former government officials.

Treasury officials believe their forgivable small business loans, together with the Fed's corporate-debt backstops, have kept the banking system running well. As a result, Mr. Mnuchin said, they aren't concerned that fewer firms may use the Main Street program than anticipated in March and instead see it as a fallback if the economy takes a turn for the worse.

Meanwhile, Congress has been unable so far to agree on any legislative response to the demands for change touched off by the killing of George Floyd in the custody of the Minneapolis police.

Democrats blocked the Senate from debating and holding amendment votes on a policing bill from Sen. Tim Scott (R., S.C.). House Democrats passed their own broader proposal, but the Senate declined to take it up, leaving any legislation at a standstill.

--Andrew Duehren contributed to this article.

(END) Dow Jones Newswires

July 16, 2020 10:44 ET (14:44 GMT)

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