By Nick Timiraos and Kate Davidson
Treasury Secretary Steven Mnuchin said Tuesday the Trump
administration didn't anticipate further changes that would ease
access to loan programs it had established with the Federal Reserve
to alleviate the fallout from the pandemic-induced recession.
"I unfortunately think there's not much more we can do," he told
lawmakers at a congressional hearing.
Congress in March authorized $454 billion for the Treasury to
backstop losses in Fed lending programs, and Mr. Mnuchin authorized
$195 billion for five different lending programs with the Fed.
The Treasury secretary indicated he didn't see a need to use the
remaining $259 billion, and he said he would support repurposing
$200 billion of those funds for other spending programs.
The five lending programs the Fed and Treasury established using
that support would theoretically allow for nearly $3 trillion in
new borrowing, but the Fed has extended less than $20 billion in
In some cases, such as the Main Street Lending Program for small
and midsize businesses, low uptake reflects complications the Fed
and Treasury encountered launching the program and enticing banks
and borrowers to use it. For others, lower volumes reflect the
success the mere announcement of the Fed backstops have had in
spurring private investors to buy assets.
Members of both parties have criticized the $600 billion Main
Street program for low lending volume. The program has around 230
loans worth around $2 billion that have been made or are in
process, Fed Chairman Jerome Powell said at the hearing
Democrats, meanwhile, expressed frustration that a separate $500
billion loan program for state and local government borrowing has
resulted in only two loans. "This is unacceptable," said Rep.
Maxine Waters (D., Calif.), chairwoman of the House Financial
Services Committee. "This pandemic response has fallen badly
Mr. Powell told lawmakers Tuesday that the government could
reach hard-hit industries and workers more readily with additional
grants, as opposed to recalibrating existing Fed loan programs.
"It's very clear that we are to make loans only to solvent
borrowers," said Mr. Powell at a news conference last week. He
pointed to how Congress in the past decade wanted to make it harder
to extend emergency loans, particularly to banks. "Now we're using
that same law for smaller business borrowers, and you know, it's
not a perfect fit."
On Tuesday, Mr. Powell said lowering the minimum loan amount for
Main Street loans to $100,000 from $250,000 wasn't likely to make a
big difference because the program hasn't attracted significant
interest from borrowers seeking loans of less than $1 million.
Extending credit in smaller amounts "would need a different
facility," he said. Mr. Powell encouraged lawmakers to instead
consider a grant-like approach such as the Paycheck Protection
Program, which provided around $540 billion in small-business
Mr. Powell wasn't asked whether he would support repurposing the
Treasury's uncommitted funds to backstop Fed lending programs.
Mr. Powell said the economic response to the coronavirus has
been effective but that Congress would likely need to spend more
money to shore up parts of the economy that continue to
The Fed cut rates to near zero in March and has purchased
trillions of dollars of securities after the coronavirus pandemic
threatened to touch off a financial panic as investors and
businesses sought to raise cash. The central bank also backstopped
an array of lending markets.
But with short- and long-term interest rates at historically low
levels, the Fed could have fewer tools to spur a recovery than it
did after the 2008 financial crisis. Some officials have
consequently called for continued fiscal relief measures to spur a
Referring to monetary and fiscal policy, Mr. Powell said
Tuesday, "The recovery will go faster if we have both tools
continuing to work together as they have."
Messrs. Powell and Mnuchin begin three days of hearings on
Capitol Hill on Tuesday morning, beginning with the House Financial
Services Committee. Both men also will appear before the Senate
Banking Committee on Thursday. Mr. Powell testifies Wednesday
before a separate House panel overseeing the U.S. response to the
Mr. Powell said lawmakers should be pleased that around half of
the 22 million jobs lost in March and April had been recovered this
summer, but he said the 11 million shortfall in employment since
February was worrisome.
"We still have 11 million people out there" without jobs, Mr.
Powell said. "There is a lot of work to do there."
Congressional Democrats have been at a stalemate for months with
Republicans and the White House over the size of another spending
package. Democrats are pushing for significant relief to state and
local governments and a package of at least $2.2 trillion, the size
of the bipartisan measure approved in March.
Republicans have balked at the size and some of the individual
components and have proposed spending of up to $1 trillion in
additional relief. The White House has indicated it could support
legislation that costs around $1.5 trillion.
Mr. Mnuchin said in his testimony that the administration was
ready to reach a bipartisan agreement. "I believe a targeted
package is still needed," he said.
Write to Nick Timiraos at firstname.lastname@example.org and Kate
Davidson at email@example.com
(END) Dow Jones Newswires
September 22, 2020 12:46 ET (16:46 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.