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 The U.S. central bank, with Treasury's backing, has launched
programs to improve the flow of credit as economic activity cratered
and millions of jobs were lost, including its new Main Street
Lending Program for mostly medium-sized businesses.
Treasury has been at the forefront of the $660 billion
forgivable-loan Paycheck Protection Program (PPP) aimed at keeping
small businesses afloat and their employees on payrolls.
Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin are
due to testify before the U.S. House of Representatives Financial
Services Committee at 12:30 p.m. EDT (1630 GMT) to discuss how funds
were disbursed to households and businesses.
Lawmakers on the Democratic-controlled panel are likely to question
whether those most in need have received support.
Powell and Mnuchin testified about the coronavirus economic response
before the Senate Banking Committee last month.
TO THE HAVES OR HAVE NOTS?
In prepared testimony released on Monday, Powell noted that the
economic recovery had begun sooner than expected, but that output
and employment are still far below pre-crisis levels, with the brunt
of the pain borne by women and minorities. And a full recovery, he
reiterated, is unlikely until people feel safe about going out and
about.
"The path forward will also depend on the policy actions taken at
all levels of government to provide relief and to support the
recovery for as long as needed," he said.
Several government programs designed to cushion the blow from the
pandemic, including enhanced unemployment benefits, are expected to
expire this summer. But concerns the virus has not been contained
have added to uncertainty as many parts of the country reopened
their economies after lockdowns were put in place in March and
April.
Fifteen U.S. states reported last week a record surge in cases of
COVID-19, the respiratory illness caused by the coronavirus that has
killed more than 125,000 people in the United States.
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Numerous Fed policymakers, including Powell, have said that more fiscal and
monetary help will likely be required to keep what is expected to be a slow and
uneven economic recovery on track.
The Fed has come under fire for a perception that it has prioritized Wall Street
over Main Street, helping fuel economic inequality by boosting the price of
assets like stocks.
The central bank has bought trillions of dollars of bonds, and rolled out nearly
a dozen programs to backstop and extend corporate credit and promote bank
lending, arguing that bracing the economy as a whole is helped when companies
maintain access to the financing critical to their operations.
Data on Sunday showed the Fed bought $428 million in bonds of individual
companies through mid-June, making investments in household names like Walmart
Inc and AT&T Inc as well as in major oil firms, tobacco giant Philip Morris
International Inc, and a utility subsidiary of billionaire Warren Buffett's
Berkshire Hathaway holding company.
At the same time, its Main Street Lending Program has yet to make a loan and has
taken three months to come to fruition, though Powell said in his prepared
testimony he expected it to be a "valuable resource" in the months ahead. The
central bank's programs overall have so far seen modest use.
Mnuchin will also likely be grilled about PPP. After an initial round of funding
was exhausted quickly, there remains about $140 billion of aid untapped by small
businesses.
Mnuchin agreed last week to give Congress full access to loan-level data for the
program after coming under bipartisan fire for saying that revealing the
identities of businesses that took funds could be "confidential" and
"proprietary."
(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)
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