Powell, Mnuchin enter the lion's den again to discuss pandemic response
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[June 30, 2020]
By Lindsay Dunsmuir
WASHINGTON (Reuters) - U.S. lawmakers on
Tuesday will get another chance to grill the heads of the Federal
Reserve and Treasury over the effectiveness of the nearly $3 trillion in
emergency aid doled out to stem the economic fallout from the novel
coronavirus pandemic.
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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Federal Reserve Chairman Jerome Powell talks with U.S. Treasury
Secretary Steven Mnuchin during the G20 finance ministers and
central bank governors meeting in Fukuoka, Japan June 8, 2019.
REUTERS/Kim Kyung-Hoon/Pool/File Photo
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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