- Before Senate, Federal Reserve Chairman Jerome Powell warns of continuing economic uncertainties
- The Fed is at odds with the Treasury, which is allowing several lending facilities to expire at the end of the year
- Treasury Secretary Steven Mnuchin blames local lockdowns for impeding economic growth and advocates for targeted relief
Federal Reserve Chairman Jerome Powell asserted that the Fed’s emergency lending program helped stabilize and grow the economy in remarks before the Senate on Monday, while also warning that the outlook for the American economy remains uncertain due to the COVID-19 pandemic.
Powell’s defense of the lending programs, delivered as part of the CARES Act updates the Fed and Treasury must deliver to Congress, reflects his disagreement with Treasury Secretary Steven Mnuchin on the efficacy of the facilities. Mnuchin has decided that several of the Fed programs, including ones to purchase corporate bonds, assist state and local governments, and provide loans to small and medium-sized businesses will not be extended beyond the end of the year.
Powell said the lending programs worked to stabilize the economy, provide assurances to investors, and “helped unlock almost $2 trillion in funding,” although only about $100 billion of the allocated funds were actually spent. He said that the programs remain important due to an “extraordinarily uncertain” economic outlook in the coming months, as surging COVID-19 infections may dampen economic activity until vaccines are widely distributed.
Mnuchin has said that he believes the economy has recovered to the point where the Fed programs are no longer necessary. He is urging Congress to strike a bipartisan deal to use the $455 billion in funds to be returned from the Fed for a targeted relief to assist the industries that have suffered the greatest losses due to the pandemic.
Powell and Mnuchin will make additional appearances before Congress this week. According to remarks prepared for today, Powell will again emphasize economic risks and his disagreement with Mnuchin’s decision, while Mnuchin will blame state and local lockdowns for slowing economic growth.
