Lawmakers clash over role of Fed at stimulus deal
The maneuver has called into question the fate of Congress’ relief plan at a critical time, as coronavirus cases rise, unemployment insurance claims remain high, and a weakening series of data points highlight households and workers alike. American companies grapple with short-term economic hardships even as vaccines fuel hopes of a future rebound. Without renewed government support, millions of people could face a gloomy pandemic winter with little help at their disposal.
The language Mr. Toomey and other Republicans are pushing for would cancel funding intended to support the Fed’s credit to small and medium businesses, state and local governments, and large corporations. More alarming for Democrats, it would also prevent the Fed and the Treasury Department from restarting new versions of the critical loan programs passed this year.
It would take a useful tool off the table for Mr Biden as he takes office amid a lingering economic slump – and it angered Democrats, who had lambasted Treasury Secretary Steven Mnuchin for his decision last month to close the Fed’s programs at the end of the year.
Mr Toomey has denied attempting to harm the incoming Biden administration or derail the economy. But he admitted his move was aimed at preventing Democrats from taking advantage of the Fed’s emergency loan programs as a way to get cheap credit for senior borrowers. The programs were aimed at preventing market collapse, Toomey argued, not helping municipalities or putting oil and gas companies at a disadvantage against green power competitors.
“It would be a terrible idea to turn these programs into something else,” Toomey said on a call with reporters. According to the plans of some Democrats, he warned, “the Fed would not be the lender of last resort, it would be the lender of first resort.”
Mr Toomey, who said the new language was “the most important thing” to him, said it was also widely supported by Republicans in the Senate and by Mr Mnuchin. A senior administration official confirmed that the Treasury Secretary had backed him.
Democrats have condemned the move, which would leave the Biden administration with even fewer tools to tackle the economic mess it will inherit.
“This is a significant last-minute request from Senate Republicans that goes far beyond anything they have asked for in the past,” said Bharat Ramamurti, Democratic member of the Congressional Oversight Committee responsible for overseeing the Fed’s programs. This would “drastically limit the ability of the Biden administration and the Fed” to provide credit and support markets next year, he said.
The report was provided by Zolan Kanno-Youngs from Washington and Nicolas fandos from New York.