WASHINGTON – Negotiations on a coronavirus aid package appeared to hit an 11th-hour setback Friday when Democrats accused Republicans of making a late demand to block Federal Reserve lending programs.
Republican Sen. Patrick J. Toomey of Pennsylvania has led a GOP push to block the next administration and the Federal Reserve from relaunching several expiring lending programs for businesses next year. Democrats said the move could hamper the economic recovery and hamstring the incoming Biden administration.
“We almost have a bipartisan COVID package, but at the last minute Republicans are making a demand that WAS NEVER MENTIONED AS KEY TO THE NEGOTIATIONS,” Sen. Brian Schatz, D-Hawaii, tweeted Friday. “They want to block the FED from helping the economy under Biden. It’s the reason we don’t have a deal.”
A senior Democratic aide said Republicans insisted including a “purely political, unrelated provision to tie Biden’s hands and risk throwing the economy into a tailspin. The aide said the measure would amount to “an unprecedented change to the law to strip the Fed chair of one of their most important tools to quickly respond to any future economic crisis.”
It wasn’t clear Friday morning whether the issue could still be resolved in short order or whether it threatened to derail the entire emerging agreement on a long-sought relief package for the COVID-19 pandemic.
Congressional leaders are pass that roughly $900 billion measure as part of an omnibus spending package for the current fiscal year. Current stopgap funding for federal agencies runs dry at midnight Friday, risking a partial government shutdown by early next.
But Senate Majority Leader Mitch McConnell suggested Friday morning that a deal could still come together soon.
“The talks remain productive,” the Kentucky Republican said on the Senate floor. “In fact, I am even more optimistic now than I was last night that a bipartisan, bicameral framework for a major rescue package is close at hand.”
In a call with reporters Thursday, Toomey said preventing the next Treasury secretary and the Federal Reserve from relaunching five emergency credit facilities next year was “the most important thing to me” in the COVID-19 rescue package. The facilities are set to end on Dec. 31.
“Maintaining the integrity of the role of the Fed, preventing the Fed from being politicized, from being misused, from becoming an allocator of credit and America’s biggest commercial bank, that’s the most important thing,” said Toomey, who is in line to be the top Republican on the Senate Banking Committee next year.
At the onset of the pandemic, the Fed launched a series of emergency lending facilities to rescue financial markets that were drowning in uncertainty, using the Treasury Department’s Exchange Stabilization Fund to backstop the loans those programs made. Congress gave Treasury $454 billion in a March relief package (PL 116-136) to top up the fund and support the creation of additional Fed credit facilities.
Just creating the programs was enough to calm the markets, and the facilities were ultimately little used, leaving $429 billion unspent. The Main Street Lending Program has issued about $6 billion in loans, while the Municipal Liquidity Facility has only issued two loans, totaling $1.65 billion.
Treasury Secretary Steven Mnuchin announced he would end most of those programs at the end of the year and ask for the untapped funds to be returned to the general fund, saying that’s what the March law required.
But Democrats have called foul, saying Mnuchin’s decision to end the facilities, which was announced after the election, is aimed at hurting President-elect Joe Biden’s ability to respond to the pandemic’s economic fallout.
Toomey said the language he wants added to the COVID-19 relief package would ensure the law is followed when Biden takes office in January. But on Thursday, the Congressional Research Service released a report saying that the law does not require ending the facilities or returning the funds.
If the lending dispute can be resolved, lawmakers could unveil legislation as early as Friday to provide pandemic relief that has been delayed for months.
The pending package is expected to offer a second round of tax rebate checks to households, more loans for small businesses, an expansion of the food stamp program, expanded unemployment benefits, money for vaccine distribution and health care providers, aid to the transportation industry and more.
But hopes for speedy passage of such a package by Friday night were dashed and congressional leaders acknowledged they would be working at least through the weekend to complete their work.
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(Niels Lesniewski and Jennifer Shutt contributed to this report.)
