Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell provided the first public update on the Coronavirus Aid, Relief and Economic Security Act, two months after Congress approved the $2.2 trillion federal package. Mnuchin and Powell testified on Tuesday before the Senate Banking, Housing and Urban Affairs committee by videoconference about the program's performance. The questioning — and answering — became testy at times.
The CARES Act has drawn criticism for being slow to deliver stimulus payments to millions of Americans and for funneling money to larger companies while depriving small businesses of emergency funds. Some large corporations have since been shamed into returning Paycheck Protection Program loans, while many small businesses turn elsewhere for aid. Meanwhile, a $500 billion lending program run by the Federal Reserve has gone largely unused, according to a Congressional Oversight Commission report issued Monday night.
Since President Donald Trump into law on March 27, more than 1 in 5 workers has applied for jobless aid, and millions of Americans are struggling even to afford their basic needs. Most states are now focused on restarting their economies despite public concerns that reopening too quickly could spur more outbreaks of COVID-19.
Latest major developments:
- Treasury Secretary Steven Mnuchin said he's open to discussing easing some of the spending rules that limit Paycheck Protection Program loans for small businesses.
- Senator Ben Sasse of Nebraska questioned if the Fed's lending programs "will be bailing out the worst malls in America."
- Senator Sherrod Brown of Ohio pressed Mnuchin if it is "fair" that many "essential" food, health and other workers are low-paid.
- Mnuchin said two lending programs will be ready to launch by the end of May.
- Senator Elizabeth Warren of Massachusetts called on CEOs to be held "personally accountable" if their companies tap CARES Act funds they are not eligible to use.
- The White House signaled this week it is open to relaxing Paycheck Protection Program rules.
- More than for taxpayers have been issued, Treasury Department says.
- Mnuchin told a Senate panel the U.S. has distributed nearly $1 trillion in stimulus aid so far.
- Federal Reserve chief Jerome Powell said the economy could take until the to fully recover.
Mnuchin open to discussing easing rules for Paycheck Protection Program loans
A key point of interest of the Senate Banking Committee hearing reviewing the efficacy of the CARES Act was whether the Treasury Department would relax some of the rules of the Paycheck Protection Program, the $660 billion loan fund created to help rescue small businesses.
Two rules in particular have drawn scrutiny fromand some senators:
- Businesses must spend the bulk of their funds from the program in eight weeks in order to have their loan and its 1% interest charge forgiven.
- Businesses must spend 75% of their Paycheck Protection Program loan on worker pay versus other costs like rent.
Treasury Secretary Steven Mnuchin gave a lukewarm response to the idea of changing those rules during Tuesday's hearing. He said he was open to talking about extending the June 30 spending deadline, but said that change would have to be made by an act of Congress not the Treasury Department.
As for the 75% payroll rule, which is never spelled out in the language of the CARES Act, Mnuchin said he believed the Treasury-written rule matched the intent of the relief law.
"The purpose of the program was to fund eight weeks of payroll plus overhead," Mnuchin testified.
As Senate questions CARES Act, Trump pushes for reopening
President Donald Trump has been pushing for U.S. businesses to reopen, most recently in a meeting with restaurant industry executives on Monday night. CBS News White House correspondent Paula Reid spoke with top White House economic adviser Larry Kudlow on Tuesday about which policies the Trump administration is considering to facilitate the recovery, and she joined CBSN with details this morning.
"It seems that their focus is at the upper end of the income spectrum, when in fact it's been the lower-income folks who've been impacted," Reid told CBSN.
Powell grilled on bailout out of nation's "worst shopping malls"
Federal Reserve Chairman Jerome Powell was questioned in a Senate Banking Committee hearing about the wisdom of bailing out shopping centers that were already struggling before the-induced economic shutdown.
Powell said Tuesday that the Fed has bought billions of dollars of bonds in the mortgage and asset-backed securities market as part of the government's economic relief efforts. Powell said the purchases have allowed those markets to continue functioning smoothly.
"Are you worried that the Federal Reserve will be buying up the debt of the worst shopping malls in America," asked Senator Ben Sasse, a Republican from Nebraska.
Even before the coronavirus struck, investorthat many shopping malls that have borrowed money in the market backed by commercial mortgage-backed securities could go bankrupt.
Powell responded that the Fed would buy up only the highest rated portion of the bonds. "I think the credit risk is minimal to us," he said, adding that the purchases are unlikely to stoke inflation or lead to "any other adverse outcomes."
Brown: Essential workers deserve better pay
Senator Sherrod Brown used his time during Tuesday's hearing on the CARES Act to push Treasury Secretary Steven Mnuchin on the issue of low pay for food, health care and custodial workers who have been deemed "essential" during the coronavirus pandemic.
"A grocery store worker in Ohio told me recently, 'I don't feel safe at work and they don't pay me much. I don't feel essential, I feel expendable,'" Brown, the Senate Banking Committee's ranking member, said in his opening remarks.
The Ohio Democrat also asked Mnuchin if he thought the workers' pay was fair.
"The workers who have kept our country running during this public health emergency — the workers who we call essential workers — are often the lowest paid. They put their lives on the line to keep our country running, they're still worried about paying the bills. Do you think that's fair?" Brown asked.
The treasury secretary did not reply directly despite Brown pressing him on the issue. The lawmaker then repeated his question, adding, "They do the laundry, they are custodians, they prepare our food."
"I just want to thank all our workers," Mnuchin began, before Brown cut him off.
"Thanking is great," Brown said. "Is it fair?"
"I don't know what specific workers you're referring to," Mnuchin said.
"Some of the best things people can do is to support pandemic pay for these workers," Brown replied. He then criticized the White House's push to reopen the economy, saying that people would die if forced to resume work without protection.
"How many workers should give their lives to increase our GDP by half a percent? The president says, 'Reopen slaughterhouses,' but says nothing about slowing the line down, nothing about protective equipment," Brown said.
"No worker should give their lives to do that, senator, and I think your characterization is unfair," said Mnuchin, adding that "We don't intend to send anyone back to work without protections."
Fed's municipal and main street lending programs to open by end of May
Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell said two of the remaining aid programs authorized under Congress's coronavirus economic relief will be ready to launch by the end of the month.
Under the CARES Act, the Fed is authorized to lend directly to cities and to small and midsize businesses. The latter, called the Main Street lending program and administered by Treasury, was allocated $500 billion dollars to support those lending facilities.
Powell said the Main Street program has been more difficult to launch than other initiatives because most lending to midsize businesses is done through private markets, where the Fed normally does not intervene.
Still, Powell and Mnuchin said the program would launch by the end of next week.
Warren demands bailed-out CEOs be held personally accountable
Senator Elizabeth Warren is calling for CEOs to be held "personally accountable" if their companies are found to receive CARES Act funds they don't qualify for under the $2.2 trillion relief package.
"Certification that bailout funds are being used appropriately by the recipients is critical to ensuring that only companies that meet the specified eligibility criteria receive this taxpayer-subsidized money," the Massachusetts Democrat, a member of the Senate Banking Committee, said in a letter on Tuesday addressed to Treasury Secretary Steven Mnuchin, Federal Reserve chief Jerome Powell and the Federal Reserve Bank of New York.
The CARES Act sets out several requirements for companies tapping the emergency relief programs: Most of their employees must be based in the U.S., the companies cannot receive other targeted aid under the act and they must certify they meet the law's conflict-of-interest provisions against receiving any other targeted aid. In her letter, Warren recalled corporate abuses following the 2007-2008 financial crisis and urged the New York Fed to hold CEOs' feet to the fire.
"[Y]ou must ensure that – unlike in the wake of the 2008 financial crisis – companies that rip off taxpayers and the executives that run them are not let off the hook with minimal fines, no criminal liability and no requirements that they even admit guilt," she wrote.
"[A]ll certification paperwork should contain clear language that indicates that the executives are subject to civil and criminal penalties, including disgorgement, if they provide fraudulent or misleading information or misuse funds," said Warren, who also called for businesses to periodically certify they meet the act's requirements for as long as their bonds are outstanding.
Warren, among the Senate's most prominent critics of Wall Street, also called for the Treasury and the Fed to respond to a Congressional Oversight Committee report on Monday that found barely any lending from a $500 billion Treasury fund meant for COVID relief.
White House signals support for easing small business aid ahead of Mnuchin testimony
The White House signaled this week that it is open to relaxing the rules governing the Paycheck Protection Program, an emergency relief fund created under the CARES Act for small businesses. But it's unclear if Treasury Secretary Steven Mnuchin will back altering the program at Tuesday's Senate Bank Committee hearing.
Mnuchin and Federal Reserve Chairman Jerome Powell are scheduled to appear before lawmakers starting at 10 a.m. The hearing is the first oversight session on the $2.2 trillion federal relief package signed into law by President Donald Trump in late March.
Mr. Trump said he is open to the idea of extending the time frame for borrowers to spend the PPP loans in a meeting on Monday with restaurant executives. Under current rules, small businesses that get Paycheck loans must spend the money within eight weeks in order to get forgiveness. Restaurant executives asked the president to extend that to 24 weeks.
In a prepared testimony for the hearing, however, Mnuchin did not allude to any potential changes to the Paycheck Protection Program, saying only that the government is committed to getting money into the hands of the American people as soon as possible and that the stimulus efforts are working.
Mnuchin: Government has distributed nearly $1 trillion in stimulus aid
Treasury Secretary Steven Mnuchin is expected to tell a Senate panel on Tuesday that the federal government has already distributed nearly $1 trillion in stimulus aid that was approved as part of the Coronavirus Aid, Relief and Economic Security Act. Another $200 billion has been pledged to back the government's various loan facilities.
In prepared testimony released late Monday, Mnuchin said the Treasury Department is working hard to implement the CARES Act and that those efforts are paying off. He also said the U.S. is moving closer to reopening and predicted an economic rebound. "Working closely with governors, we are beginning to open the economy in a way that minimizes risks to workers and customers. We expect economic conditions to improve in the third and fourth quarters," he said.
Mnuchin and Federal Reserve Chairman Jerome Powell are scheduled to appear before the Senate Banking, Housing and Urban Affairs Committee Tuesday at 10 a.m. The hearing is the first government oversight hearing on the $2.2 trillion federal relief package approved in March.
Powell pledges to release names of big companies that benefit from Fed's emergency programs
Federal Reserve Chairman Jerome Powell will pledge to reveal the names and other details of the entities that borrow from the emergency programs the central bank has set up to offset the economic hit from the viral outbreak.
In prepared testimony for a congressional hearing on Tuesday, Powell said the central bank will disclose the amounts borrowed and the interest rates it levies under its programs to provide credit for large corporations, state and local governments, and medium-sized businesses.
"We are deeply committed to transparency, and recognize that the need for transparency is heightened when we are called upon to use our emergency powers," he said in his prepared testimony.
Powellon Sunday that U.S. unemployment could hit upwards of 25% and that the economy may not recover from the shutdowns caused by the coronavirus until the end of 2021.
Federal Reserve's $500 billion stimulus effort off to a slow start
A $500 billion federal fund created under the CARES Act and designed to lend money to businesses is off to a slow start, a congressional oversight panel said in a new report.
The Treasury Department fund is being used to guarantee new, expansive Federal Reserve lending programs to companies, states and cities that could be leveraged to reach $4.5 trillion.
To date, however, only one of the new Fed programs has started operating, a loan fund likely to be tapped by large public companies, according to the report by the Congressional Oversight Commission. The program launched May 11 with $37.5 billion from Treasury.
Lawmakers are expected to question Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin on Tuesday about the report and the CARES Act's economic impact when they testify before the Senate Banking Committee.