Fight against Federal Reserve powers delaying year-end deal
A partisan fight over language that would end the Federal Reserve’s power to set up credit loan programs to support the fragile U.S. economy has emerged as a major hurdle to reaching a deal on a COVID relief plan -19 year-end.
Republicans say the Fed’s authority to put in place special purpose vehicles to keep money flowing in the U.S. economy is no longer needed and that Congress has always been intent on ending the special authority created by the CARES law in March.
But Democrats fear that limiting the power of the Fed may be an attempt to sabotage the ability of the new Biden administration to respond to an economic downturn. If Senate Republicans refuse to agree to another major tax break plan in 2021, they say, the Fed will need the flexibility to pump money into the economy.
Senate Republican Whip John ThuneJohn Randolph ThuneHouse Passes Biparty Bills To Boost Network Security, Senate Close To Agreement On Defense Bill After Setback Congress Target In December: Avoid Closure And Default MORE (SD) Thursday identified language supported by the senator. Pat ToomeyPatrick (Pat) Joseph Toomey Black Women Seek To Build On Gains In Upcoming Election Watch Live: GOP Senators Introduce New Infrastructure Proposal Sasse Rebuilt By Nebraska Republican Party For Impeachment Vote MORE (R-Pa.) To reduce the Fed’s authority to set up credit lending facilities as a high priority for Republicans.
“I think the authority of the Federal Reserve – there’s a very strong interest in making sure that door is closed. This is a high priority for many of our members, ”said Thune.
Toomey’s proposal, which the Pennsylvania senator describes as a “consensus” position in the Senate Republican Conference, would cancel unused funds allocated in March to support the Fed’s lending programs, would reiterate the lending facilities will expire at the end of the year and would ensure that the Treasury Department and the Fed could not create future clones of the program.
Democrats, however, balk at the idea. They argue it would have an impact President-elect Joe BidenJoe Biden Biden and Harris Host ‘Family’ Hanukkah Celebration with Over 150 Guests Symone Sanders to Leave White House at Year End Defense and National Security Overnight – Senate Seeks to Break Project Deadlock defense law PLUSability to respond to an economic crisis with an uncooperative Congress. Unless Democrats win two second Senate elections in Georgia next month, Republicans will control the Senate in 2021.
Senator Chris CoonChris Andrew CoonsOvernight Energy & Environment – Brought to you by ExxonMobil – Democrats seek to preserve climate provisions Democrats fight to maintain climate priorities in spending bill Coons says White House could impose border fees for PLUS carbon-intensive products (D-Del.), A close ally of Biden, called Toomey’s proposal a non-starter.
“My concern is that this severely limits the ability of any future administration to act decisively and timely to help support the economy,” he said.
“If you tell current and previous Treasury leaders about the role 13 (3) has played as a tool, they would say we shouldn’t be giving it up,” he said, referring to the loan programs. emergency set up under section 13 (3) of the Federal Reserve Act.
Senator Sherrod BrownSherrod Campbell BrownPowell Says Fed To Consider Faster Cut Amid Soaring Inflation Biden Faces New Pressure From Climate Groups After Powell Picked Five Senate Democrats Who Reportedly Opposed Biden’s Bank Candidate MORE (Ohio), the top Democrat on the banking committee, accused the Treasury Secretary Steven mnuchinSteven MnuchinThe Hill’s Morning Report – Brought to you by Facebook – Biden Tackles Omicron Risks With New Travel Rules Mnuchin and McConnell Discuss Debt Limit in Brief Meeting Large Russian hacking group linked to Sinclair ransomware attack: PLUS report this month to attempt to “sabotage” the economy by announcing his plan to end programs and return unspent funds to the general fund, which would complicate the task of his alleged successor, Janet YellenJanet Louise Yellen On the money – Powell and Yellen face pressure on inflation Powell, Yellen says they have underestimated inflation and supply grunts On the money – Powell pivots as inflation is increasing MORE, Biden’s choice to run the Treasury, to access it.
Mnuchin disputes this accusation and says he is only trying to follow the intent of the CARES Act, which Republicans say has always been aimed at terminating the Fed’s powers at the end of the year.
Democrats point out that Federal Reserve Chairman Jerome Powell told the banking panel earlier this month that he wanted the facilities to remain in place.
“Our thought is that we would have left the facilities in place to be safety nets. We are not questioning the secretary’s decision regarding the CARES bill money because it is entirely his decision to make. But I think central banks generally would have done it, ”said Powell.
Toomey’s proposal would only affect the facilities that received money from the CARES Act, the primary market business credit facility, the secondary market business credit facility, the program Main Street Loan Facility, the Municipal Credit Facility and the Term Asset Backed Securities Lending Facility.
Toomey said it would prevent Democrats from “transforming” the program to fund a variety of priorities Congress never intended to fund.
“It would be a terrible idea to turn these programs into something else,” he said. “We’ve heard all kinds of specific ideas from Democrats who want to, for example, use these Fed facilities to bail out states and municipalities. Fund their programs that they put in the HEROES law, ”referring to the $ 3.4 trillion proposal passed by House Democrats in May.
Toomey angrily denied Democrats’ claims that Republicans are trying to cripple Biden before he takes office.
“Quite contrary to what some of my fellow Democrats have suggested, this is by no means an effort to cripple the Biden administration or weaken our economy. It’s a ridiculous idea, ”he said.
He noted that efforts to end the programs began when Republicans were involved in drafting the CARES law when they pushed for a December 31 end date.
A Senate Republican said Toomey made Fed-related language “a very bright red line.”
Toomey told reporters on Thursday that was his top priority.
“It’s the most important thing for me,” said Toomey, who would be chairman of the Senate Banking Committee next year if the Republicans retain their majority.
He said his goal was to “maintain the integrity of the role of the Fed, the independence of the Fed” and “to prevent the Fed from being politicized” and “from being misused to become a credit grantor and the largest commercial bank in the United States ”.
Other Democrats are raising serious concerns, however.
Senator Bob menendezRobert (Bob) Menendez Five Ways Senate Could Change Biden’s Spending Plan Spending Bill Faces Senate Rush Republicans Worried About Biden’s Candidate For Ambassador To Germany MORE (DN.J.), a senior Democratic official on the Banking Commission, said: “I have a negative opinion of this.
“I think it is malicious to shut down the installation and not let the new administration be able to use it,” he said.
Senator Brian schatzBrian Emanuel Schatz Congress Should Throw Down Dangerous HR 1619 Anywhere, Anywhere Alabama Casino Precedent, The Republican’s Infrastructure Layout He Voted Against Telehealth Was A Boon During The Pandemic ; Congress should continue to innovate MORE (D-Hawaii), another member of the banking committee, called Toomey’s proposal “not launched.”
“From the point of view of how you handle negotiations in good faith as an adult, you are just not allowed to make new consecutive requests at the eleventh hour,” he said.
“It is a novelty as a condition for achieving something,” he added. “This is not the way to make a deal, it is the way to make a deal.
representing Donna ShalalaDonna Edna Shalala Democrats face grim prospects in Florida Democrats consider comeback after losing Pelosi re-election, Schumer to appoint new commissioners to CARES PLUS law oversight committee (D-Fla.) And Bharat Ramamurti, two Democratic members of the bipartisan congressional oversight committee created to oversee the CARES Act, released a statement denouncing the Republican proposal.
“The Senate Republicans’ proposal is radical and reckless. This limits the ability of the Biden administration to deal with our current economic crisis and undermines the ability of the Fed – not just now, but indefinitely – to respond to future financial crises, ”they said.
Shalala and Ramamurti argued that Mnuchin recently said that if market conditions deteriorate, the emergency loan facilities could still be reopened using funding other than CARES.
“Now Senate Republicans are trying to cut even that last safety net for the economy,” they said.
Sylvan Lane contributed.