Powell, Mnuchin enter the lion’s den again to discuss COVID-19 response

WASHINGTON: US lawmakers on Tuesday (Jun 30) will get another chance to grill the heads of the Federal Reserve and Treasury over the effectiveness of the nearly US$3 trillion in emergency aid doled out to stem the economic fallout from the novel coronavirus pandemic.

The US central bank, with Treasury’s backing, has launched programmes to improve the flow of credit as economic activity cratered and millions of jobs were lost, including its new Main Street Lending Program for mostly medium-sized businesses.

The Treasury has been at the forefront of the US$660 billion forgivable-loan Paycheck Protection Program (PPP) aimed at keeping small businesses afloat and their employees on payrolls.

Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin are due to testify before the US House of Representatives Financial Services Committee at 12.30pm EDT (1630 GMT) to discuss how funds were disbursed to households and businesses.

Lawmakers on the Democratic-controlled panel are likely to question whether those most in need have received support.

Mr Powell and Mr Mnuchin testified about the coronavirus economic response before the Senate Banking Committee last month.

TO THE HAVES OR HAVE NOTS?

In prepared testimony released on Monday, Mr Powell noted that the economic recovery had begun sooner than expected, but that output and employment are still far below pre-crisis levels, with the brunt of the pain borne by women and minorities. And a full recovery, he reiterated, is unlikely until people feel safe about going out and about.

“The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed,” he said.

Several government programmes designed to cushion the blow from the pandemic, including enhanced unemployment benefits, are expected to expire this summer. But concerns the virus has not been contained have added to uncertainty as many parts of the country reopened their economies after lockdowns were put in place in March and April.

Fifteen US states reported last week a record surge in cases of COVID-19, the respiratory illness caused by the coronavirus that has killed more than 125,000 people in the United States.

Numerous Fed policymakers, including Mr Powell, have said that more fiscal and monetary help will likely be required to keep what is expected to be a slow and uneven economic recovery on track.

The Fed has come under fire for a perception that it has prioritised Wall Street over Main Street, helping fuel economic inequality by boosting the price of assets like stocks.

The central bank has bought trillions of dollars of bonds, and rolled out nearly a dozen programmes to backstop and extend corporate credit and promote bank lending, arguing that bracing the economy as a whole is helped when companies maintain access to the financing critical to their operations.

Data on Sunday showed the Fed bought US$428 million in bonds of individual companies through mid-June, making investments in household names like Walmart and AT&T as well as in major oil firms, tobacco giant Philip Morris International, and a utility subsidiary of billionaire Warren Buffett’s Berkshire Hathaway holding company.

At the same time, its Main Street Lending Program has yet to make a loan and has taken three months to come to fruition, though Mr Powell said in his prepared testimony he expected it to be a “valuable resource” in the months ahead. The central bank’s programmes overall have so far seen modest use.

Mr Mnuchin will also likely be grilled about PPP. After an initial round of funding was exhausted quickly, there remains about US$140 billion of aid untapped by small businesses.

Mr Mnuchin agreed last week to give Congress full access to loan-level data for the programme after coming under bipartisan fire for saying that revealing the identities of businesses that took funds could be “confidential” and “proprietary.”

Source: https://www.channelnewsasia.com/news/business/powell-mnuchin-to-discuss-covid-19-12885326