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The heads of the Treasury Department and America’s central bank look set to get some tough questions on Tuesday morning from lawmakers, as they give their first quarterly report on aid programs set up by the $2.2 trillion CARES Act.
Their testimony before the Senate Banking Committee is coming as a new congressional panel has released its first report on the big relief package’s $500 billion fund for lending to businesses and to state and local governments.
The 17-page report out Monday from the Congressional Oversight Commission — which has four members but still lacks a chairperson — says the Treasury has yet to disburse much of that $500 billion. It also features five pages of questions, such as “What will the effect of Treasury and Fed lending be on overall employment?”
At the remote hearing planned for 10 a.m. Eastern Time on Tuesday, Treasury Secretary Steven Mnuchin is likely to face questions about the Paycheck Protection Program’s problems, while Federal Reserve Chairman Jerome Powell probably will get wish lists for lawmakers about expanding the central bank’s Main Street Lending Facility and its Municipal Liquidity Facility, according to Capital Alpha Partners analyst Ian Katz.
The PPP, a $670 billion program that aims to help small businesses hurt by the coronavirus crisis, has drawn a range of criticism, including over how publicly traded companies scored the forgivable loans while small businesses reported problems in getting aid. Restaurants, hotels and other businesses also have asked for changes to the PPP, such as eliminating a rule that says 75% of a loan’s proceeds must go to worker paychecks. Mnuchin has signaled he would be open to some program tweaks.
Related:Emergency loans for small businesses ‘flowed to areas less hard hit’ by coronavirus, study finds
Also see:PPP discriminates against women and minorities, lawsuit alleges
“The program’s objective is sometimes lost amid the noisy debating,” Katz said in a note. “The idea, which is in the name, is to protect worker paychecks. It’s difficult to peg one metric as an indicator of whether the program is achieving that goal, but the gloomy weekly unemployment claims data suggest there’s room for improvement.”
See:Nearly 39 million Americans have applied for jobless benefits
Powell likely will draw many of the same questions that the Fed’s vice chairman for banking supervision, Randal Quarles, got a week ago, including over whether banks should continue to pay dividends, Katz said. Other topics could be “whether non-bank lenders could get into the Main Street programs, whether Main Street should be expanded by lowering a $500,000 loan minimum, and if non-profits should be able to participate,” the analyst said.
Read more:Fed stands behind U.S. banks no matter what the coronavirus demands, Quarles says
In addition, Mnuchin and Powell could be asked about an ongoing fight over “business interruption” insurance policies that aren’t covering coronavirus-related claims, according to Katz.
Powell is expected to urge lawmakers to “do everything” they can to help those suffering during the coronavirus crisis, according to his prepared remarks, which were released Monday. Mnuchin is will say he anticipates the economy will “improve in the third and fourth quarters,” according to his prepared remarks.
In a “60 Minutes” interview on Sunday, Powell said he remains optimistic about the U.S. economy even if the recovery from lockdowns could drag out until the end of 2021.
This is an updated version of a report first published on May 18, 2020.
