Mnuchin, Powell Pledge Additional Relief to Prevent Lasting Damage to Economy
01 July 2020 - 7:42AM
Dow Jones News
By Nick Timiraos
The nation's top two economic policy makers pledged to consider
additional relief to prevent lasting damage to labor markets and
businesses amid signs that more states are struggling to suppress
the coronavirus pandemic.
A congressional hearing with Treasury Secretary Steven Mnuchin
and Federal Reserve Chairman Jerome Powell, however, was light on
the specifics of what measures might constitute an agreement
between President Trump and congressional Democrats on any further
aid.
Congress faces deadlines over the coming weeks. New forgivable
loans available under the $670 billion Paycheck Protection Program
for small businesses can't be made when the initiative expires
Wednesday, and government analysts estimate around $130 billion in
funds authorized by Congress won't be lent.
Meanwhile, an extra $600 a week in unemployment benefits that
Congress approved in March -- to make up for incomes lost as
workplaces closed -- is set to expire in late July. And state and
local governments have been finalizing budgets for the fiscal year
that begins Wednesday.
"We have a lot of important features that all come to an end in
July," Mr. Mnuchin told lawmakers at the House Financial Services
Committee on Tuesday. He said the administration wanted any
additional relief to be "targeted to certain industries that have
been especially hard-hit by the pandemic."
Mr. Powell said hiring, spending and other economic activity had
rebounded earlier than central bank officials had anticipated in
the spring but said the increase in commerce that entails large
gatherings or other close personal contact carried new risks.
"We have entered an important new phase and have done so sooner
than expected," Mr. Powell said. "While this bounce back in
economic activity is welcome, it also presents new challenges --
notably, the need to keep the virus in check."
A surge in new coronavirus cases and rising hospitalization
rates in states such as California and Texas are jeopardizing the
lifting of restrictions on certain activities elsewhere.
"Hypothetically, a second outbreak would force governments and
people to withdraw again from economic activity," Mr. Powell said.
While stating that he wasn't forecasting another outbreak, he said,
"The worst part of it would be to undermine public confidence,
which is what we need to get back to lots of kinds of economic
activity that involves crowds."
Mr. Powell joined business executives and others who have warned
in recent weeks that any economic rebound will be limited if
governments and businesses can't make people feel safe working or
spending money indoors. "Full recovery is unlikely until people are
confident that it is safe to re-engage in a broad range of
activities," Mr. Powell said.
Messrs. Powell and Mnuchin appeared in a cavernous auditorium on
Capitol Hill that offered lawmakers more space than the tight
quarters of a traditional hearing room. They sat with masks at
separate tables behind Plexiglas shields, and Mr. Powell wore his
mask while speaking.
The hearing before the House Financial Services Committee is
part of quarterly appearances required by the $2 trillion relief
package Congress approved in March, which provided more than $450
billion for the Treasury to cover losses in emergency-lending
programs run by the Fed.
The Fed has established nine such programs, including several to
backstop lending to large and small companies, cities and states,
with $195 billion provided from the Treasury to cover losses.
House Democrats in May passed a $3.5 trillion stimulus bill,
which includes extending the enhanced jobless benefits through the
end of the year and relief for cities and states. The White House
has preferred to take a wait-and-see approach to evaluate what is
working and what isn't from already approved money. Some
Republicans have voiced concerns about deficit spending.
Lawmakers have been considering how to structure further
additional relief to address high unemployment and potential
business failures resulting from the pandemic, particularly in the
hospitality, travel and entertainment industries that could see
depressed levels of activity as long as the virus isn't under
control.
Messrs. Powell and Mnuchin told lawmakers there were limits to
how much the Fed's emergency lending programs could help businesses
with too much debt or too little revenue, including for hotels and
other commercial real estate enterprises.
"Debt doesn't solve every problem," said Mr. Powell.
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
June 30, 2020 17:27 ET (21:27 GMT)
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