WASHINGTON — The potential deal on a new coronavirus relief package has hit a snag over a provision pushed by U.S. Sen. Pat Toomey to ensure the temporary Federal Reserve lending programs set up last spring are halted at the end of the year.
Toomey, a Pennsylvania Republican, says those lending programs were intended to provide short-term help at a time when financial markets were in a precarious place, and should not be repurposed.
“We are simply saying these programs were meant to be temporary, they’re going to be temporary,” Toomey said during a conference call Thursday.
But Democrats have accused him of making a last-minute push to include the provision, and argue that it could hamstring the incoming Biden administration as it grapples with the ongoing economic effects of the pandemic.
“They want to block the FED from helping the economy under Biden,” Sen. Brian Schatz, (D-Hawaii), tweeted. “It’s the reason we don’t have a deal.”
The issue wasn’t the only thing holding up a hard-won agreement in the negotiations over a $900 billion stimulus, based in large part on a bipartisan proposal unveiled earlier this month. But it’s “a big one,” Sen. John Thune, (R-S.D.), told reporters Friday afternoon, adding that Republicans view the Fed lending programs as designed “for a temporary time that needs to be ended. And the Dems see it differently.”
The lack of consensus on a COVID-19 relief measure also delayed action on a spending bill to keep the government funded past Friday’s midnight deadline.
Both chambers of Congress were preparing to vote Friday evening on legislation to keep the government operating through Sunday, allowing two additional days to hammer out a coronavirus stimulus deal.
After months of delays, top congressional leaders had made headway earlier this week on a relief bill, negotiating late into the evening Tuesday.
The expected framework was poised to include among other provisions, more direct payments to Americans; extended emergency unemployment benefits; eviction protections; the suspension of student loan payments; additional loans for small businesses; and added funding for food assistance, child care support and coronavirus testing centers and vaccine distribution.
Unlikely to make the final cut were two contentious provisions: $160 billion targeted to state and local governments, which was sought by Democrats, and a GOP-backed proposal to protect employers from COVID-19-related lawsuits by workers who get sick.
While those issues had stymied agreement for months, another came to the forefront Thursday: Toomey’s drive to permanently end the emergency credit facilities and other direct lending programs underwritten by $500 billion outlined in the CARES Act last spring.
Treasury Secretary Steven Mnuchin last month asked the Fed to wrap up most of the emergency lending programs by the end of the year due to the law’s requirements. Those lending programs largely went unused, but their creation was viewed as helping to calm the financial markets.
“They were to provide a backstop, and in all cases would cease operations no later than the end of 2020,” said Toomey, who was involved in crafting the legislation creating those credit facilities. He added that his provision could be viewed as “redundant,” and that the opposition indicates that some would like to extend the program beyond what the law intended.
But Democrats and some Fed experts have raised concerns about cutting off any options for the Treasury to resume the program. Sen. Mark Warner, (D-Va.), said in a statement that the policy would hurt the Fed’s independence, and weaken its ability to respond quickly to future crises.”
House Majority Leader Steny Hoyer, (D-Md.), accused Republicans of seeking to “get an advantage against Biden in the next administration.”
Toomey disputed that his effort was related to the incoming administration, saying he had argued as the legislation was being drafted to end the lending programs on Sept. 30, and had been working since the summer on language to ensure the programs come to a halt.
The Trump administration also has signaled support for Toomey’s proposal, with White House economic adviser Larry Kudlow telling reporters that the administration is “strongly in support” of Toomey’s approach to the emergency lending funds.