NAICU Washington Update

Hearing Held on Ending CARES Act Lending Programs

December 03, 2020

The Senate Banking Committee heard testimony this week from Treasury Secretary Steven Mnuchin and Federal Reserve Board Chairman Jerome Powell regarding the Trump Administration’s decision to wind down pandemic emergency lending programs authorized in the CARES Act.  The hearing comes as the lending programs are set to expire on December 31, 2020.

The programs affected by the decision include corporate bond purchasing, the Main Street Lending Program, and lending to state and local governments.

While Powell and Mnuchin worked closely on the recovery provisions in the stimulus bills, they disagree on whether the lending programs should continue.  

Powell joined Senate Democrats in disagreeing with the move by Treasury, citing the ongoing need for these programs in a fragile economy.  He believes extending the programs into next year assures businesses that funds will be available if needed and provides stabilization to the economy, even if a small percentage of the authorized funds have been used.  Several Democrats, led by Banking Committee ranking minority member Sherrod Brown (D-OH), were sharply opposed to ending these programs and think it is a political move to harm the economy prior to President-elect Biden taking office.

Mnuchin and the Republicans on the committee say winding down these programs is appropriate and that Congress never intended them to be extended beyond the end of the year.  Several Republican members also pointed out that only a fraction of the approximately $2 trillion authorized for the lending programs was used.  Mnuchin, who stated that by law he does not have the authority to extend these programs beyond the end of the year, pushed for Congress to enact additional stimulus legislation that provides grants to small and mid-sized businesses.  

Even if additional stimulus legislation includes an extension of these programs, it’s unclear whether there would be enough support to pass the Senate. Several Republican Senators have called for the programs to end, citing the recent market stability, and believe that Congress can address any future economic downturn legislatively.

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