Deal on Fed removes impediment to settlement on COVID-19 aid


Washington, December 20

Washington, December 20

Top congressional lawmakers struck an agreement on the last major obstacle to a COVID-19 economic relief package costing nearly $1 trillion, clearing the way for votes as early as Sunday.

A Democratic aide said in an email that an agreement had been reached late Saturday and that compromise language was being finalised to seal a deal to be unveiled on Sunday.

The breakthrough involved a fight over Federal Reserve emergency powers that was defused by an odd couple — the Senate’s top Democrat and a senior conservative Republican.

“We’re getting very close, very close,” Minority Leader Chuck Schumer, D-NY, said earlier Saturday as he spent much of the day going back and forth with GOP Senator Pat Toomey of Pennsylvania had been pressing a provision to close down Fed lending facilities that Democrats and the White House said was too broadly worded and would have tied the hands of the incoming Biden administration.

The COVID-19 legislation has been held up after months of disfunction, posturing and bad faith, but talks turned serious in December as lawmakers on both sides finally faced the deadline of acting before exiting Washington for Christmas.

Saturday’s deadlock was just the latest stumble in a partisan, months-long fight over pandemic relief and the lack of progress is backing lawmakers once again up against a government shutdown deadline Sunday night.

Lawmakers on both sides said a provision by Sen Pat Toomey that would curb emergency Federal Reserve powers was the sticking point. The Republicans are insisting on the Toomey plan while the Democrats are adamantly against it.

A new deadline of midnight Sunday for a government shutdown served as a backstop for the tortuous negotiations, which were being conducted in secret largely among the top four leaders in Congress.

“We need to conclude our talks, draft legislation, and land this plane,” said Senate Majority Leader Mitch McConnell.

Sen Pat Toomey defended his controversial provision in a floor speech, saying the emergency powers were designed to stabilise capital markets at the height of the COVID panic this spring and are expiring at the end of the month anyway. The language would block the Biden administration from restarting them.

Even Toomey said this week that his provision “could be seen as redundant” but neither he nor his Democratic adversaries were backing down from the fight, though compromise language was being shuttled back and forth.

At issue are Fed emergency programs, launched amid the pandemic this spring, that provided loans to small and mid-size businesses and bought state and local government bonds. Those bond purchases have made it easier for those governments to borrow, at a time when their finances are under pressure from job losses and health costs stemming from the pandemic.

Treasury Secretary Steven Mnuchin said last month that those programs, along with two that purchased corporate bonds, would close at the end of the year, prompting an initial objection by the Fed. Under the Dodd-Frank financial reform law passed after the Great Recession, the Fed can only set up emergency programs with the support of the treasury secretary.

But in Mnuchin’s letter closing the programs, he said the Fed could request that future treasury secretaries renew them. Fed Chair Jerome Powell echoed that view Wednesday at a news conference. Yet Toomey’s language would bar the Fed from doing so.

That prompted a rare statement Saturday from former Federal Reserve Chairman Ben Bernanke, who oversaw a dramatic expansion of the Fed’s emergency lending during the Great Recession, which most economists credit with helping end the financial crisis.

“It is vital that the Federal Reserve’s ability to respond promptly to damaging disruptions in credit markets not be circumscribed,” Bernanke said.

“The relief act should ensure, at least, that the Federal Reserve’s emergency lending authorities, as they stood before the passage of the CARES Act (in March), remain fully intact and available to respond to future crises,” he added.

Democrats in Congress also say that Toomey is trying to limit the Fed’s ability to boost the economy, just as Biden takes office.

“This is about existing authorities that the Fed has had for a very long time, to be able to use in an emergency. It’s about a lending authority for helping small businesses, state government, local government in the middle of a crisis,” said Sen Elizabeth Warren, D-Massachusetts.

Toomey disputed that charge, saying his proposal “is emphatically not a broad overhaul of the Federal Reserve’s emergency lending authority”.

The massive package would wrap much of Capitol Hill’s unfinished 2020 business into a take-it-or-leave-it measure that promises to be a foot thick or more.

House lawmakers will probably have only a few hours to study it before voting as early as Sunday afternoon. A Senate vote would follow, probably on Monday. One more short-term funding bill probably would be needed to avoid the looming deadline.

An agreement in principle Saturday would be a precursor to more hours of translating compromises into detailed legislation. Lawmakers are eager to exit Washington and close out a tumultuous year.

The $900-billion package comes as the pandemic is delivering its most fearsome surge yet, killing more than 3,000 victims per day and straining the health care system. While vaccines are on the way, most people won’t get them for months. Jobless claims are on the rise.

The emerging agreement would deliver more than $300 billion in aid to businesses and provide the jobless a $300-per-week bonus federal unemployment benefit and renewal of state benefits that would otherwise expire right after Christmas. AP



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