FILE PHOTO: U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Board Chairman Jerome Powell testify during a Senate’s Committee on Banking, Housing, and Urban Affairs hearing examining the quarterly CARES Act report to Congress, in Washington, DC, U.S., September 24, 2020. Drew Angerer/Pool via REUTERS
December 1, 2020
By Howard Schneider
WASHINGTON (Reuters) – Top U.S. economic officials on Tuesday urged Congress to provide more help for small businesses amid a surging coronavirus pandemic and concern that relief from a vaccine may not arrive in time to keep them from failing.
“These businesses cannot wait two or three months,” Treasury Secretary Steven Mnuchin said during a hearing before the Senate Banking Committee, urging lawmakers to repurpose funds he is clawing back from other Federal Reserve loan programs to put perhaps $300 billion into grants for struggling businesses.
Mnuchin’s decision to shut those emergency programs at the end of this month was the focus of partisan bickering at the hearing, with Republicans agreeing that other forms of help are more appropriate now that a vaccine is in view, and Democrats arguing the Fed programs should be left in place until the economic recovery is more complete.
But there was broader agreement that the next few weeks could be critical in determining whether the country’s better-than-expected recovery can be coaxed along until the impact of the vaccine is felt – or will weaken in the meantime as the virus spreads, and some families begin to run out of cash.
Fed Chair Jerome Powell, speaking at the same hearing, said he agreed that grants would be more appropriate at this point to help at-risk businesses and families survive the winter.
“People that are in public-facing jobs, in public-facing industries – they may see the light at the end of the tunnel the middle of next year … They may need more help to get there,” Powell said, referring to restaurants, hotels and entertainment venues that have been the hardest hit by the pandemic.
Job losses in those industries have fallen most heavily on women and minorities.
“Some of these businesses – what they need is fiscal policy, a grant, to get through this last bit of the pandemic, rather than borrowing more,” Powell said.
The Fed chief’s comments shifted attention from the looming Dec. 31 end of Fed emergency programs established early in the pandemic to keep credit flowing to small businesses and local governments, and toward ways to fill the cracks beginning to show in the U.S. recovery.
In the medium term, with a vaccine on the horizon, there is “upside risk,” Powell said, but substantial uncertainty in the meantime about how much longer some families can hold out.
After weeks of deadlock over further government spending for pandemic relief, there may be renewed momentum towards some sort of deal.
Mnuchin on Tuesday is to hold his first talks since the election with House of Representatives Speaker Nancy Pelosi, and a bipartisan group of senators has proposed a $900 billion bill including an extension of federal unemployment benefits.
(Reporting by Howard Schneider; Editing by Tom Brown, Chizu Nomiyama and Paul Simao)