Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin sat before the Senate Banking Committee on Thursday. The economic leaders spoke with the committee about the potential to reallocate some $2.3 billion in unused federal aid money to help U.S. households and businesses.
Powell and Mnuchin drew attention to about $200 billion that Congress had previously allocated to the Treasury for the purpose of backstopping central bank loans. Money that can be accessed to help those most in need amid the coronavirus recession.
Additionally, Mnuchin pointed to $130 billion that remains in the now-expired Paycheck Protection Program. That program, formed in March as a result of the bipartisan CARES relief act, assisted small businesses with interest-free loans as an incentive to keep employees on the payroll. Mnuchin’s first priority, the Secretary said, is for Congress to approve a revival of the program, using these untapped funds.
Furthermore, Powell responded to questions about the Main Street Lending Program, to which Congress allocated $75 billion in March. But most of that money, says the Fed Chair, remains untouched.
“The Risk of No Further Action”
As Congressional efforts on a second coronavirus relief package remain in limbo, leaders are now looking for ways to make the most of this untapped funding. But Powell warned that not passing another relief package could make the difference between an expedited economic recovery, and a sluggish one.
Moreover, Powell expressed fears that once American households use up their stimulus checks and unemployment benefits—both provisions of the CARES Act—they could face financial calamity. “This risk,” he said, “is they will go through that money, ultimately, and have to cut back on spending and maybe lose their home or their lease.”
“That is the downside risk of no further action,” the Fed Chairman stated. “We don’t see much of that yet, but it could well be out there in the not-too-distant future.”
Asked about the best use of the unused funding, Powell plainly stated that households and small businesses ought to be the focus.