Fed lending still a snag as Washington lawmakers say they inch closer to coronavirus aid deal

Fed lending still a snag as Washington lawmakers say they inch closer to coronavirus aid deal

A dispute over restricting the Federal Reserve’s emergency lending powers remained a potentially deal-killing hurdle to another large coronavirus aid package in Congress on Saturday, even as lawmakers said progress was made in other areas.

Congress gave itself through Sunday to reach a new deal by extending the government’s funding authority for another two days late Friday. The idea is they would graft an emerging fiscal stimulus package of around $900 billion onto a $1.4 trillion bill to fund government operations through 2021.

The stimulus bill is expected to include the revival or extension of several parts of the CARES Act aid bill passed in March. Direct payments to individuals of $600, half the amount of spring payments, would be included, as well as an extension of pandemic-related jobless benefits and a revival of a federal add-on jobless payment, this time of around $300. The Paycheck Protection Program that gave forgivable loans to small businesses would also be revived.

But several senators said Saturday the main snag holding up a final agreement was whether and how to curtail Federal Reserve lending powers.

Sen. Pat Toomey, a Pennsylvania Republican, has pushed for language to make sure the Fed can’t restart lending programs for small businesses and can’t backstop the municipal and corporate bond markets without getting a fresh green light from Congress. Democrats say his proposal would hamper the central bank’s ability to act in the future and possibly hamstring the Biden administration’s efforts to boost the economy.

“If you’ve got an objection to the way we’ve worded this and you want language that is narrower, I’m all ears. We could work this out,” Toomey said on the Senate floor.

Sen. Chuck Schumer, the Senate Democratic leader, said Toomey’s proposal goes further than canceling programs approved in the CARES Act.

“What he’s proposing is not about COVID or helping the American people, it’s about tying the hands of the next Treasury Secretary and the next Fed Chairman in a true emergency,” he said on the Senate floor.

Both sides appeared to be digging in on Saturday, even as they said the rest of a deal was getting closer to being hashed out. Michigan Democrat Sen. Debbie Stabenow said, “We’re very close. That’s all I’m going to say. It’s just very, very close. It’s putting the pieces together – a lot of pieces agreed to, some not.”

Sen. Angus King, an Independent from Maine who caucuses with Democrats, said Democrats should stand firm on the Fed programs.

“If Mitch McConnell wants to leave Americans suffering for a totally irrelevant provision, to try and cripple our ability, to deal with an upcoming election, that’s his choice and he’s going to have to live with it,” King said.

The Republicans face runoff elections for two U.S. Senate seats in Georgia on Jan. 5 to retain control of the Senate.

Sen. John Kennedy, a Louisiana Republican, warned Republicans were unlikely to back down. “I could see us here until Christmas Eve, maybe New Years Eve. But it’s not some esoteric quibble. And it’s not just Pat Toomey. This is now the Republican position,” he said.

If a deal is reached, the House would take voting on the package first. Democratic leaders there have told their members not to expect a vote until Sunday afternoon at the earliest. Sen. John Thune, the second-ranking Republican in the Senate, said Saturday a vote was more likely Monday.

If lawmakers can’t vote on a deal Sunday, they would again need to extend the government’s funding by midnight to avoid a government shutdown. It is unclear how long such an extension would last.

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