Coronavirus relief deal hinges on talks over Fed lending powers

Congressional leaders are aiming to reach a deal Sunday on a coronavirus relief package but their success depends on negotiations between Senate Minority Leader Charles Schumer (D-N.Y.) and Sen. Pat Toomey (R-Pa.) over the Federal Reserve’s lending powers. 

Leaders hope to attach the COVID-19 relief package to a $1.4 trillion year-end spending bill and bring to an end the 2020 legislative session in time for lawmakers to return home for Christmas. 

The major issues that bogged down talks over a new COVID-19 relief package for much of this year, such as whether to provide large amounts of money to state and local governments and how much to spend on federal supplemental unemployment insurance, are resolved.

The potential deal is now stuck on a disagreement between Republicans and Democrats over the special lending powers granted to the Federal Reserve in the CARES Act, which Congress passed in March.

Sen. Pat Toomey (R-Pa.), who is poised to become the next chairman of the Senate Banking Committee, wants language to wind down the Fed’s credit lending facilities.    

Toomey met Saturday afternoon with Sen. Tom Cotton (R-Ark.) and Schumer in the leader’s Capitol office to hash out a compromise.

“I think that we should be able to get a deal done,” Toomey told reporters after the meeting.

The two sides agreed to exchange written proposals Saturday evening in order to hammer out the details, which is turning into a tricky task.

Schumer sounded a more pessimistic tone shortly before a 6 p.m vote. 

“We’re sending offers back and forth but I don’t know,” he said. “We’ll see what his offer is.” 

Schumer said Toomey’s proposal goes “way beyond” what Democrats are comfortable with and expressed concern that there hasn’t been more congressional study of the issue. 

“We’re trying but this is a new thing and what they ask for goes way beyond. It’s the kind of thing that should have a strong legislative discussion,” he said. “We’re doing our best to pass this bill.”

Sen. John Cornyn (R-Texas), an advisor to the Senate GOP leadership, said once there’s an agreement on readjusting the Federal Reserve’s authority under Section 13(3) of the Federal Reserve Act, which was expanded in the CARES Act, Congress will quickly move the broader package.

“It looks like they’re both going to go back and draft their proposals. But it sounds like both sides are trying to get where they need to go,” he said. 

The Toomey language was the main item of discussion during a conference call that Republican senators held with Treasury Secretary Steve Mnuchin early Saturday afternoon. 

Senate Majority Leader Mitch McConnell (R-Ky.) told colleagues on the call that he fully endorsed Toomey’s proposal, which would end Fed lending facilities that received CARES Act money.

Those programs are the primary market corporate bond credit facility, the Main Street lending program and the municipal credit facility.

Toomey defended his proposal on the Senate floor Saturday. 

“These facilities did exactly what they were designed to do,” he said, arguing the programs restored the private credit markets and don’t need to continue. 

“This is no big rewrite of the Fed’s 13(3) lending facility,” he said, adding that lawmakers always intended the expanded authority to end on Dec. 31.

Republican senators said the Toomey language was the only substantive piece of the relief package they discussed and that many of its other elements remain unconfirmed.

Sen. Josh Hawley (R-Mo.), however, said he has received a commitment that a provision to provide $600 stimulus checks will remain in the package.

Schumer told Democratic colleagues during a 5 p.m. conference call that Toomey expressed willingness to modify his language and that a deal is possible, though he added that a deal is not expected Saturday evening. 

This timeline would set up a final vote on a combined coronavirus relief and omnibus spending package for Sunday evening or Monday.

The legislation is expected to include a package to extend expiring tax provisions and possibly also bipartisan energy legislation — a result of months of work by Sen. Lisa Murkowski (R-Alaska). 

But getting the language right on the Fed lending authorities is a challenge.

“They’re working on it but it’s still very hard. We shall see,” said Sen. Debbie Stabenow (D-Mich.). 

“When we write it, it appears he wants to do more than what he’s saying,” she added.

Another Democratic senator who requested anonymity to discuss the subject said there’s bipartisan agreement that the Federal Reserve’s authority should be reset to what it was before the pandemic hit in March, but Toomey and Schumer can’t yet agree on the language.

“The problem is Toomey talks very reasonably and then they get language and the language is like, ‘No, this is not what we agreed to,’” said the senator. 

A third Democratic senator briefed by Schumer said: “There’s not a deal.”

“Anything’s possible but there’s not a deal at the table and it’s not like one side is waiting to hear back from the other. I don’t know there is a way to write statutory language in the next 48 hours that doesn’t come back and bite us,” the source said. “This is super complicated.”

“It’s really hard to figure out any path forward if they continue to insist on this being part of the package,” the senator added. “This is the last thing you should be doing in the dead of night.”

McConnell wants to avoid having to pass another short-term spending resolution. He would need unanimous consent from 99 other senators to waive procedural hurdles, and some of his colleagues are getting frustrated about having to pass stopgap measures.

“If they can’t get it done [Sunday] we’re up against another shutdown and I don’t know what the appetite are for another CR. People are not happy,” said one GOP senator, referring to the possible need for another continuing resolution to fund the government.

Some Republicans are growing impatient over a fight that was not on their radar a week ago, though Toomey did include a version of his proposal in a slimmed-down relief package Senate Republicans advanced after the August recess.

“It’s taking a lot longer than I would like,” said Sen. Susan Collins (R-Maine). 

But negotiators are getting pressure from both sides not to back down on the Federal Reserve language.

“If they’re going to take away Fed facilities and drive this country into a depression, I’m willing to stay here through Christmas and New Year’s. It’s bullshit,” said Sen. Jon Tester (D-Mont.). 

Democrats have expressed frustration over this issue, claiming that it is an effort to limit the tools at President-elect Biden’s disposal next year.

But Republicans are rallying around Toomey.

“The Democrats are trying to extend it to use it as a backdoor to do what they couldn’t do through the front door,” said Sen. John Kennedy (R-La.), voicing the concern of many Republicans that the incoming Biden administration could morph the Fed authorities to funnel aid to state and local governments.

“I think we oughta stand firm,” Kennedy said. 

The Senate is scheduled to open at 1 p.m. Sunday with its first vote scheduled at 1:30 pm.