Lawmakers on Wednesday attempted to pull Federal Reserve Board Chair Jerome Powell into a partisan battle over a deepening stalemate over further coronavirus relief and the U.S.’s grueling fight against a pandemic.
In a Wednesday hearing on the Federal Reserve’s response to the coronavirus recession, the most powerful U.S. economic policymaker found himself refereeing disputes between Democrats and Republicans with just six weeks until Election Day.
Powell faced several questions and concerns from lawmakers on a special House subcommittee about what the Fed could do to help smaller businesses beyond the scope of its current emergency lending programs. Lawmakers also pushed the Fed chief to require large companies that receive help from the bank to hold onto as many employees as possible.
Much of Powell’s appearance before the House Oversight Committee’s special coronavirus subcommittee revolved around the partisan tensions that have left millions of struggling Americans and U.S. businesses without further aid.
“You’ve given us a precious grant of independence if we stay out of politics and stick to our knitting,” Powell said when asked by Rep. Jim Jordan (R-Ohio) if states with stricter coronavirus restrictions were holding back the recovery from the coronavirus recession.
“I wouldn’t prejudge state and local governments and their decisions,” he added.
About 11 million Americans remain unemployed, and the first wave of unemployment benefits for coronavirus job losses are set to expire over the coming weeks. Escalating closures of small businesses will likely make it harder for them to find work again.
Wednesday’s hearing was dominated by partisan bickering, finger-pointing and sniping over subjects that are well beyond the Fed’s domain.
Lawmakers sparred over and asked Powell to weigh in on Trump’s initial response to the coronavirus pandemic, China’s culpability, Trump’s relationship with China, whether the Centers for Disease Control and Prevention (CDC) was suppressing information about the virus, how quickly states should reopen schools and how quickly states should rollback pandemic-related restrictions.
In response, Powell stuck to his past comments about the economic impact of the virus and how measures to curb it, such as mask-wearing and social distancing, are unequivocally helpful for both the medical and economic recovery from the pandemic.
He also rebuffed questions about the size and scope of another fiscal stimulus deal, voicing support for some form of aid but leaving the details to lawmakers to hash out.
“I have a strong desire to not play a role in your discussions,” he said when asked to weigh in on how much aid should be given to state and local governments.
Powell took a more aggressive tone with several lawmakers who pushed the chairman beyond the realm of his domain.
“I just want to make it clear that I do not have a judgment on the pace of school closures whatsoever,” Powell responded after Rep. Mark Green (R-Tenn.) cited the rising number of youth suicides and accused “the left” of “rambling about science and numbers” but “clearly ignoring them to keep schools closed.”
“I don’t have one and I wouldn’t say if I did,” Powell continued.
Rep. Jamie Raskin (D-Md.), asked Powell to weigh in on Trump’s claim that “herd mentality” — a possible reference to “herd immunity” — would help the U.S. defeat the coronavirus without further restrictions.
“I never comment on the president’s comments or policies,” Powell replied.
Other lawmakers pressed Powell on what more the Fed could do to help small businesses and workers in general while Congress was paralyzed by partisan divides.
Some Democratic members of the panel asked Powell to consider lowering the minimum loan threshold for the Fed’s Main Street Lending Program (MSLP), a facility designed to help mid-sized businesses weather the pandemic. The MSLP has only financed $1 billion of the $600 billion it is authorized to extend, and lawmakers have asked the Fed to use the money for smaller firms.
The minimum for a MSLP loan is set at $250,000, which Democrats consider too high to cover small businesses in desperate need of credit. But Powell said the MSLP has seen virtually no demand for loans less than $1 million and that the Fed is not well equipped to underwrite a flood of smaller loans that could lead to substantial taxpayer losses.
“It’s really, really not practical for the Fed to try to create a facility that would deal with millions or hundreds of thousands of very small loans,” Powell said.
“Something like the [Paycheck Protection Program] could continue to do a lot of good in the small- and medium-sized companies space because it’s going to take longer than we had hoped for some companies to be able to get back online,” he added.