The first Congressional oversight hearing for the Coronavirus Aid, Relief and Economic Security Act made it quite clear that the $2.3. trillion legislation designed to support an ailing economy is a work in progress.
Much of the $500 billion included in the Act to support businesses and state and local governments hasn’t even been disbursed yet — including $46 billion earmarked for airlines and businesses critical for national security, according to a congressional report released Monday and discussed at Tuesday’s hearing before the Senate Banking Committee.
Of the remaining $454 billion that the U.S. Treasury Department can use to support emergency lending facilities by the Federal Reserve, the Treasury has committed to dispense only $195 billion, said Treasury Secretary Steven Mnuchin, who testified at the hearing with Federal Reserve Board Chairman Jerome Powell.
Plus, only two of multiple lending facilities are operational today, and both are corporate credit facilities. The remaining facilities, roughly six, should be ready to start by May 31 — including the new “Main Street” lending facilities for small and midsize businesses — after which money will start to flow, according to Powell.
The bulk of the funds available through those facilities is “mostly ahead of us,” said Powell, who added that the Fed will make adjustments to those programs “if the uptake is not enough.”
Committee members repeatedly asked both Powell and Mnuchin about the flexibility of programs and about additional support for state and local governments, which are losing revenue as a result of the current economic recession tied to the COVID-19 pandemic.
Powell noted that about 13% of the U.S. workforce is employed by state and local governments, which are facing revenue losses. When asked about what might happen next, he said additional layoffs by state and local governments could impact the economic recovery.
Powell agreed to review a bipartisan bill introduced by Sen. Bob Menendez, D-N.J., to provide $500 billion in direct lending to state and local governments. He also repeated his mantra that the Fed addresses liquidity issues through loans and not via direct spending programs, which is the purview of Congress: “We try to stick to our knitting.”
Risks to States, Communities
Mnuchin noted that the Treasury has expanded flexibility for disbursement of $150 billion in CARES Act funds for state and local governments to include fire, police and other groups of first responders, as well as additional essential workers responding to the health crises — but not for those with jobs in teaching and other local government work.
Those expenditures are dependent on “which taxing authority pays for [them],” he explained.