Powell, Mnuchin enters the lion’s den again to discuss the response to the pandemic

WASHINGTON (Reuters) – US lawmakers on Tuesday will have another chance to criticize the heads of the Federal Reserve and Treasury over the effectiveness of the nearly $ 3 trillion in emergency aid apportioned to stem the economic consequences of the new coronavirus pandemic .

FILE PHOTO: Federal Reserve Chairman Jerome Powell speaks with United States Secretary of the Treasury Steven Mnuchin during the G20 Finance Ministers and Central Bank Governors meeting in Fukuoka, Japan, on Aug. 8. June 2019. REUTERS / Kim Kyung-Hoon / Pool / File Photo

The US central bank, backed by the Treasury, has launched programs to improve the flow of credit as economic activity plummeted and millions of jobs were lost, including its new Main Street business loan program in mostly medium.

The Treasury has been at the forefront of the $ 660 billion Forgivable Loan Protection Program (PPP) intended to keep small businesses and their employees afloat on payrolls.

Fed President Jerome Powell and Treasury Secretary Steven Mnuchin are due to testify before the Financial Services Committee of the US House of Representatives at 12:30 pm EDT (1630 GMT) to discuss how funds were disbursed to households and businesses.

Lawmakers on the Democratic-controlled panel are likely to question whether those in need have received support.

Powell and Mnuchin testified about the economic response of the coronavirus to the Senate Banking Committee last month.

To those who have or don’t have?

In prepared testimony released Monday, Powell noted that the economic recovery had started earlier than expected, but that output and employment are still well below pre-crisis levels, with the brunt of the pain borne by women and minorities. And he reiterated that a full recovery is unlikely until people feel safe to get out and go.

“The way forward will also depend on political actions taken at all levels of government to provide aid and support recovery for as long as necessary,” he said.

Several government programs designed to cushion the pandemic’s hit, including enhanced unemployment benefits, are expected to expire this summer. But concerns that the virus has not been contained have increased uncertainty as many parts of the country reopened their economies after blockades were established in March and April.

Fifteen US states last week reported a record increase in cases of COVID-19, the respiratory illness caused by the coronavirus that has killed more than 125,000 people in the United States.

Numerous Fed policymakers, including Powell, have said that more fiscal and monetary aid will likely be needed to sustain what is expected to be a slow and uneven economic recovery.

The Fed has come under fire for the perception that it has prioritized Wall Street over Main Street, helping to fuel economic inequality by raising the price of assets like stocks.

The central bank bought trillions of dollars in bonds and launched nearly a dozen programs to support and extend corporate credit and promote bank lending, arguing that strengthening the economy as a whole is useful when companies maintain access to critical financing for their operations. .

Sunday’s data showed the Fed bought $ 428 million in bonds from individual companies through mid-June, making investments in names known as Walmart Inc and AT&T Inc, as well as major oil companies, tobacco giant Philip Morris International Inc and a subsidiary of public services. billionaire Warren Buffett’s Berkshire Hathaway holding company.

At the same time, its High Street Loan Program has yet to make a loan and has taken three months to complete, although Powell said in his prepared testimony that he hoped it would be a “valuable resource” in the coming months. In general, central bank programs have had modest use.

Mnuchin will also likely be questioned about PPP. After an initial round of funding quickly ran out, about $ 140 billion in aid remains untapped by small businesses.

Mnuchin agreed last week to give Congress full access to the loan-level data for the program after being the subject of bipartisan criticism for saying that revealing the identities of the companies that took funds could be “confidential” and “proprietary.”

Report by Lindsay Dunsmuir; Editing by Paul Simao

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