United States risks 'permanent damage' from extended shutdown: Mnuchin

Jerome Powell chairman of the US Federal Reserve speaks about the $2 trillion coronavirus rescue package passed by lawmakers in March during a virtual Senate Banking Committee meeting

United States risks 'permanent damage' from extended shutdown: Mnuchin

The $500 billion Treasury fund includes $46 billion to make loans and loan guarantees to the airline industry, which has been hit hard by the pandemic as air traffic has come to a near halt.

"If you offer back a worker and they don't take that job, you will be required to notify the local unemployment insurance agency because that person will no longer be eligible for unemployment", Mnuchin said.

Mnuchin said he hoped to reach a bipartisan agreement "technical fix" that would extend the loans. That observation had raised concerns that the Fed would adopt a cautious approach that would provide less financial support.

Mnuchin and Powell said economic data from states that are beginning to reopen will be key to determining the next steps in the federal response.

Banking Committee Holds Virtual Hearing
Steven Mnuchin US Treasury secretary speaks during a virtual Senate Banking Committee hearing seen on a smartphone

Ohio Sen. Sherrod Brown, the ranking Democrat on the committee, accused the Trump administration of pushing businesses to reopen prematurely, without adequate safeguards for workers.

Treasury Secretary Steven Mnuchin will likely come under tough questioning from senators Tuesday about a small business lending program included in the government's $2 trillion relief package.

Lawmakers from both parties have criticized the Payroll Protection Program, which initially provided $349 billion in forgivable loans to small companies but has been plagued by a host of problems. Many businesses were unable to get loans before the initial funding was exhausted.

In a letter (pdf) sent Monday to Mnuchin, Fed chairman Jerome Powell, and Federal Reserve Bank of NY president John Williams, Warren said she is "disappointed that you have not established strong requirements for [bailout] programs to ensure that taxpayer dollars are used wisely and in support of workers and the economy as a whole".

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Senator Elizabeth Warren on Tuesday pressed Treasury Secretary Steven Mnuchin to commit to requiring medium and large companies receiving loans from the CARES Act to retain their employees, and called on him hold corporate executives personally liable if they fail to meet certain certification requirements during a testy exchange in a Senate hearing. The prospect of any quick rebound in employment is becoming increasingly dim with tens of millions jobless and no strong treatment or vaccine immediately available to support Americans' confidence in returning to work, school and shopping. Late Monday, Treasury said that this week it is sending out almost four million payments on prepaid debit cards.

Working with the Treasury, the central bank has launched unprecedented support for markets and the economy since mid-March.

The comments by Powell compare with remarks at the end of last month, when he dismissed concerns about ballooning federal debt, saying that "this is the time to use the great fiscal power of the U.S".

Much of Powell's prepared testimony was a review of programs put in place by the central bank.

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Powell, a Republican whom Trump nominated to the top Fed job, has already said he thinks governments should do more, and has said the Fed is willing to go further if needed to support the economy.

The Fed had already pledged to publish the names of its borrowers from its Main Street Lending program, and some of its other lending efforts. It has revived many of those programs to smooth the flow of credit in the current crisis.

American families and businesses are feeling the pain amid the nationwide shutdowns, Mnuchin told a Senate committee, but reopening the economy will need to be done with caution. "It'll weigh on the economy", Powell said. Powell stressed additional measures may be necessary to prevent lasting economic damage. But states and localities say they are in need of federal money to avoid having to cut jobs and services, and legislation to provide that money remains at an impasse in Congress.

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