Dems Block Stimulus After GOP Moves To Strip Fed's Pandemic Powers

As pandemic relief negotiations continue to stall in Congress, the latest major obstacle has emerged; a battle over the Fed's ability to channel tens of billions of dollars to state and local governments - a largely-unused provision in the Cares Act which expires on Dec. 31.

Democrats want to preserve this option for what the Wall Street Journal editorial board describes as a plan "to use the Fed to go around Congress if they don't control the Senate next year," while Republicans - led by Sen. Pat Toomey (R-PA) - want to repurpose approximately $429 billion in Cares Act funding to finance roughly half of the new spending.

According to the report, the Fed only made $25 billion in loans and other commitments because the majority of businesses and municipalities were able to borrow more cheaply in the private market.

That Democrats are opposing the Toomey language gives away that their plan is to use the Fed to go around Congress if they don’t control the Senate next year. They’re afraid a GOP Senate won’t agree to another spending blowout to rescue profligate states like Illinois and New Jersey. They want to use the Fed’s municipal and state lending facility, which was stood up this year at the height of the pandemic and market disruption, as the bailout vehicle. -Wall Street Journal

At present, Fed Chairman Jerome Powell has agreed to return the unused portion of the funding to the Treasury, following the request of Secretary Steven Mnuchin. If the Cares Act is allowed to lapse on Dec. 31, a Biden Treasury would require a new appropriation from Congress to restore the programs.

The Journal also notes that after the $429 billion is repurposed for Covid relief, the Fed will still control some $35 to $40 billion as a cushion for various pandemic facilities - which could then be leveraged as much as 10x to lend to cities and states on terms set by the Biden Treasury and the Fed.

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Moon Kil Woong 1 month ago Contributor's comment

Dems should demand a public list of which companies got stimulus money and why? There are tons of small angry business owners who got nothing as big businesses and the politically connected ate it. Be capitalistic and give it to consumers and let them pick where to use it. At least it will help Americans.

As for stimulus plans, I hope it pays for vaccine and treatments for the Corona virus at least.