Congressional Democrats and the prospective Biden administration accused Republicans of jeopardizing a $ 900 billion fiscal stimulus agreement by insisting on curbing the Federal Reserve’s crisis-funding powers as tensions mounted in recent negotiations.
The late obstacle to reaching an agreement came as leaders of both parties sought to strike a compromise that would help the world’s largest economy weather the recent surge in coronavirus cases and support the slowing recovery.
The spit over the Fed’s lending came unexpectedly on Thursday when Pat Toomey, the Republican Senator from Pennsylvania, said he and other party’s lawmakers had been pressing for a provision preventing the Fed from reviving a number of credit facilities linked to the pandemic will expire at the end of the year.
Democrats on Friday reacted angrily to Mr Toomey’s move, saying it could limit the ability of U.S. policy makers to respond to next year’s economic downturn.
“As we navigate an unprecedented economic crisis, it is in the interests of the American people to maintain the Fed’s ability to respond quickly and forcefully,” said Brian Deese, who was won over as director of the US state’s National Economic Council by President-elect Joe Biden in its administration.
Proposals to sabotage President Biden and our nation’s economy are ruthless, wrong, and have no place in this legislation
“Undermining that authority could mean less corporate lending on Main Street, higher unemployment and greater economic problems across the country.”
Data released late Thursday showed an increase in requests for assistance from the Fed’s Main Street Lending Program, which was set up to help small and medium-sized businesses and which expires on December 31st.
Maxine Waters, chair of the House Financial Services Committee, and Richard Neal, chair of the House Means and Ways Committee, made a joint statement lambasting Mr Toomey’s move. “Extreme Senate demand from Republicans threatens to derail this much-needed move and it must be abandoned immediately for us to move forward,” they said.
“Proposals to sabotage President Biden and our nation’s economy are ruthless, false, and have no place in this legislation,” Massachusetts Senator Elizabeth Warren said in a statement.
As the friction increased, Republicans replied that the Democrats were more interested in getting tools to bail out the financial markets than in reaching an agreement. They also noted that members of their party, including Mr Toomey, had long promoted the idea of curtailing the Fed’s ability to revitalize its credit facilities, so this should not have come as a surprise.
“The language used by the Senate Republicans affects a very narrow universe of credit facilities and is emphatically not a major overhaul of the Federal Reserve’s emergency lending agency,” Toomey said Friday, defending his plan.
Larry Kudlow, Donald Trump’s top economic advisor, said the White House strongly supported his position, as did other Republican colleagues.
Republican Senator John Cornyn in Texas added on Twitter that the provision would “only enforce accountability and consensus, rather than allow unilateral action,” while Arkansas Senator Tom Cotton said, “Democrats are crazy for them the Fed as a slush fund ”.
The future of the Fed’s crisis credit facilities is in the air since US Treasury Secretary Steven Mnuchin ordered the Fed to shut down some of them by the end of the year, including those that buy corporate and municipal debt.
The Fed and Treasury would have the power to revive them without the approval of Congress by using limited resources from a rainy day fund in the Treasury, but Mr Toomey’s plan would hinder that.
The Fed lending dispute meant negotiations are expected to continue through the weekend. Legislators had hoped to get a deal before a Friday evening deadline to avoid a government shutdown. As a result, the House of Representatives had to pass an emergency law to extend state funds for an additional two days until Sunday.
The Senate also later passed the measure, and it was legally signed by President Trump on Friday night.
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