By Nick Timiraos and Kate Davidson 

Treasury Secretary Steven Mnuchin said Tuesday the Trump administration didn't anticipate further changes that would ease access to loan programs it had established with the Federal Reserve to alleviate the fallout from the pandemic-induced recession.

"I unfortunately think there's not much more we can do," he told lawmakers at a congressional hearing.

Congress in March authorized $454 billion for the Treasury to backstop losses in Fed lending programs, and Mr. Mnuchin authorized $195 billion for five different lending programs with the Fed.

The Treasury secretary indicated he didn't see a need to use the remaining $259 billion, and he said he would support repurposing $200 billion of those funds for other spending programs.

The five lending programs the Fed and Treasury established using that support would theoretically allow for nearly $3 trillion in new borrowing, but the Fed has extended less than $20 billion in such loans.

In some cases, such as the Main Street Lending Program for small and midsize businesses, low uptake reflects complications the Fed and Treasury encountered launching the program and enticing banks and borrowers to use it. For others, lower volumes reflect the success the mere announcement of the Fed backstops have had in spurring private investors to buy assets.

Members of both parties have criticized the $600 billion Main Street program for low lending volume. The program has around 230 loans worth around $2 billion that have been made or are in process, Fed Chairman Jerome Powell said at the hearing Tuesday.

Democrats, meanwhile, expressed frustration that a separate $500 billion loan program for state and local government borrowing has resulted in only two loans. "This is unacceptable," said Rep. Maxine Waters (D., Calif.), chairwoman of the House Financial Services Committee. "This pandemic response has fallen badly short."

Mr. Powell told lawmakers Tuesday that the government could reach hard-hit industries and workers more readily with additional grants, as opposed to recalibrating existing Fed loan programs.

"It's very clear that we are to make loans only to solvent borrowers," said Mr. Powell at a news conference last week. He pointed to how Congress in the past decade wanted to make it harder to extend emergency loans, particularly to banks. "Now we're using that same law for smaller business borrowers, and you know, it's not a perfect fit."

On Tuesday, Mr. Powell said lowering the minimum loan amount for Main Street loans to $100,000 from $250,000 wasn't likely to make a big difference because the program hasn't attracted significant interest from borrowers seeking loans of less than $1 million.

Extending credit in smaller amounts "would need a different facility," he said. Mr. Powell encouraged lawmakers to instead consider a grant-like approach such as the Paycheck Protection Program, which provided around $540 billion in small-business relief funding.

Mr. Powell wasn't asked whether he would support repurposing the Treasury's uncommitted funds to backstop Fed lending programs.

Mr. Powell said the economic response to the coronavirus has been effective but that Congress would likely need to spend more money to shore up parts of the economy that continue to struggle.

The Fed cut rates to near zero in March and has purchased trillions of dollars of securities after the coronavirus pandemic threatened to touch off a financial panic as investors and businesses sought to raise cash. The central bank also backstopped an array of lending markets.

But with short- and long-term interest rates at historically low levels, the Fed could have fewer tools to spur a recovery than it did after the 2008 financial crisis. Some officials have consequently called for continued fiscal relief measures to spur a faster rebound.

Referring to monetary and fiscal policy, Mr. Powell said Tuesday, "The recovery will go faster if we have both tools continuing to work together as they have."

Messrs. Powell and Mnuchin begin three days of hearings on Capitol Hill on Tuesday morning, beginning with the House Financial Services Committee. Both men also will appear before the Senate Banking Committee on Thursday. Mr. Powell testifies Wednesday before a separate House panel overseeing the U.S. response to the coronavirus pandemic.

Mr. Powell said lawmakers should be pleased that around half of the 22 million jobs lost in March and April had been recovered this summer, but he said the 11 million shortfall in employment since February was worrisome.

"We still have 11 million people out there" without jobs, Mr. Powell said. "There is a lot of work to do there."

Congressional Democrats have been at a stalemate for months with Republicans and the White House over the size of another spending package. Democrats are pushing for significant relief to state and local governments and a package of at least $2.2 trillion, the size of the bipartisan measure approved in March.

Republicans have balked at the size and some of the individual components and have proposed spending of up to $1 trillion in additional relief. The White House has indicated it could support legislation that costs around $1.5 trillion.

Mr. Mnuchin said in his testimony that the administration was ready to reach a bipartisan agreement. "I believe a targeted package is still needed," he said.

Write to Nick Timiraos at and Kate Davidson at


(END) Dow Jones Newswires

September 22, 2020 12:46 ET (16:46 GMT)

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