Fed chairman urges more relief aid
Federal Reserve Chairman Jerome Powell has a clear message for Congress: Spend more money, right now.
In an interview Wednesday with the Peterson Institute for International Economics, Powell called the COVID-19 pandemic an unprecedented economic challenge that needs to be met with even more aggressive federal policies. And he said Fed loans alone won't prevent a prolonged recession.
"The recovery may take some time to gather momentum and the passage of time can turn liquidity problems into solvency problems," Powell said. "Additional fiscal support could be costly, but worth it if it helps avoid long-term damage and leaves us with a stronger recovery."
Pointing to Congress, the leader of the nation's central bank added: "This tradeoff is one for our elected representatives who wield powers of taxation and spending."
The comments were sure to come as music to the ears of House Democrats, who proposed roughly doubling the nearly $3 trillion in relief aid Congress has already provided in four laws enacted since March (PL 116-123, PL 116-127, PL 116-136, PL 116-139). They introduced a measure Tuesday (HR 6800) offering another $3 trillion for more cash payments to families, business loans, extended unemployment benefits, food aid and more.
But Republicans have pushed to pump the brakes on more aid, saying they'd rather see how the economy responds to the money already provided. They've also raised concerns about federal debt, which is on course to surpass 100 percent of GDP this year, the highest level since World War II.
"I don't think at this point there's any sense of urgency, until we see how some of these programs that are already authorized and funded are working and it seems like at least right now they're working pretty well," Senate Majority Whip John Thune, R-S.D., said Tuesday.
Powell addressed those arguments in his interview. "I think now, when we are facing the biggest shock the economy has had in modern times, is for me not the time to prioritize considerations of debt," he said.
"I think the time to do that is during good times, when the economy is strong and unemployment is low," Powell added. "That's the time to be addressing those concerns." Jim Saksa and Doug Sword have the full story here.
The bottom line: The pressure to spend more is growing at a time of mass unemployment.
New relief bill proposes additional flexibility for SBA loans
The new relief bill from House Democrats attempts to make small-business loans more flexible and useful to more companies -- but it offers no new money.
The bill (HR 6800) would provide small businesses significantly more flexibility on how they spend forgivable loans obtained under the so-called Paycheck Protection Program. It would expand PPP eligibility to critical-access hospitals, dark-money special interest groups, and local news outlets owned by media conglomerates.
The Democrats' proposal would leave the SBA's stricter rules blocking public companies in place, but would expand eligibility in other ways. Most dramatically, it would expand eligibility from just charitable organizations as defined by section 501(c)(3) of the Internal Revenue Code to all 501(c) non-profit organizations -- including so-called dark money political groups that aren't required to disclose their donors under section 501(c)(4). Trade association lobbying groups would also qualify for the PPP loans.
Even though the proposal would greatly expand the number of eligible organizations to apply for loans -- and extend the deadline to apply from June 30 to the end of the calendar year -- it doesn't appropriate additional funds. FiscalNote, parent company of CQ Roll Call, has received a loan under the Paycheck Protection Program.
Despite its popularity, the program has drawn criticism from certain business sectors, such as independent restaurants and retailers, that the PPP can't help. The SBA and Treasury Department implemented rules requiring borrowers to use 75 percent of the loans for payroll and just 25 percent for rent, mortgage or utility payments.
Those rules made the PPP loans less appealing to companies such as restaurants that have relatively low employee costs compared to rent or debt expenses. The Democratic proposal would prevent the SBA from putting any ratio requirements on how much of the loans must be used for forgivable purposes.
And the bill would extend the "covered period" for loan forgiveness under the program from eight weeks to 24 weeks. That would allow businesses to sit on the money longer without reopening and still not have to repay their loans, as they wait for stay-at-home orders to be lifted. Jim Saksa has the full story here.
Democrats propose $200 billion for housing aid
The Democratic aid package would also provide nearly $200 billion in long-sought affordable housing and rental assistance funding.
The measure would include a complicated scheme for the Federal Reserve essentially to cover the cost of suspending almost all debt payments for renters, homeowners, student loan borrowers, consumers, small businesses and non-profit groups.
The package (HR 6800) would place broad moratoriums on debt collections and enforcement actions. It would ban evictions, foreclosures, repossessions and wage garnishments. It would apply to an enormous amount of credit, including leases, mortgages, consumer debt, private student loans, small business loans and non-profit groups' lines of credit. The moratoriums would last either for a year or 120 days after the pandemic's disaster declarations end.
To keep the landlords, mortgage servicers, credit card companies, student lenders, debt collectors and other creditors afloat, the bill would direct the Fed to stand up credit facilities to provide them long-term, low-interest loans to bridge the sudden stop in repayments. Those facilities would be backed by some of the $454 billion in Treasury Department funds provided in a March economic relief package (PL 116-136).
The Democratic proposal also includes $100 billion for emergency rental assistance grants, which would more than double the Department of Housing and Urban Development's entire budget, and $75 billion for homeowner assistance. Jim Saksa has all the details here.
Farmers and food aid boost in new relief bill
Farmers struggling with lost markets because of COVID-19 would receive more federal aid under the Democratic relief bill. And food stamp beneficiaries would see a 15 percent boost in monthly benefits.
The bill (HR 6800) calls for $16.5 billion in direct payments to farmers and ranchers hurt by the pandemic with a focus on those who do not qualify for payments out of an existing $16 billion pot the Agriculture Department plans to distribute in June. The proposed payments would come from unspent Treasury funding and could serve as a second chance for hog farmers and other livestock producers who say USDA payment limits mean inadequate funding to cover their losses.
Biofuel producers, particularly ethanol makers, would get an economic lifeline with a proposal to pay 45 cents a gallon to qualifying fuel produced between Jan. 1 and May 1. The renewable fuels industry has been battered as demand for transportation fuels sharply declined because millions of people remained home rather than commuting to work. The decline in demand sent a ripple through parts of the Midwest where a third of corn production goes into ethanol.
And the bill would provide $10 billion for the Supplemental Nutrition Assistance Program, or food stamps, to handle increased administrative costs and an expected enrollment increase. People receiving the minimum food stamp benefit of $16 a month would see the amount set at $30 per month under the bill. Ellyn Ferguson has the full story here.