A bid by Republicans to constrain the Federal Reserve’s crisis lending programs is threatening to derail negotiations on a pandemic relief plan and has drawn the incoming administration of President-elect Joe Biden into the 11th hour fight.
Senator Pat Toomey, a Republican from Pennsylvania, wants a provision in the relief bill that would bar the Fed from restarting five programs that expire at the end of the year, or create similar ones going forward. The roughly $900 billion proposal being debated by Congress, would, among other things, extend support to out-of-work Americans and thousands of small businesses.
While Toomey said the language only would affect a “narrow universe” of Fed facilities, Democrats in Congress have accused Republicans of trying to hamstring the incoming Biden administration.
Brian Deese, whom Biden has picked to be director of his National Economic Council, said in a statement that the relief package “should not include unnecessary provisions that would hamper the Treasury Department and the Federal Reserve’s ability to fight economic crises.”
Democratic aides said the dispute over Fed lending powers is the biggest issue impeding final negotiations on coronavirus relief. Lawmakers are aiming to attach the aid to a bill funding the government, and a delay risks triggering a partial government shutdown after midnight Friday when current spending authority expires. Congressional leaders are trying to extend the deadline with another stopgap spending measure, but that too has become entangled in the wider debate on relief.
The Fed’s aggressive action to provide liquidity and back-stop corporate America helped stem panic among investors that threatened to seize up financial markets as the pandemic took hold in March. The central bank opposed the Trump administration’s Nov. 19 instruction to wind up several of those facilities but said it will comply with the request.
Fed Chair Jerome Powell and his colleagues have made plain their opposition to any measures that limit their emergency lending powers. They have repeatedly and publicly stressed the facilities played an important backstop role in supporting the economy during the pandemic.
A Fed spokesman declined to comment.
Legal exports said the prohibition on the Fed creating similar facilities could inhibit its response to future financial emergencies.
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