Federal Reserve Chairman Jay Powell (right) and Treasury Secretary Steven Mnuchin (left) testified before House and Senate committees this week to discuss the government’s pandemic response. Powell offered no option for administrative changes to the Main Street Lending Program (MSLP) credit lending facility while Mnuchin strongly urged Congress to repurpose unused COVID-19 relief funds in another legislative pandemic aid package. (BGov, Sept. 23 and Reuters, Sept. 24)
- Recommendations to improve access to the MSLP were a focus of recent testimony by Roundtable President and CEO’s Jeffrey DeBoer on behalf of the industry before the Senate Banking Committee. (Roundtable Weekly, Sept. 11)
- On Sept. 23, policymakers on the House Oversight and Reform Select Subcommittee on the Coronavirus Crisis questioned Powell about the efficacy of the MSLP, which has only utilized about 0.3% of its $600 billion capacity. (BGov, Sept. 23)
- Powell responded about the MSLP that the Fed has done “… basically all of the things we can think of that are clear gains (but) we are looking to do more.” He added, “… but I would say the things that we have done have been really to widen the appeal of that program and its effectiveness … there is nothing major that we see now that would be consistent with opening it up…” (BGov and CQ Committee transcript, Sept. 23)
Fed Updates MSLP FAQs
The Fed on Sept. 18 issued new guidance to banks for the MSLP in an attempt to encourage increased lending. The central bank’s revised “Frequently Asked Questions” for the MSLP emphasize that lender underwriting should look back to the borrower's pre-pandemic condition and forward to their post-pandemic prospects. The FAQs also seek to clarify the Board and Department of Treasury's expectations regarding lender underwriting. (Fed news release)
- In a news conference announcing the FAQs, Powell said, “I would say it may be that further support for commercial real estate will require further action for Congress – from Congress.”
- During his three committee appearances this week, Powell consistently emphasized that more fiscal relief is needed from Congress to sustain an economic recovery from the pandemic. Mnuchin struck a similar theme in his two committee appearances while urging Congress to pass a new package that would reuse unused funds from previous COVID-19 relief authorizations for urgent needs.
- Mnuchin told the Senate Banking Committee this week that up to $380 billion could be repurposed. "It would not cost an extra penny," Mnuchin said. (Reuters, Sept 24)
- During the Sept. 24 hearing, Senate Banking Committee Chairman Mike Crapo (R-ID) in his opening statement referred to the committee’s earlier hearing on Sept. 9 on “The Status of the Federal Reserve Emergency Lending Facilities.”
- Chairman Crapo said, “Jeff DeBoer (above) President and CEO of the Real Estate Roundtable painted a bleak picture of the condition of the commercial real estate market. He said, ‘It is impacting their ability to meet their debt service obligations which increases pressure on financial institutions, pension fund investors and others.’ And he said, ‘It is pushing property values down to the detriment of local governments. It is causing much stress to pools for commercial mortgage backed securities and it is threatening to result in countless commercial property foreclosures. The situation must be addressed.’" (Crapo’s Opening Statement, Sept. 24 and DeBoer's testimony and Q&A, Sept. 9)
- Crapo added, “Negotiating toward a realistic package that can actually get passed and signed into law would best serve the American people during this difficult time.”
- Mnuchin told the Senate Committee that he and House Speaker Nancy Pelosi (D-CA) have "agreed to continue to have discussions." (Wall Street Journal, Sept. 24)
Democrats Considering New Aid Proposal
Pelosi has directed her committee chairs this week to assemble a scaled back coronavirus relief package of approximately $2.4 trillion that could be used for as a basis for potential discussions with the White House and Senate Republicans. (Politico, BGov, and The Hill, Sept 24)
- Negotiations over a COVID-19 relief bill between Democrats and Republicans broke down in August over a nearly $1 trillion gulf between their proposals.
- The House passed a $3.4 trillion package in May (H.R. 6800), which is more than the $1.5 trillion President Trump indicated he would support and much larger than a $650 billion package supported by Senate Republicans.
- House Democrats could vote on a new plan next week, which would appease lawmakers from battleground election states anxious to pass a pandemic aid package before adjourning to campaign – despite chances that a Democrat-only plan is unlikely to attract Republican support.
Speaker Pelosi said last week that the House would remain in session until an agreement is reached, and House Majority Leader Steny Hoyer (D-MD) clarified that Representatives would be on call to return to the Capitol on short notice in the event a deal is reached. (BGov, Sept. 15)
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