Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell appeared before the Senate Banking Committee yesterday.
Both urged Congress to make more funding available for small businesses.
In his testimony, Treasury Secretary Mnuchin said, “The most important thing Congress could do would be to unlock the unused $130 billion under the government-backed Paycheck Protection Program to allow the administration to send out second checks to the hardest-hit firms.”
Earlier this year small businesses received $525 billion in low-interest loans that can be forgiven if borrowers maintain their payrolls amid the pandemic.
Federal Reserve Chairman Powell also highlighted the PPP as an important means of boosting the economy.
“The risk is that spending will weaken,” Powell said, pointing to millions of workers who will have a hard time finding a job over the long term “because they work in those difficult areas of the economy” like restaurants and travel. Increasingly, small businesses across the nation are closing and not likely to return.
Powell faced heat from the Committee for the poor performance of the Main Street Lending Program, targeted at midsized businesses. Powell reported less that approximately $2 billion had been loaned from the $600 billion Congress allocated.
In testimony on Tuesday before the House Financial Services Committee, Chairwoman Maxine Waters, D Calif., called it “unacceptable” that only about 0.2% of the Main Street program’s $600 billion lending capacity has been used to date.”
Regarding a larger relief bill, Secretary Mnuchin advised talks with House Speaker Nancy Pelosi are ongoing but opined that Democrats were thwarting progress in reaching an agreement by insisting on a plan that that spends at least $2.2 trillion.
For his part, Chairman Powell indicated the central bank remains committed to providing economic support through low-interest rates as long as necessary for the job market to recover Powell warned that the economy would not fully recover until “people are confident that it is safe to reengage in a broad range of activities.”