United States economy risks 'permanent damage' from long lockdowns, Mnuchin warns

Daniel Fowler
May 21, 2020

Mnuchin called for easing social distancing guidelines as soon as possible to restart the economy, echoing comments from President Donald Trump. "But we need to step back and ask, 'Is it enough?"

On Tuesday, Powell and Mnuchin provided their first assessment of the economic stimulus programs implemented as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Powell said that a highly anticipated lending program the Fed is creating for small businesses should be operating by the end of the month. "The amount that has gone out so far, in the context of the USA economy, is fairly modest".

United States Treasury Secretary Steven Mnuchin on Tuesday defended the Trump administration's fiscal response to the coronavirus pandemic.

"How many workers should give their lives to increase the GDP [gross domestic product] or the Dow Jones by 1,000 points?" asked Senator Sherrod Brown, the committee's top Democrat.

"No workers should give their lives to do that, Mr. Senator, and I think your characterization is unfair", Mnuchin responded.

Crapo questioned Mnuchin and Powell about a municipal lending fund and what types of cities could qualify for it. Congress allocated $150 billion for cities and states under the Cares Act, but governors and Democratic lawmakers have been pushing for more assistance. The Treasury has provided $75 billion, drawn from the $454 billion set aside by Congress, to cover any losses from the Main Street program.

Oil Rises Above $30 as Deep Production Cuts Rebalance Market
Oil prices have risen in the past three weeks as states have rolled back lockdown provisions and global output has decreased. Brent for July settlement added 3.3% to $33.57 on the ICE Futures Europe exchange following a 4.9% advance last week.

"That's right, and the rest was left up to you, and what you're saying is that you won't do it", Warren interrupted again.

"The administration wants to put more workers at risk to boost the stock market", Brown said.

Mnuchin came under sharp questioning from Sen. When pressed, Secretary Mnuchin notes the delay stems from the time it has taken to get the facilities up and running.

In a letter to the Federal Reserve Board ahead of the hearing, Warren also called for executives to be subject "to civil and criminal penalties, including disgorgement, if they provide fraudulent or misleading information or misuse funds, and should be required to immediately repurchase their bonds for the full amount when eligibility criteria are breached".

Mnuchin said in prepared testimony that so far, the paycheck program has processed more than 4.2 million loans for over $530 billion "to keep tens of millions of hardworking Americans on the payroll". To have the loans forgiven, they must rehire all their employees within eight weeks of receiving the funds, even if they have little business or work for them to do.

Mnuchin, pressed about those issues and about opening the loan program to more nonprofits, said his department was considering making changes. "In all the facilities that are not the main street facilities, you're not putting in any requirement for payroll, and the main street facility is something about commercial reasonable effort to be able to maintain jobs".

Material from Bloomberg News was used in this report.

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