Sen. Patrick Toomey, R-Pa., On Monday defended his opposition to expanding the Federal Reserve’s emergency lending programs, which had become a last-minute stalemate in the negotiations. coronavirus stimulus.
An agreement on the Fed’s credit powers was reached over the weekend, paving the way for an agreement on the $ 900 billion largest package. Congress was scheduled to vote this Monday.
Democrats had worried that Toomey’s original proposal would prevent the Fed from responding adequately to future crises.
In an interview with Squawk Box, Toomey said he fully supported the extensive credit programs launched by the central bank in March in response to the growing pandemic. But Pennsylvania Republicans said they should be liquidated by the end of December and Congress needs to be re-approved before they can be restarted.
“They are unprecedented extraordinary powers and can only be justified in a real emergency,” Toomey told CNBC. “The Fed recognized that. They came to Congress in March and said, ‘That’s what we’d like to do.’ Will you finance it? “And then they created them, and I voted in favor of that. I supported them because I thought we were in such a big emergency. Of course we’re not in a financial crisis right now.”
Rather, Toomey said the U.S. economy was recovering well from the pandemic, except for some sectors, such as travel and hospitality. For this reason, Toomey said financial assistance programs should be more targeted.
Some Democrats had criticized Toomey’s initial stance toward the Fed, suggesting he and other Republicans were trying to limit the tools available to President-elect Joe Biden’s administration once he takes office in January. Toomey said he was struggling to ensure the central bank stayed in its monetary policy lane.
Toomey spokesman Steve Kelly told Reuters that the senator’s deal with Democrats “terminates more than $ 429 billion in unused funds under the CARES Act; puts an end to the Law’s lending facilities FACES before December 31, 2020, prevents the restart of these facilities and prohibits their duplication without the approval of Congress. ” A senior Democratic aide said, according to Reuters, Toomey had agreed to “drop the broad language in his proposal that would have prevented the Fed presidency from establishing similar facilities in the future.”
On Monday on CNBC, Toomey, who serves on the Senate finance, budget and banking committees, said “my concern was that there would be huge political pressure to misuse them, transform these liquidity facilities that they had successfully restored market liquidity and turned them into an instrument of fiscal policy, which is a terrible idea. “
Treasury Secretary Steven Mnuchin told CNBC he believed Democrats and Republicans got “a very good compromise” around the Fed’s emergency lending powers. “This is no different than after the financial crisis in Dodd-Frank,” he told Squawk on the street on Monday, referring to the 2010 law regulating financial institutions. “The Fed used to be able to lend directly to any company and Congress said, ‘No, we want you to come back if you need it in the future.’
Toomey, who has indicated he will not run for re-election in 2022, said he would be willing to allow the Fed to restore extensive lending programs in the event of deteriorating economic conditions in the future.
“If we go back to a terrible circumstance next year or ten years from now and the Fed and the Treasury come together and say,‘ Hey, that’s the kind of facility we need, ’I would support that in the circumstances. appropriate “. Toomey said. “But it shouldn’t be some kind of permanent vehicle for some politicians to decide, ‘Let’s take this and start making subsidized loans.'”