Mnuchin, Powell testify on CARES Act response

The leaders of the Treasury Department and Federal Reserve said they're working hard to get money in the right hands following passage of a congressional relief package but that plenty of work remains.

In remote testimony Tuesday before the Senate Banking Committee, Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell outlined their responses since Congress passed the Coronavirus Aid, Relief and Economic Security Act in March, which included $454 billion for struggling businesses.

Mr. Mnuchin said Treasury has committed up to $195 billion in credit support under the CARES Act and has another $259 billion to dole out.

"I've allocated about half of that, and let me be clear, I am prepared to allocate the rest of that," Mr. Mnuchin said. "The only reason I have not allocated it fully is we are just starting to get these facilities up and running, we want to have a better idea as to which one of the facilities needs more capital as well as the potential for adding additional facilities. So I expect to allocate all the capital as needed as was given to us."

Following a question from Sen. Mike Crapo, R-Idaho, the committee's chairman, Mr. Mnuchin said the Treasury is willing to take risks in distributing the CARES Act capital. "The way these facilities work is in the facilities that don't have any credit risk, such as the (Paycheck Protection Program), I approve those without capital allocated," he said. "By definition, any facility that the Fed believes puts them at risk, I do put up capital. So by definition that capital is at risk, and we are fully prepared to take losses in certain scenarios on that capital."

In his opening statement, Mr. Crapo said "The CARES Act is the biggest rescue package in the history of Congress, and we need to make sure the dollars and program quickly find their mark."

Democrats on the committee, chiefly Ranking Member Sherrod Brown, D-Ohio, said the Treasury and Fed aren't doing enough to help American workers.

In discussing when it is prudent to have businesses reopen, Mr. Brown said there has to be a plan in place to protect workers. "How many workers should give their lives to increase the GDP or the Dow Jones by 1,000 points?" he asked Mr. Mnuchin to which the secretary said none and disagreed with the characterization.

Later, following a question from Sen. Pat Toomey, R-Pa., on the potential negative economic impact of keeping states and cities shut down, Mr. Mnuchin said, "There is the risk of permanent damage. As I've said before, we're conscious of the health issues and we want to do this in a balanced and safe way."

In his written testimony, Mr. Powell said available economic data for the current quarter show a sharp drop in output and an equally sharp rise in unemployment. "By these measures and many others, the scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II."

Mr. Powell said the Fed is prepared to use "our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response."