President-elect Joe Biden’s transition team on Friday decried Republicans’ efforts to shackle the Federal Reserve as Biden enters office.
Both sides in recent days have indicated they’re close to a deal on a stimulus bill aimed at buoying the U.S. economy as it weathers the COVID-19 storm.
But reports Thursday and Friday indicated Republicans wanted to rein in the Federal Reserve’s powers to help businesses and municipalities stay afloat, efforts it’s pursued for months through programs set up in the last COVID-19 stimulus bill, but which the Trump administration and congressional Republicans have sought to cut off as Trump leaves office.
The stimulus “should not include unnecessary provisions that would hamper the Treasury Department and the Federal Reserve’s ability to fight economic crises,” incoming National Economic Council Director Brian Deese said in a statement released through the transition.
“As we navigate through an unprecedented economic crisis, it is in the interests of the American people to maintain the Fed’s ability to respond quickly and forcefully,” Deese said. “Undermining that authority could mean less lending to Main Street businesses, higher unemployment, and greater economic pain across the nation. Congress’s good faith effort to deliver immediate relief should not be delayed by provisions that could put our future financial stability at risk.”
Republicans, with an eye on President Donald Trump’s impending exit from the White House, are trying to prevent the Federal Reserve from continuing to use the lending powers it’s employed through the pandemic once Biden takes over.
Among other things, the Fed has used funds appropriated through the CARES Act to serve as an emergency lender to businesses struggling with dramatic COVID-related declines, as well as to support local governments.
“It is not the role of our central bank, the Fed, to engage in fiscal policy, social policy or allocating credit,” Sen. Pat Toomey (R-PA), the incoming chair of the Senate Banking Committee and the leader of the effort to restrict the Fed, said on a conference call Thursday.
The GOP proposal “is radical and reckless,” said Rep. Donna Shalala (D-FL) and Bharat Ramamurti, both members of the Congressional Oversight Commission, in a statement on Thursday. “It limits the ability of the Biden Administration to address our current economic crisis and it undermines the Fed’s ability — not just now, but indefinitely — to respond to future financial crises.”
Senate Republicans are once again holding up COVID negotiations.
Now they want to handicap the Federal Reserve's ability to support our economy and struggling communities.
This has to stop. Americans are suffering, and they're trying to nickel-and-dime your COVID relief.
— Sherrod Brown (@SenSherrodBrown) December 18, 2020
The legislative language that would make the emergency lending funds expire on Dec. 31 has the support of Treasury Secretary Steve Mnuchin, an unnamed senior administration official told The New York Times.
Mnuchin has himself tried to tie the incoming administration’s hands on this front, announcing in November — following Trump’s loss — that the Treasury Department would claw back CARES Act dollars from the Federal Reserve at the end of the year.
On Friday, shortly after the Deese’s statement, the Democratic chairs of the House Financial Services and Ways & Means committees called Toomey’s provision a “poison pill” and “dangerous.”
“An agreement on a coronavirus relief bill was within sight, but Senate Republicans are now holding up the entire package over this unacceptable provision designed to sabotage the economic recovery under the Biden Administration,” the chairs, Reps. Maxine Waters (D-CA) and Richard Neal (D-MA), wrote.
“Senate Republicans’ extreme demand threatens to derail this urgently needed action, and it must be immediately abandoned so that we can move forward,” they added.