MANHATTAN (CN) — Stock losses that started off minor only deepened Tuesday by the end of two-hour Senate hearing where Treasury Secretary Steven Mnuchin warned of at least another month of economic hardship.
Predicting a “very difficult” June, the Trump appointee drew fire from some members of the Senate Banking Committee over what has been perceived as a lack of guardrails for companies to get stimulus funds.
“You are boosting your Wall Street buddies and you are leaving America behind,” said Senator Elizabeth Warren.
A Massachusetts Democrat who spearheaded the creation of the Consumer Financial Protection Bureau after the 2008 financial crisis, Warren said the government did nothing to stop companies from laying off employees after reaping millions from the fund created by the CARES Act.
“You were given authority to determine the terms, you said it yourself, you’re putting out term sheets,” Warren said. “And those term sheets do not require that a single corporation getting millions of dollars in taxpayer money retain one job.”
As the hearing dragged on, markets failed to hold onto to Monday’s rally, where rising oil prices and promising news on a Covid-19 vaccine brought the Dow Jones Industrial Average up more than 900 points. By the market’s close this afternoon, the Dow lost nearly 400 points.
The Treasury has $500 billion that it can dole out to ailing businesses under the Coronavirus Aid, Relief, and Economic Security Act. Just earlier this week, however, a congressional oversight panel found that the Treasury has approved only $37.5 billion from the fund and is yet to cut a single check.
Warren asked whether executives could be subject to criminal prosecution if they allowed the misuse of stimulus funds or provided false certification.
Mnuchin took offense at Warren’s comments, inserting a dig of his own. “Senator Warren, I think that’s a very unfair characterization,” he said. “These issues were discussed with both Republicans and Democrats at the time. You were not necessarily part of those discussions, but these were completely discussed.”
Warren noted that Treasury had wide latitude to draft such requirements in their term sheets for the bailout programs. “I’m talking about your term sheets that you’re putting out,” Warren cut in later during the questioning, “and you’re telling me that you’re not going to require any payroll.”
The committee also heard Tuesday from Federal Reserve Chairman Jerome Powell.
As would be expected from anyone in this office, the testimony largely stayed apolitical and did not include specific suggestions for a fiscal stimulus.
“We try to stick to our knitting over here,” Powell said multiple times during the hearing.
Powell instead urged Congress to take action that would prevent states and cities from going bankrupt, noting that economy would worsen if that happened. About 13% of the American workforce is employed by state or local government, and at least 1 million of those workers have lost their jobs due to the coronavirus-related downturn.
Powell said the Federal Reserve would not shy away from other liquidity programs, as needed. “When economic and financial conditions improve, we will put these tools back in the toolbox,” Powell said during his prepared remarks.
One of those tools the Fed has not yet employed is the $600 billion Main Street Lending Program, which Powell said will be up and running in two weeks. The program will provide loans to small- and medium-sized businesses that were “in good financial standing” prior to the shutdowns in March.
Some investors would like the Fed to close its toolbox sooner rather than later, noting the central bank’s liquidity programs could distort prices and deepen the national debt.
“I’m glad that Powell acknowledged that the actions of the Fed is just part of the fiscal/monetary response, but we should fear more steps by the Fed, not cheer them,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in an investor’s note Tuesday morning. “More Treasury buying means more monetization of our rising debts and deficits, something only a banana republic should like.”
Others are not keen on further fiscal actions by Congress, either, as during the hearing several Republican senators openly balked at the idea of another stimulus package.
Pennsylvania’s Pat Toomey said that only half of the trillions of dollars appropriated during the pandemic has been spent so far. “You could make a strong case not to pass a new spending bill,” he said during the hearing. Louisiana’s John Kennedy similarly said another stimulus had “less than a 50% chance of passing,” due to political lines being staked out in the Senate and House.
More than 4.8 million people worldwide have been confirmed infected by Covid-19, according to data from researchers at Johns Hopkins University, and roughly 321,000 have died. In the United States, more than 1.5 million people have contracted the novel coronavirus and more than 91,000 have died.
Follow @NickRummell
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
Additional Reads
-
-
Bay Area district attorney to face recall election April 15, 2024
