Economy

U.S. risks 'permanent damage' from extended shutdown: Mnuchin

U.S. risks 'permanent damage' from extended shutdown: Mnuchin”

Powell appeared before lawmakers for a virtual hearing with U.S. Treasury Secretary Steven Mnuchin on the first quarterly CARES Act report to Congress. Lawmakers are expected to push the Fed chief to spell out if he thinks more fiscal support is necessary and what form it should take.

Mnuchin's comments came in a joint appearance before the Senate banking committee with Jerome Powell, the chairman of the Federal Reserve.

"I think the jobs numbers will be worse before they get better", Mnuchin said, adding that the overall economy too was likely to weaken in the near term before starting to recover towards the end of the year. The program would support lending up to $600 billion, with Treasury providing $75 billion to offset any potential losses.

Highlighting the worst unemployment rates since the Great Depression of the 1930s, now driving the economic downturn, Mnuchin said it is essential to reopen the American economy.

Ohio Sen. Sherrod Brown, the ranking Democrat on the committee, accused the Trump administration of pushing businesses to reopen prematurely, without adequate safeguards for workers. Mnuchin said he'd review that.

Congress is considering legislation that would free up trillions of dollars of additional aid to further bolster the economy, help states and increase pay for essential workers who are doing some of the most risky jobs.

In a letter (pdf) sent Monday to Mnuchin, Fed chairman Jerome Powell, and Federal Reserve Bank of NY president John Williams, Warren said she is "disappointed that you have not established strong requirements for [bailout] programs to ensure that taxpayer dollars are used wisely and in support of workers and the economy as a whole". To get the loans forgiven they have to rehire all their employees within eight weeks of receiving the funds, even if they have little business or work for them to do. The prospect of any quick rebound in employment is becoming increasingly dim with tens of millions jobless and no strong treatment or vaccine immediately available to support Americans' confidence in returning to work, school and shopping.

More news: Cash strapped Thai Airways to seek bankruptcy rehabilitation

Working with the Treasury, the central bank has launched unprecedented support for markets and the economy since mid-March.

Mnuchin and Powell said the Fed's emergency lending programs for mid-sized businesses and state and local governments should be up and running by the end of this month.

"The amount that has gone out so far, in the context of the US economy, is fairly modest", Powell said.

The Fed had already pledged to publish the names of its borrowers from its Main Street Lending program, and some of its other lending efforts.

The challenges of reopening parts of the economy were underscored by the hearing's format.

Federal Reserve Chairman Jerome Powell sought to maintain neutrality in the debate over whether Congress should build on record stimulus, to further cushion an economy facing increasingly dire pressure from the coronavirus pandemic.

Powell said Sunday on CBS' "60 Minutes" that Congress and the Fed must be prepared to provide additional financial support to prevent permanent damage to the economy from widespread bankruptcies among small businesses and long-term unemployment.



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