Fight over Fed powers stalls $900B aid plan

WASHINGTON — An arcane battle over emergency Federal Reserve powers is frustrating efforts to lock down an agreement on an almost $1 trillion COVID-19 economic relief package. Saturday’s impasse is just the latest stumble in a partisan, monthslong fight, and feelings hardened as the Senate congregated for a weekend session.

Lawmakers on both sides said a provision by Sen. Pat Toomey, R-Pa., that would curb emergency Federal Reserve powers was the sticking point. Republicans are insisting on the Toomey plan, while Democrats are adamantly against it. A compromise was proving elusive, and the two sides seem stuck.

“That has to be resolved. And then everything will fall into place,” said House Speaker Nancy Pelosi, D-Calif. “It’s a very significant difference.”

Toomey defended his provision in a floor speech, saying the emergency powers were designed to stabilize capital markets at the height of the COVID-19 panic this spring and are expiring at the end of the month anyway. The language would block the Biden administration from restarting them.

At issue are Fed emergency programs, launched amid the pandemic this spring, that provided loans to small and midsize businesses and bought state and local government bonds. Those bond purchases have made it easier for governments to borrow, at a time when their finances are under pressure from job losses and health costs stemming from the pandemic.

Treasury Secretary Steven Mnuchin said last month that those programs, along with two that purchased corporate bonds, would close at the end of the year, prompting an initial objection by the Fed.

But in Mnuchin’s letter closing the programs, he said the Fed could request that future treasury secretaries renew them. Toomey’s language would bar the Fed from doing so.

Democrats in Congress also say Toomey is trying to limit the Fed’s ability to boost the economy, just as Biden takes office.

“This is about existing authorities that the Fed has had for a very long time, to be able to use in an emergency,” said Sen. Elizabeth Warren, D-Mass. “It’s about a lending authority for helping small businesses, state government, local government in the middle of a crisis.”

Toomey disputed that charge, saying his proposal “is emphatically not a broad overhaul of the Federal Reserve’s emergency lending authority.”

The massive package would wrap much of Capitol Hill’s unfinished 2020 business into a take-it-or-leave-it measure that promises to be a foot thick or more. House lawmakers will probably have only a few hours to study it before voting as early as Sunday afternoon. A Senate vote would follow, probably on Monday.