WASHINGTON — Treasury Secretary Steven Mnuchin told senators Tuesday that his department and the Fed are “fully prepared to take losses in certain scenarios” on the capital remaining to be distributed from the CARES Act.
Mnuchin did not describe the “certain scenarios” in which he is prepared to take losses, but he emphasized that the Treasury is ready to distribute the entire $500 billion initially appropriated to help struggling businesses impacted by the coronavirus pandemic.
So far, Mnuchin said, the government has committed up to $195 billion in credit support, leaving $259 billion to create or expand programs as needed. That total of $454 billion is equal to the original appropriation, minus the $46 billion specifically earmarked for airlines.
Mnuchin made the remarks in remote testimony before the Senate Banking Committee on the Trump administration’s efforts to stanch the economic bleeding caused by the pandemic. Mnuchin testified alongside Federal Reserve Chairman Jerome Powell.
“There are scenarios within [the business lending programs] where we could lose all of our capital, and we’re prepared to do that. And there are scenarios where the world gets better, and we could actually make a small amount of money,” Mnuchin said in an exchange with Sen. Mark Warner, D-Va.
“Our intention is that we expect to take some losses on these facilities. That’s our base case scenario.”
In his opening remarks, Mnuchin acknowledged “unprecedented challenges the American people are experiencing due to the Covid-19 pandemic. This disease is impacting families and communities across the nation. Through no fault of their own, the American people are also enduring economic challenges.”
More than 36 million Americans have filed for unemployment during the pandemic.
Mnuchin defended the administration’s track record on disbursement of money from the $2 trillion CARES Act passed by Congress to aid struggling businesses, industries and individuals.
“We have worked closely with the Small Business Administration on the Paycheck Protection Program to ensure the processing of more than 4.2 million loans for over $530 billion to keep tens of millions of hardworking Americans on the payroll,” Mnuchin said.
He also noted that Treasury has issued “more than 140 million Economic Impact Payments for over $240 billion to provide direct relief to millions of Americans,” and “almost $150 billion to states, local, and tribal governments through the Coronavirus Relief Fund for essential services.”
Mnuchin also noted that his department has “approved nearly $25 billion in payroll support to the airline industry to protect this critical sector of our economy.” He did not say the money has been distributed, only “approved.”
The slow pace of airline relief funds was one of the topics of a critical report released Monday by a congressional oversight committee charged with monitoring the implementation of the CARES Act.
Even before the Senate hearing began, Democrats on the committee signaled that Mnuchin would face a grilling over the slow pace of Treasury loans to struggling companies, and questions over how much of the money was actually going to workers. The CARES Act contained $500 billion for Treasury and the Fed to lend to businesses.
Sen. Sherrod Brown of Ohio, the top Democrat on the committee, said that, “from what we know so far, it does not appear that this administration or the Federal Reserve are making workers their priority.”
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Brown said he was interested in pressing Mnuchin and Powell “not about what you’re doing for big banks or big corporations and how you expect that money to trickle down, but how you’re making sure the money and authority Congress gave you actually help the people who make this country work.”