WASHINGTON, DC -- U.S. Treasury Secretary Steven Mnuchin warned Tuesday of potential long-term damage to the U.S. economy the longer states are shut down due to the coronavirus pandemic.
"There is risk of permanent damage," Mnuchin told the U.S. Senate Banking Committee.
Republicans and Democrats have been divided over how to safely reopen the economy and how quickly it can be done without putting lives at risk. The Trump administration, as well as several Republican governors, have pushed communities to open as fast as possible -- but there are few national guidelines. All states will be partially reopened by Memorial Day.
The debate over when and how to reopen the economy was laid bare during the hearing. In a testy exchange, Ohio Democratic Sen. Sherrod Brown accused the Trump administration of being eager to send employees back to work during uncertain times.
"How many workers should give their lives to increase the GDP or the Dow by 1,000 points?" Brown asked.
"No workers should give their lives to do that, senator, and I think your characterization is unfair," Mnuchin said.
Mnuchin told lawmakers that while he thinks "the jobs numbers will be worse before they get better," he expects economic conditions will improve in the third and fourth quarters of this year.
"The country will emerge from the pandemic stronger than ever," he said.
Mnuchin and Federal Reserve Chairman Jerome Powell also faced questions from the Banking Committee about how they're implementing the $2.2 trillion coronavirus rescue package.
Here are additional takeaways from the hearing:
Billions of dollars in lending to small and mid-sized business will start in June
The program to lend billions of dollars to small- and medium-sized businesses should be ready to launch by the end of the month, Powell said, amid complaints the money has been too slow to reach the public.
Known as the Main Street Lending Program, it was included in the relief bill passed in March.
Congress appropriated $454 billion to be sent to the Fed to serve as the baseline for lending facilities -- including the Main Street Lending Program, as well as lending program for cities and local governments. The Fed has revised the terms and qualifications for the programs multiple times, but they still haven't launched yet.
Bipartisan push to make small business lending more flexible
A separate loan program for small businesses called the Paycheck Protection Program was implemented by Treasury and the Small Business Administration. To date, about 4.2 million small business loans have been made for a total of more than $530 billion.
But borrowers have been frustrated with how the rules of the program keep changing and it's made some business owners afraid to spend the money.
Borrowers are required to spend the money in eight weeks, which is proving difficult for some who may not have been able to open their doors yet with stay-at-home orders still active in many states and cities.
On Tuesday, Mnuchin acknowledged that the eight-week deadline is a concern.
"We'd like to get a bipartisan technical fix," he said.
There's a lot of support from industry groups and lawmakers for extending the eight-week period, including Republican Sen. Marco Rubio, chairman of the Senate's Small Business Committee. House Democrats have proposed extending it to 24 weeks.
Mnuchin won't commit to further restrictions on big business
Sen. Elizabeth Warren, a Democrat from Massachusetts, pressed Mnuchin on whether he would require big companies receiving money from the aid package to hire back their workers.
Congress gave Treasury the authority to dole out $500 billion to shore up mid-sized and large corporations. But unlike the Paycheck Protection Program and other small-business lending facilities, which forgive loans when businesses keep employees on their payroll, Treasury did not stipulate anything about big businesses having to do the same.
"You're boosting your Wall Street buddies, and you are leaving the American people behind," Warren said. "You were given the authority to determine the terms ... and those term sheets do not require that a single corporation getting millions of dollars in taxpayer money retain one job."
Mnuchin called that a "very unfair characterization," noting that different programs have different requirements, and that there are certain restrictions on employee compensation, dividends and buybacks for companies receiving loans.
"We expect people to use their best efforts to support jobs," Mnuchin said.
Warren noted that's far from a requirement.
Republicans want to see results before passing another stimulus package
Democrats are eager to appropriate more money to be help the economy. Last week, the U.S. House passed another $3 trillion sweeping bill for Covid-19 relief.
But seeing that the Federal Reserve is still in the process of rolling out its emergency lending programs, many Republicans want to wait for the money to be spent before rushing to pass another bill.
"I think you can make a pretty strong case that before we rush out and do another spending bill, we actually let some of this stuff go to work and understand the consequences of what we've already done," said Sen. Pat Toomey, a Republican from Pennsylvania.
Powell, noting that the government response has been big and fast, suggested more money could be needed.
"The question looms in the air of 'is it enough'," he said.