Closing In on Stimulus Deal, Lawmakers Clash Over Fed’s Role

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The maneuvering put the fate of Congress’ relief package back in doubt at a critical juncture, as coronavirus cases surge, unemployment insurance claims remain high, and a spate of weakening data points underline that American households and businesses are contending with near-term economic pain even as vaccines stoke hopes for a future rebound. Without renewed government support, millions could be staring down a bleak pandemic winter with little help at their disposal.

The language Mr. Toomey and other Republicans are pushing for would rescind funding earmarked to support Fed credit for small and medium-sized businesses, state and local governments and big corporations. More alarming to Democrats, it would also bar the Fed and Treasury Department from restarting new versions of critical loan programs enacted this year.

That would take off the table a useful tool for Mr. Biden as he takes office amid a continuing economic slump — and it angered Democrats, who had blasted Steven Mnuchin, the Treasury secretary, for his decision last month to close the Fed programs at the end of the year.

Mr. Toomey denied that he was trying to hurt the incoming Biden administration or tank the economy. But he conceded that his measure was intended to prevent Democrats from taking advantage of the Fed’s emergency loan programs as a way to get cheap credit to favored borrowers. The programs were meant to keep markets from breaking down, Mr. Toomey argued, not to help municipalities or disadvantage oil and gas companies relative to green-energy competitors.

“It would be a terrible idea to morph these programs into something else,” Mr. Toomey said in a call with reporters. Under some Democrat’s plans, he warned, “the Fed wouldn’t be the lender of last resort, it would be the lender of first resort.”

Mr. Toomey, who said the new language is “the most important thing” to him, said it was also widely supported by Senate Republicans and by Mr. Mnuchin. A senior administration official confirmed that the Treasury secretary supported it.

Democrats condemned the move, which would leave the Biden administration with even fewer tools to fight the economic mess it will inherit.

“This is a significant last-minute request from Senate Republicans that goes well beyond anything they have asked for in the past,” said Bharat Ramamurti, a Democratic member of the congressional oversight commission tasked with overseeing the Fed’s programs. It would “radically limit the ability of the Biden administration and the Fed” to provide credit and support markets next year, he said.

Reporting was contributed by Zolan Kanno-Youngs from Washington and Nicholas Fandos from New York.

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