US Congress strikes stimulus deal with weaker curbs on Fed powers

US lawmakers from both major parties have struck a deal on a $900 billion economic stimulus package, after Republicans agreed to amend a provision that would have removed some of the Federal Reserve’s emergency powers.

The revised wording of the stimulus bill requires the Fed to repay unused funds from its ‘Main Street’ emergency lending facility at the end of 2020, and prevents the Fed from duplicating the facility in 2021 without Congressional approval. However, unlike the original wording, it does not ban the Fed from ever using a similar facility again.

Republican senator Pat Toomey had proposed the amendment, with the backing of many other Republicans and, reportedly, support from Treasury secretary Steven Mnuchin.

On December 20, as the deal was announced, Toomey called it a “win for taxpayers and for an independent Fed”. Republicans had feared the Main Street programme could have been used by the incoming administration of Joe Biden to launch new stimulus measures without Congressional approval.

Speaking on the Senate floor, majority leader Mitch McConnell said the change in the bill’s language ensured the emergency programmes would “sunset” as originally intended.

“Senator Toomey and our Democratic colleagues have landed on compromise language that ensures this will happen; redirects the dormant money in these accounts toward the urgent needs of working Americans; and ensures that these expiring programmes cannot be simply restarted or cloned without another authorisation from Congress,” he said.

Democrats had responded angrily to what they saw as the unhelpful insertion of the Fed amendment at the eleventh hour of the negotiations. Speaking to reporters after a deal was reached, Senate Democratic leader Chuck Schumer said “the Toomey sabotage was undone”.

Take-up of the Main Street programme has been relatively limited. From an envelope of $600 billion only about $6 billion has been used. The facility was designed to support lending to small and medium-sized businesses by allowing the Fed to take a 95% stake in eligible loans via a special-purpose vehicle.

The $900 billion stimulus package now has broad support from both Democrats and Republicans and is likely to pass a final vote in both houses of Congress later today (December 21).

Though the full text has not yet been published, the bill is expected to include $600 cheques to be mailed out to eligible people – couples with a combined income of less than $150,000 or individuals with an income of less than $75,000. The first US stimulus package, passed in March this year, included cheques for $1,200.

Nancy Pelosi, the Democratic speaker of the House of Representatives, told reporters she believed more would need to be done under the new administration. “We consider this a first step,” she said.