Lawmakers sparred over Republican plans to curb the Federal Reserve’s crisis lending powers over the weekend, as talks on a $900bn economic relief package came down to the line ahead of a Sunday night funding deadline.
Members of Congress had originally set themselves a deadline of the end of the working week to strike a deal to continue funding the federal government and provide much-needed stimulus to a US economy battered by the Covid-19 pandemic. But a stop-gap measure approved late Friday extended the deadline to the end of the weekend.
Earlier in the week, congressional leaders insisted that a deal was close on what would be the second-largest economic relief package in US history, trailing only the $2.2tn Cares Act, which was passed in March at the onset of the coronavirus pandemic in the US.
But negotiations hit a stumbling block on Thursday when Pat Toomey, a Republican senator from Pennsylvania, sought to insert language into the legislation that would prevent the Fed from reviving emergency credit facilities that are due to expire at the end of the year.
Democrats have sharply rejected the efforts, accusing Republicans of trying to “tie the hands” of a Joe Biden White House at the last minute.
The proposal prompted a public warning from Ben Bernanke, the former Fed Chair, on Saturday.
“I strongly support the passage of new aid for families and businesses suffering from the effects of the pandemic,” Mr Bernanke wrote in a statement.
“However, it is also vital that the Federal Reserve’s ability to respond promptly to damaging disruptions in credit markets not be circumscribed. The relief act should ensure, at least, that the Federal Reserve’s emergency lending authorities, as they stood before the passage of the CARES Act, remain fully intact and available to respond to future crises.”
Mr Biden will be inaugurated as the 46th US president on January 20, and while Democrats will control the House of Representatives, it remains unclear whether Republicans will hold the Senate. Control of the upper chamber of Congress will be decided by two Senate run-offs to be held in Georgia on January 5.
Chuck Schumer, the top-ranking Senate Democrat, on Saturday said Mr Toomey’s proposal was the “number one outstanding issue” in negotiations.
“Senator Toomey’s new proposal would potentially prohibit the Treasury and the Fed from setting up new emergency lending facilities moving forward, greatly reducing their ability to respond to economic crises,” Mr Schumer said.
“Senator Toomey’s proposal would do more than just prevent the next Treasury secretary and the Federal [Reserve] chair from using the emergency lending programmes that saved our economy and stabilised markets back in March and April,” he added. “It could potentially prevent them from setting up new facilities that look or even smell like those programmes moving forward.”
Earlier on Saturday, Mitch McConnell, the Republican Senate majority leader, called for Democrats to compromise.
“There is a kind of gravitational pull here in Congress, where unless we are careful, any major negotiation can easily slide into an unending catalogue of disagreements. Let’s guard against that,” he said.
“We’ve had productive discussions this past week,” he said. “But the American people cannot feed their families or pay their bills with Congress’s good-faith discussions. They need us to act. We need to conclude our talks, draft legislation, and land this plane.”