In a Senate Banking Committee hearing on the coronavirus response today, Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin emphasized the importance of additional fiscal support as the economy continues to feel the effects of the COVID-19 pandemic. An additional stimulus could serve as a “bridge” that would help hard-hit sectors of the economy survive until a vaccine can be distributed, they said.
While Powell observed that the economy has “performed better than expected” overall during the pandemic, certain sectors have been disproportionately affected, including small businesses. “What we’re hearing from community bankers . . . is that there are a lot of small businesses that are at risk of going out of business during this winter, which could be a tough few months,” he said.
“More fiscal response is needed,” added Mnuchin, calling on lawmakers to focus their efforts on “what we can pass quickly on a bipartisan basis to target the most difficult part of the economy.” Among other things, he urged lawmakers to reallocate the $140 billion in unspent Paycheck Protection Program funds, emphasizing that “these small businesses can’t wait two or three months.”
He also recommended that certain funds be set aside specifically for community development financial institutions to ensure that loans are flowing to low- to moderate-income communities. He applauded a bipartisan effort led by Sens. Mark Warner (D-Va.) and Tim Scott (R-S.C.) that would allocate an additional $10 to $12 billion for CDFIs, “which will create $100 billion of lending quickly.”