U.S. prepared to suffer losses on coronavirus rescue plans

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WASHINGTON – Secretary of the Treasury, Steven Mnuchin, told senators on Tuesday that his department and the Fed were “fully prepared to take losses in certain scenarios” on the remaining capital to be distributed from the CARES law.

Mnuchin did not describe the “certain scenarios” in which he is prepared to suffer losses, but he stressed that the Treasury is ready to distribute all of the $ 500 billion initially earmarked to help troubled businesses affected by the coronavirus pandemic.

So far, Mnuchin said, the government has committed up to $ 195 billion in credit support, leaving $ 259 billion to create or expand programs as needed. This total of $ 454 billion is equal to the initial credit, less the $ 46 billion specifically reserved for airlines.

Mnuchin made the remarks during remote testimony before the Senate Banking Committee on the Trump administration’s efforts to stem the economic bleeding caused by the pandemic. Mnuchin testified alongside the President of the Federal Reserve, Jerome Powell.

“There are scenarios in [the business lending programs] where we could lose all of our capital, and we are ready to do so. And there are scenarios where the world is improving, we could actually make a small amount of money, “said Mnuchin in a conversation with Senator Mark Warner, D-Va.

“Our intention is to expect to suffer losses on these facilities. This is our basic scenario. “

In his opening remarks, Mnuchin acknowledged

“We have worked closely with the Small Business Administration on the paycheck protection program to process over 4.2 million loans for more than $ 530 billion to maintain tens of millions of American workers on the payroll, “said Mnuchin.

He also noted that the Treasury issued “more than 140 million economic impact payments for more than $ 240 billion to provide direct relief to millions of Americans”, and “nearly $ 150 billion to states , local and tribal governments through the Coronavirus Relief Fund for essential services. . “

Mnuchin also noted that his department had “approved nearly $ 25 billion in wage support to the airline industry to protect this vital sector of our economy.” He did not say that the money had been distributed, only “approved”.

The sluggishness of airline relief funds was one of the subjects of a critical report released on Monday by a Congressional oversight committee tasked with monitoring the implementation of the CARES law.

Even before the Senate hearing began, the committee’s Democrats signaled that Mnuchin would be upset over the slow pace of Treasury loans to distressed businesses, and questions about the amount of money that was actually going to workers. The CARES law contained $ 500 billion for the Treasury and the Fed to lend to businesses.

Ohio Senator Sherrod Brown, the committee’s first Democrat, said that “as far as we know so far, it does not appear that this administration or the Federal Reserve is making workers their priority.”

Brown said he was interested in pressuring Mnuchin and Powell “not what you do for big banks or big companies and how you expect this money to flow, but how you make sure that the money and the authority that Congress has really helped you the people who make this country work. ”

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