Federal Reserve Chairman Jerome Powell said Tuesday that emergency lending programs enacted in legislation in March would be up and running by the end of May.
“On the Main Street and frankly all of the other facilities, we expect all of them to be stood-up and ready to go by the end of this month; I won’t say it won’t be a day or two in June, but that’s our expectation,” he told the Senate Banking Committee.
The pandemic relief CARES Act signed into law at the end of March authorized the central bank to establish six new lending facilities aimed at providing emergency loans, including the Main Street New Loan Facility meant to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the coronavirus pandemic.
Powell was testifying before the Senate panel with Treasury Secretary Steven Mnuchin. The two are testifying because of an oversight provision in the recently enacted CARES Act that requires them to report to Congress the progress they have made in fulfilling the obligations of the legislation.
During the hearing, Powell fielded several questions regarding his stance on providing additional aid to state and local governments. This issue is a legislative hot spot as the Democratic-controlled House last week approved the HEROES Act largely along party lines that extends relief to municipalities. Meanwhile, Senate Republicans are mostly cool to the idea.
Sen. Robert Menendez, a Democrat from New Jersey who sits on the Banking Committee, was one of the panelists trying to get Powell to say that additional funding to state and local government is needed. He asked if legislation he introduced on Monday providing $500 billion to municipalities is the “the type of solution” that would address the funding issue.
Powell dodged the question by saying that “we try to stick to our own knitting over here” while adding that “those questions are really for elected members.”
Committee members also confronted Powell about the central bank purchasing junk bonds. In an exchange with Sen. Chris Van Hollen, a Democrat from Maryland, Powell said that the only high-yield bonds the central bank is able to purchase are those from companies with investment grade ratings as of March 22, but whose rating might have slipped because of the pandemic.
“We are not buying junk bonds generally across the board at all,” Powell said.
Van Hollen responded that some of the companies don’t fit the profile described by Powell.
“A lot of those bonds were already in trouble before the intervention and their trouble was not directly related to the pandemic,” the senator said.
