Oversight of the Treasury Department's and Federal Reserve's Pandemic Response — Hybrid Hearing (September 22, 2020)
Summary
Memorandum dated September 17, 2020 from FSC Majority Staff to Members of the Committee on Financial Services, chaired by Maxine Waters, on the September 22, 2020 full committee hybrid hearing Oversight of the Treasury Department's and Federal Reserve's Pandemic Response. The hearing is set for Tuesday, September 22, 2020 at 10:30 a.m., with Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell as witnesses, and the memo says it is the Committee's second hearing fulfilling the CARES Act quarterly testimony requirement. The overview cites CDC counts of more than 6.6 million cases and 196,000 deaths as of September 17 and a 31.7% annualized decline in second-quarter real gross domestic product. It describes the $500 billion Economic Stabilization Fund, including a $700 million loan to YRC Worldwide Inc.
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“Oversight of the Treasury Department's and Federal Reserve's Pandemic Response — Hybrid Hearing (September 22, 2020).”
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United States House of Representatives
MAXINE WATERS, CA PATRICK MCHENRY, NC
CHAIRWOMAN RANKING MEMBER
Committee on Financial Services
2129 Rayburn House Office Building
Washington, D.C. 20515
September 17, 2020
Memorandum
To: Members, Committee on Financial Services
From: FSC Majority Staff
Subject: September 22, 2020, Full Committee hybrid hearing, “Oversight of the Treasury
Department’s and Federal Reserve’s Pandemic Response”
The Committee on Financial Services will hold a hybrid hearing entitled, “Oversight of the Treasury
Department’s and Federal Reserve’s Pandemic Response,” on Tuesday, September 22, 2020 at 10:30 a.m.
in 2128 Rayburn House Office Building. Members who wish to participate remotely may do so via Cisco
Webex. This single-panel hearing will have the following witnesses:
• The Honorable Steven Mnuchin, Secretary, U.S. Department of the Treasury
• The Honorable Jerome Powell, Chair, Board of Governors of the Federal Reserve System
Overview
The Coronavirus Disease 2019 (COVID-19) pandemic has had profound health, economic and financial
impacts globally and in the United States. According to the Centers for Disease Control and Prevention
(CDC), there have been more than 6.6 million cases and 196,000 deaths in the United States as of
September 17. 1 Real gross domestic product declined at an annualized rate of 31.7% in the second quarter
of 2020 according to the August 27 second estimate from the Bureau of Economic Analysis (BEA). 2 In
response, Congress has enacted a series of laws, including the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act), 3 which was signed into law on March 27, 2020. The CARES Act directs the
U.S. Department of the Treasury (Treasury) and the Board of Governors of the Federal Reserve System
(Federal Reserve or Fed) to take a series of actions to assist those affected by the economic impact of the
pandemic, including consumers, businesses, non-profits, states, territories, and municipalities.
The law established ongoing streams of reporting to Congress related to the activities of the Treasury and
the Fed under the CARES Act including: bimonthly reporting by GAO, 4 ongoing oversight and monthly
reports by the Congressional Oversight Commission, 5 and quarterly reports by the Special Inspector
General for Pandemic Recovery (SIGPR). 6 The law also requires the Treasury Secretary and Federal
Reserve Chair to testify quarterly before the Committee. 7 This is the Committee’s second hearing fulfilling
this statutory requirement. 8
1 Centers for Disease Control and Prevention (CDC), “Cases in the U.S.,” (last accessed Sep 17, 2020).
2 BEA, “Gross Domestic Product, 2nd Quarter 2020 (Advance Estimate) and Annual Update,” (July 30, 2020).
3 P.L. 116-136
4 See GAO, “COVID 19: Opportunities to Improve Federal Response and Recovery Efforts,”GAO-20-625 (June 25, 2020); and GAO,
“COVID-19: Brief Update on Initial Federal Response to the Pandemic,” GAO-20-708 (Aug. 31, 2020).
5 For information about the Congressional Oversight Commission, including reports published and hearings held, see http://coc.senate.gov.
6 For first SIGPR report, see Special Inspector General for Pandemic Recovery, “Initial Report to Congress,” (Aug. 3, 2020)
7 §4026(c) of the CARES Act
8 This memo is intended to provide updates on relevant CARES Act programs. For an overview and more information on these programs,
see the hearing memo from the first quarterly hearing held by the Committee on June 30, 2020.
2
Emergency Relief for Businesses, Nonprofits, States, Territories, & Municipalities
Congress appropriated $500 billion to the Treasury’s Economic Stabilization Fund to provide loans, loan
guarantees or other investments, either directly or through programs and facilities administered by the
Federal Reserve, to eligible businesses, nonprofits, states, territories, and municipalities as provided under
Title IV of the CARES Act. 9
Treasury Emergency Lending Programs for Certain Industries.
Of the $500 billion, Treasury can make up to $25 billion available to passenger airlines, up to $4 billion
to cargo airlines, and up to $17 billion to businesses critical to maintaining national security. Treasury can
make the remainder—$454 billion plus any unused funds initially allocated to assist the specified
industries—available to support Federal Reserve lending facilities. The authority to enter into new
transactions terminates on December 31, 2020. Recipients are legally required to repay assistance with
interest. To date, Treasury has announced one Title IV (Subtitle A) loan of $700 million to a trucking
company (YRC Worldwide Inc.) on the basis that the company is critical to national security. 10 It also
announced letters of intent with ten major airlines, which may result in future loans. 11 Separate from the
$500 billion, Title IV of the CARES Act provides up to $32 billion to continue payment of employee
wages, salaries, and benefits at airline-related industries. As of August 12, Treasury has approved over
$27 billion to 586 applicants, with $24.2 billion in anticipated support to 338 passenger air carriers, $660.4
million to 35 cargo companies, and almost $2.3 billion to 213 contractor companies. 12
Federal Reserve Emergency Lending Programs and Facilities.
The Fed has created nine temporary emergency programs and facilities using authorities under Section
13(3) of the Federal Reserve Act in response to COVID-19. 13 Many are backed by Treasury’s Exchange
Stabilization Fund (ESF), including at least $454 billion provided through the CARES Act, in the event
of losses. Seven of these programs are backed by ESF funds: Commercial Paper Funding Facility
(CPFF); 14 Main Street Lending Program (MSLP); Money Market Fund Liquidity Facility (MMLF);15
Municipal Liquidity Facility (MLF); Primary Market Corporate Credit Facility (PMCCF); 16 Secondary
Market Corporate Credit Facility (SMCCF); 17 and Term Asset-Backed Securities Loan Facility (TALF). 18
The other two emergency programs not backed by the ESF are the Primary Dealer Credit Facility
9 Treasury, “Update on Treasury Implementation of the Payroll Support Program for the Aviation Industry,” (May 12, 2020); and
Congressional Research Service (CRS), “Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act (P.L. 116-
136),” (Apr. 28, 2020).
10 The Congressional Oversight Commission’s third report in July 2020 expressed concerns about the loan to YRC Worldwide Inc.,
primarily over whether the company was appropriately designated by Treasury and the Department of Defense as “critical to maintaining
national security” and whether the company’s financial condition exposed taxpayers to a significant risk of loss. For more, see
Congressional Oversight Commission, “Third Report of the Congressional Oversight Commission,” (July 20, 2020), p. 15-16, 31-34.
Further information on the rationale for granting YRC’s designation is detailed in Appendix A and B of the Commission’s 4th Report. See
Congressional Oversight Commission, “The Fourth Report of the Congressional Oversight Commission,” (Aug. 21, 2020), p. 62-75.
11 U.S. Treasury, “Statement from Secretary Steven T. Mnuchin on CARES Act Loans to Major Airlines,” (July 7, 2020). The amount
pledged in these letters of intent has not been disclosed.
12 U.S. Treasury, “Payroll Support Program Payments,” (Aug. 12, 2020).
13 For a full overview of these facilities, see House Financial Services Committee hearing memo for hearing entitled, “Monetary Policy and
the Economy,” (June 17, 2020).
14 Federal Reserve, “Federal Reserve Board Announces Establishment of a Commercial Paper Funding Facility (CPFF) to Support the
Flow of Credit to Households and Businesses,” (Mar. 17, 2020). For more on commercial paper, see CRS Insight IN11332, “COVID-19:
Commercial Paper Market Strains and Federal Government Support,” by Rena S. Miller.
15 Federal Reserve, “Federal Reserve Board broadens program of support for the flow of credit to households and businesses by
establishing a Money Market Mutual Fund Liquidity Facility (MMLF),” (Mar. 18, 2020). For more on money market mutual funds, see
CRS In Focus IF11320, “Money Market Mutual Funds: A Financial Stability Case Study,” by Eva Su.
16 Federal Reserve, “Federal Reserve Announces Extensive New Measures to Support the Economy,” (Mar. 23, 2020).
17 Ibid.
18 Fed, “Term Asset-Backed Securities Loan Facility,” (last accessed Sep. 8, 2020).
3
(PDCF), 19 and the Payroll Protection Program Lending Facility (PPPLF). 20 The current amount
outstanding under each program is summarized in Table 1 of the Appendix. Use of some facilities is
declining, while use of others is increasing. Table 2 of the Appendix summarizes how much CARES Act
funding has been pledged to each facility. In total, $215 billion of ESF funds has been pledged to date,
but if limited to the programs identified as CARES Act programs by Chair Powell, that total is $195
billion. The distinction does determine which programs are subject to the terms and conditions of the
CARES Act, however. Below is a further discussion of recent developments with the MSLP and MLF.
Main Street Lending Program (MSLP): The MSLP buys new or expanded loans from depository
institutions that are five-year loans to businesses with up to 15,000 employees or up to $5 billion in
revenues. There are loan options for non-profit organizations as well. 21 The MSLP was designed to
support up to $600 billion in lending, though the program's development thus far has been slow, with less
than 1% of the program’s capacity utilized. 22 To date, a relatively small number of financial institutions
are participating in the MSLP, with 575 lenders registered to participate (compared to 5,460 PPP lenders),
and half of the MSLP‘s 118 loans to date facilitated by a single lender. 23 The Congressional Oversight
Commission has examined the MSLP’s performance, citing several reasons for lower than expected
utilization, including businesses’ lack of awareness of the program, favorable private sector lending
conditions, and the impact of the PPP in helping small businesses. 24 One common barrier is the Fed’s
restriction on loans to companies with greater than 6x earnings before interest, depreciation, taxes, and
amortization (EBIDTA), which limits the extent to which firms that entered the crisis with a high debt
load can access MSLP. On September 1, Secretary Mnuchin testified that he expected MSLP loans to
grow to $50 billion in the coming weeks, but also said that he expected the program to remain under
capacity, in part because of the EBIDTA restrictions. 25 Congressional action would be needed to increase
the MSLP’s risk appetite, according to a senior Fed official. 26
Municipal Liquidity Facility (MLF): The MLF purchases shorter-term state and municipal debt in
response to higher yields and reduced liquidity in that market. The facility purchases only tax or revenue
anticipation debt of states, larger counties (with at least 500,000 residents), and larger cities (with at least
250,000 residents). 27 Following criticism that the MLF was “functionally unusable” for the vast majority
of eligible borrowers, the Fed announced on August 10 that it would reduce the penalty rates by 50 basis
points across the board. 28 Even with these reductions, MLF rates remain “substantially higher than market
rates.” 29 Only two entities have utilized the MLF since it became operational in May: Illinois sold a $1.2
billion bond to the MLF in June, and the New York Metropolitan Transportation Authority sold $450
million in notes to the MLF in August. 30
19 Federal Reserve, “Federal Reserve Board Announces Establishment Of A Primary Dealer Credit Facility (PDCF) To Support The Credit
Needs Of Households And Businesses,” (Mar. 17, 2020). Also see Federal Reserve Bank of New York, “Primary Dealers.”
20 Federal Reserve, “Federal Reserve Will Establish A Facility To Facilitate Lending To Small Businesses Via The Small Business
Administration's Paycheck Protection Program (PPP) By Providing Term Financing Backed By PPP Loans,” (Apr. 6, 2020).
21 https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm
22 “The Fourth Report of the Congressional Oversight Commission,” Congressional Oversight Commission, (Aug. 21, 2020).
23 “Congress needs to weigh in on expanding Main Street loan program to more businesses, Boston Fed chief says,” Washington Post,
(Sep. 8, 2020).
24 Ibid.
25 “Mnuchin sees Fed ’Main Street’ loans ballooning up to $50B after slow start,” Politico, (Sep. 1, 2020)
26 Ibid.
27 “Municipal liquidity facility,” Board of Governors of the Federal Reserve System, (Apr. 9, 2020).
28 “Federal Reserve Lowers Pricing for Municipal Liquidity Facility,” Yale Program on Financial Stability, (Aug. 19, 2020).
29 “The Fourth Report of the Congressional Oversight Commission,” Congressional Oversight Commission, (Aug. 21, 2020).
30 “New York MTA rejects bids, head to the Fed,” BondBuyer, (August 18, 2020), https://www.bondbuyer.com/news/new-york-mta-sells-
second-large-deal-to-federal-reserve
4
Paycheck Protection Program (PPP) for Small Businesses and Nonprofits
The CARES Act established the PPP at the Small Business Administration, which provides forgivable
loans to small businesses and certain non-profit organizations through financial institutions, including
banks and credit unions. The program has been modified and expanded several times by Congress. The
deadline for making loans eligible for the PPP was August 8, 2020. By that date, more than 5.2 million
loans with a value of about $525 billion had been approved, leaving $134 billion in authorized funding
unused. 31
Coronavirus Relief Fund for States, Territories, and Tribal Areas
Under Title V of the CARES Act, the law directs Treasury to administer the $150 billion Coronavirus
Relief Fund and distribute funds to governments in states, territories, and tribal areas. 32 As of August 20,
$149.5 billion of the funds have been allocated by Treasury. 33 The remaining $0.5 billion in allocations
have been withheld from tribal governments while the eligibility of Alaska Native Corporations is subject
to litigation.34 As of June 30, 2020, nontribal governments have incurred costs for $35.6 billion in Fund
payments, or 25% of their total allocation. 35
Economic Impact Payment for Individuals and Families
Section 2201 of the CARES Act directed the Internal Revenue Service (IRS) to provide economic impact
payments (EIPs) to most households, 36 and were distributed through direct deposit, Direct Express debit
card, EIP Prepaid Card, or by paper check. As of July 2020, 159 million EIPs worth more than $267
billion, with an additional $2.5 billion delivered to individuals in territories, have been delivered.37
Eligible individuals who did not receive an EIP have an opportunity to claim the payment as a tax rebate
on a future tax return. Up to 12 million eligible individuals may not have received a payment. 38
Expiration of CARES Provisions and Economic Recovery
The expiration of key provisions in the CARES Act along with several long-term trends suggest that the
economic recession caused by the COVID-19 pandemic could be severe and lasting. An August survey
conducted by the New York Times found potentially lasting changes in consumer spending habits, with in-
person business visits down nearly 25% compared to 2019, including in areas where health restrictions
were mostly lifted. 39 Moody’s Analytics estimates that renters already owed nearly $25 billion at the
beginning of August, and the expiration of a federal, state, and local moratoria on evictions could lead to
a wave of evictions. 40 Over 830,000 public sector jobs have been lost since February, and more layoffs
are expected. 41 State governments face budget shortfalls of over $500 billion through FY 2022, 42 and an
estimated 5.3 million public sector jobs could be lost by the end of 2021 if Congress does not pass more
federal aid. 43
31 SBA, “Paycheck Protection Program (PPP) Report,” Approvals through August 8, 2020.
32 CRS, “The Coronavirus Relief Fund (CARES Act, Title V): Background and State and Local Allocations,” (Apr. 14, 2020).
33 U.S. Treasury, “Daily Treasury Statement,” (Aug. 20, 2020).
34 U.S. Treasury, “Coronavirus Relief Fund Tribal Allocation Methodology,” (Aug. 11, 2020).
35 U.S. Treasury, “Interim Report of Costs Incurred by State and Local Recipients through June 30,” (July 24, 2020); and “Coronavirus
Relief Fund Frequently Asked Questions,” (Aug. 10, 2020).
36 Most individuals received $1,200 ($2,400 for married taxpayers filing a joint tax return) and $500 per eligible child. These amounts
phase out for individuals with an adjusted gross income above $75,000 ($150,000 for married joint returns).
37 Internal Revenue Service, “IRS Statement on Economic Impact Payments by state (as of July 17, 2020),” (July 17, 2020). For a
compilation of data, see CRS Report R46415, CARES Act (P.L. 116-136) Direct Payments: Resources and Experts.
38 Chuck Marr, Kris Cox, Kathleen Bryant, et al., “Aggressive State Outreach Can Help Reach the 12 Million Non-Filers Eligible for
Stimulus Payments,” Center on Budget and Policy Priorities, (June 23, 2020)
39 “Virus alters where people open their wallets, hinting at a halting recovery,” New York Times, (Aug. 19, 2020)
40 “Trump is calling for another moratorium on evictions. Landlords are pushing back,” Washington Post, (Aug. 6, 2020)
41 Bureau of Labor Statistics, “Employment Situation Summary,” (Sep. 4, 2020)
42 Center on Budget and Policy Priorities, “States continue to face large shortfalls due to COVID-19 effects,” (July 7, 2020)
43 EPI, “Without federal aid to state and local governments, 5.3 million workers will lose their jobs by the end of 2021,” (June 10, 2020)
5
Legislation
• H.R. 6800, the Heroes Act (Lowey). The bill includes provisions that would: provide nearly $1
trillion to state, local, territorial and tribal governments; $175 billion to support renters and
homeowners; an additional stimulus payment of $1,200 per family member; an extension of enhanced
unemployment benefits to January 2021; an extension and/or expansion of various emergency lending
programs, including PPP, MSLP, and MLF. 44
• H.R. 6852, To prohibit the Secretary of the Treasury and the Board of Governors of the Federal
Reserve System from waiving provisions related to COVID-19 emergency relief and taxpayer
protections related to such relief (Ocasio-Cortez). The bill would prohibit the Treasury and Fed
from waiving the CARES restrictions on executive compensation, stock buybacks and dividend
payments.
• H.R. 6892, To amend the CARES Act to add requirements for the Main Street Lending Program
related to non-profit organizations, small businesses, minority depository institutions, and
community development financial institutions, and for other purposes (Beatty). This bill would
expand the MSLP by expanding the program’s support for small businesses, nonprofits and public
universities, including by eliminating the MSLP’s minimum loan threshold, among other changes.
• H.R. 6918, the Paycheck Recovery Act (Jayapal). This bill would establish a worker retention
program where all public and private employers, as well as independent contractors, domestic workers,
and gig workers, that have seen a 10 percent or greater revenue loss since 2019, would be eligible for
a three-month, renewable lump sum grant payment to maintain their workforce at current wages and
benefits, until the nationwide unemployment rate is 7 percent or lower for three months. 45
• H.R. 7023, To require the Secretary of the Treasury to implement a program that provides
financial assistance to sports facilities, museums, and community theaters, and for other
purposes (Trahan-McKinley). The bill would establish a loan program for community-owned or
private small businesses that are contractually obligated to make lease, rental, or bond payments on
publicly-owned sports facilities, museums, or community theaters. 46
• H.R. 7197, the Real Economic Support That Acknowledges Unique Restaurant Assistance
Needed to Survive (RESTAURANTS) Act (Blumenauer-Fitzpatrick). The bill would create a $120
billion grant program run by Treasury to provide financial aid to restaurants through 2020. 47
• H.R. 7717, the Uplifting Our Local Communities Act (Tlaib). The bill would expand the Fed’s
MLF by increasing the eligibility to a greater number of cities and counties, as well as territories,
lengthening eligible bond maturity to ten years.
• H.R. 7809, the Helping Open Properties Endeavor (HOPE) Act (Taylor-Lawson). The bill would
direct Treasury to utilize CARES Act funds to establish a preferred equity lending program for
borrowers of commercial mortgages that have faced challenges accessing the Fed’s MSLP.
• H.R. 8002, the Aviation Manufacturing Jobs Protection Act (Estes-Larsen). The bill would
establish a Treasury program to provide up to 50 percent cost-share to help cover costs of pay and
benefits for aviation manufacturing employees at risk of being furloughed due to the pandemic. 48
44 See Financial Services Committee fact sheets, Appropriations Committee press release, and Small Business Committee press release.
45 See Financial Services Committee hearing entitled, “Paycheck Security: Economic Perspectives on Alternative Approaches to Protecting
Workers’ Pay during COVID-19,” (July 7, 2020).
46 Press Release, “Trahan, McKinley, Rose, Simpson Introduce Legislation to Provide Additional COVID-19 Relief to Minor League
Baseball Teams, Other Small Businesses,” (May 27, 2020)
47 Press Release, “Rep. Blumenauer Leads Bipartisan Coalition in Introducing Independent Restaurant Stabilization Fund,” (Jun. 18, 2020).
48 Press Release, “Estes, Larsen Introduce Legislation to Protect Aerospace Supply Chain Jobs,” (Aug. 11, 2020)
6
Appendix
Table 1. Status of Pandemic Response Programs and Facilities
Funds Disbursed or
Program Current Status Loans/Assets Purchased
Outstanding
Treasury Programs
Loans or Loan Guarantees to Three Industries One direct loan has been made. $0.7 billion outstanding as of
(See Federal Reserve Programs July 10, 2020
below for status of Federal
Reserve facilities)
Payroll Support Program Support to 338 passenger carriers, $27 billion in support approved
35 cargo carriers, and 213 as of August 12, 2020
contractors has been approved
Paycheck Protection Program (jointly Round I and Round II distributions $525 billion approved lending as
administered with the Small Business have been made. Closed to new of August 8, 2020
Administration) applications as of August 8, 2020
Economic Impact Payments (administered by Nearly 160 million payments have Payments issued totaling almost
the Internal Revenue Service) been disbursed to eligible $267 billion as of July 17, 2020
households as of July 17, 2020
Coronavirus Relief Fund (Aid to States and Treasury made funds available to $139 billion disbursed to states;
Localities) states and localities in April 2020 $8 billion to tribal areas; and $3
and to tribal governments in May billion to territories and
and June 2020 Washington, DC
Federal Reserve Emergency Programs
Commercial Paper Funding Facility operational $0.03 billion outstanding as of
September 9, 2020
Money Market Liquidity Facility operational $7.9 billion outstanding as of
September 9, 2020
Primary Market Corporate Credit Facility and operational $12.6 billion outstanding as of
Secondary Market Corporate Credit Facility September 9, 2020
Term Asset-Backed Securities Loan Facility operational $2.6 billion outstanding as of
September 9, 2020
Main Street Lending Program operational $1.4 billion outstanding as of
September 9, 2020
Municipal Liquidity Facility operational $1.7 billion outstanding as of
September 9, 2020
Primary Dealer Credit Facility operational $0.2 billion outstanding as of
September 9, 2020
PPP Liquidity Facility operational $67.5 billion outstanding as of
September 9, 2020
Discount Window operational $2.7 billion outstanding as of
September 9, 2020
Central Bank Liquidity Swaps operational $72.1 billion outstanding as of
September 9, 2020
Source: CRS
7
Table 2. Federal Reserve COVID-19 Emergency Programs Backed by CARES Act Funding
(billions of dollars)
Chair Powell
Announced Size ESF Funds Identified as
Limit Pledged CARES Act?
Facilities Created Prior to Enactment of CARES Act
Commercial Paper Funding Facility n/a $10 N
Money Market Fund Liquidity Facility n/a $10 N
Primary Market Corporate Credit Facility/Secondary Y
$750 $75
Market Corporate Credit Facility
Term Asset-Backed Securities Loan Facility $100 $10 Y
Facilities Created Since Enactment of CARES Act
Main Street Lending Program $600 $75 Y
Municipal Liquidity Facility $500 $35 Y
Total n/a $215 $195
Source: CRS
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