Senators reach deal on Fed powers, setting stage for coronavirus relief passage

Senate Minority Leader Charles Schumer (D-N.Y.) and Sen. Pat Toomey (R-Pa.) reached an agreement late Saturday night on language to curtail the Federal Reserve’s special lending authorities, setting the stage for passage of a coronavirus relief deal and an omnibus spending package as early as Sunday. 

At around 9 p.m. Republicans sent word to Schumer that they would accept language resolving the dispute over the Federal Reserve’s lending facilities, according to GOP aides. 

The compromise will sweep out the $429 billion in unspent CARES Act funding for the Federal Reserve’s credit lending facilities and repurpose it as an offset for a new $900 billion coronavirus relief bill, GOP sources said. 

The deal will close four Federal Reserve credit lending facilities created by the CARES Act and will prevent the Fed from standing up replica facilities in the future without congressional approval. 

Those four programs are the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Main Street Lending Program and the Municipal Credit Facility.

The Fed will retain more flexibility over restarting the Term Asset-Backed Securities Loan Facility, which will be closed but can be restarted in the future.

Toomey agreed to a narrower approach on dealing with potential “copycat” lending facilities. Negotiators agreed to specific language instead of merely an agreement in principle.  

A senior Democratic aide said that Toomey “has agreed to drop the broad language in his proposal that would have prevented the Fed chair from establishing similar facilities in the future to the ones created in March.”

“Compromise language is being finalized, and now that this obstacle has been cleared, a final agreement on an emergency relief package is significantly closer,” the Democratic aide said.

A Democratic source familiar with the talks said Treasury Secretary Steven Mnuchin had already said he would return the $429 billion in unspent CARES Act money to the general fund. 

Toomey, however, questioned that claim on Thursday. 

“I’m not certain the secretary has committed to putting this in a general funds category,” he told reporters earlier in the week. “I’m not sure I interpret his comments the way you do. And there’s also the fact there are other funds in the [Exchange Stabilization Fund] account. In any case, by having the language that we have it precludes the possibility of restarting these programs from any source.”

Another senior House Democratic aide said the Toomey deal sets the stage to iron out all the other less significant differences that had stalled the negotiations for weeks.

“We expect remaining open items to fall into place overnight,” the aide said.

Emerging from his office late Saturday night, Schumer predicted the House and the Senate both will vote on the package — a combination of a $900 billion coronavirus relief bill and a $1.4 trillion omnibus spending bill — on Sunday.

The package will include direct stimulus checks between $600 and $700, according to a commitment GOP leaders made to Sen. Josh Hawley (R-Mo.) on Friday. Sen. Bernie Sanders (I-Vt.) worked with Hawley to include the stimulus checks.

The vote Sunday would avoid the need for Congress to adopt another short-term funding extension to prevent a government shutdown.

“If things continue on this path and nothing gets in the way, we’ll be able to vote tomorrow,” Schumer said. “House and Senate.”

President Trump weighed in on the issue just as Toomey and Schumer reached their deal, clearing the way for speedy passage of the coronavirus relief package. 

“Why isn’t Congress giving our people a Stimulus Bill? It wasn’t their fault, it was the fault of China. GET IT DONE, and give them more money in direct payments,” Trump tweeted. 

Saturday’s negotiation caps more than seven months of fruitless talks between Democrats, the White House and Senate Republicans over the size and scope of a new coronavirus relief bill.

Speaker Nancy Pelosi (D-Calif.) and House Democrats proposed the $3.4 trillion HEROES Act in May and then amended their request to a $2.2. trillion relief bill in September.

The White House and Senate Republicans countered with the $1.1 trillion HEALS Act they introduced in late July. The White House increased its offer to $1.8 trillion before the election, but Democrats rejected it as insufficient.

A spokesman for Toomey hailed the deal as “an unqualified victory for taxpayers.” 

“This agreement rescinds more than $429 billion in unused CARES Act funds; definitively ends the CARES Act lending facilities by December 31, 2020; stops these facilities from being restarted; and forbids them from being duplicated without congressional approval,” said Steve Kelly, Toomey’s communications director.

“This agreement will preserve Fed independence and prevent Democrats from hijacking these programs for political and social policy purposes,” he added.

The compromise came after the sides went back and forth all day Saturday. 

The dispute over the Federal Reserve’s credit lending facilities, which were established by the CARES Act in March, remained the last outstanding sticking point in the talks to pass a new coronavirus relief bill before Christmas.

Republicans said they always intended the special lending authorities to expire by the end of this year. They feared the incoming Biden administration would be able to interpret the CARES Act in a way to prolong special lending authority and possibly use it to fund their priorities. 

For example, the GOP worried that progressives next year might use the Section 13(3) authority of the Federal Reserve Act to achieve their goals for addressing climate change or shoring up state and local budget shortfalls.

The deal clarifies ambiguity about whether the lending facilities will be ended by Dec. 31.

The compromise between the senators tees up the House to vote as soon as possible Sunday on a combination of a coronavirus relief package and an omnibus spending bill.

The Senate would vote later Sunday before government funding expires at midnight, but Senate Majority Leader Mitch McConnell (R-Ky.) will need to get consent from all 99 of his colleagues to waive procedural hurdles.

The legislation is also expected to include a package of extensions of expiring tax provisions.

It remains to be seen whether energy legislation championed by Sen. Lisa Murkowski (R-Alaska), on which there is bipartisan agreement, is folded into the larger deal.

Senate Appropriations Committee Chairman Richard Shelby (R-Ala.) said Saturday afternoon that he was not aware of it being included at the time.

Updated 1:07 a.m.