Democratic leaders are objecting to an ambitious Republican proposal to spend up to $500 billion to leverage loans to a variety of industries, ranging from airlines and energy companies to car manufacturers, as part of a coronavirus stimulus package.
As a result of this and other disagreements, Democratic leaders say they don’t have a deal ahead of a key procedural vote at 3 p.m. Sunday to proceed to consideration of the package.
“From my standpoint, we’re apart,” Speaker Nancy PelosiNancy PelosiSticking points force stimulus package talks to spill into Sunday The Memo: Democrats grapple with virus response Turning the virus into a virtue — for the planet MORE (D-Calif.) said Sunday morning before walking into a meeting with Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSticking points force stimulus package talks to spill into Sunday GOP drafting stimulus package without deal with Democrats No. 2 Republican: ‘Loose ends’ but there is agreement on ‘general contours’ of stimulus deal MORE (R-Ky.), Senate Democratic Leader Charles SchumerCharles (Chuck) Ellis SchumerSticking points force stimulus package talks to spill into Sunday Trump needs to stop the daily press briefings Overnight Health Care: Trump triggers emergency powers in coronavirus fight | McConnell sets first stimulus vote for Sunday | Five sticking points for stimulus talks | Treasury delays tax filing deadline | Dems push insurers to cover virus tests MORE (N.Y.) and House Minority Leader Kevin McCarthyKevin Owen McCarthyHillicon Valley: Senators press Amazon over workplace safety amid outbreak | Lyft expands to deliveries | Dems seek election security funds in stimulus package Tourism industry calls for 0B in relief in coronavirus stimulus package Senators urge Congress to include election funds in coronavirus stimulus MORE (R-Calif.).
Treasury Secretary Steven MnuchinSteven Terner MnuchinSenate closes in on trillion-dollar coronavirus stimulus bill Senate negotiators near agreement on keeping rebates in coronavirus stimulus package Senate coronavirus stimulus talks spill into Saturday MORE, who is pushing the massive infusion of cash to the Federal Reserve loan program, also attended the meeting in McConnell’s office.
Democrats say the corporate bailout fund falls short on several counts.
They argue that it doesn’t do enough to require companies to keep workers on payroll, urging them only to keep employees “to the extent possible,” which could result in mass layoffs after companies accept billions of dollars in taxpayer-guaranteed loans.
Democrats have countered with a proposal that corporate loans could be forgiven if major companies such as United Airlines, which has seen its market share plunge in recent weeks, retain more than 90 percent of their workers through the crisis.
They also are balking at the proposal’s weak restrictions on restricting corporate buybacks, which Mnuchin can waive.
U.S. airlines, for example, spent tens of billions of dollars in recent years on stock buybacks to boost their share prices. American Airlines alone spent $12.4 billion on stock buybacks since 2014.
The proposed loan program would give Treasury Secretary Steven Mnuchin and the Federal Reserve broad discretion to hand out loans to industries that have been hit hard by the precipitous drop in economic activity.
The rescue fund, which the Senate Republican bill initially pegged at $208 billion, would extend beyond the airline industry, which has seen its stocks plummet in recent weeks, to other industries facing a credit crunch because of the health crisis.
Mnuchin on Sunday argued the proposed $500 billion appropriation to the Treasury Department to set up a capital buffer fund for the Fed would maximize the amount of liquidity Fed chair Jerome Powell can pump into the capital markets.
“We’ll have up to $4 trillion of liquidity that we can use to support the economy. And that’s —those are broad-based lending programs under Section 133. We can leverage our equity working with the Federal Reserve,” Mnuchin said on “Fox News Sunday,” referring to a section of the Federal Reserve Act that gives the agency broad power to issue loans to borrowers who cannot secure loans.
But Democrats argue the fund has few restrictions, giving the Treasury Department and Federal Reserve broad discretion to hand out loans, perhaps even to President TrumpDonald John TrumpDemocrats grow nervous over primary delays Pence, second lady test negative for coronavirus North Korea says Trump offered country help amid coronavirus pandemic: report MORE’s own hotel and real estate empire.
Democrats also want to extend a proposed cap on executive compensation for companies that receive bailout loans beyond the two-year timeframe suggested by Republicans.