Late-breaking dispute over Fed rules risks U.S. COVID-19 relief as deadline nears

WASHINGTON (Reuters) -Backed into a corner, the U.S. Congress on Friday risked blowing through a midnight deadline to keep the government open and address the coronavirus crisis, as a partisan fight over federal lending rules caused a fresh delay on a $900 billion COVID-19 relief bill.

The U.S. Capitol dome is seen at night in Washington, U.S., December 17, 2020. REUTERS/Erin Scott

After months of partisan finger-pointing and inaction, Republicans and Democrats have been negotiating intensely on what is expected to be the biggest package since spring to provide relief to a country struggling with a pandemic killing over 3,000 people a day.

With some support from Republican President Donald Trump, who leaves office on Jan. 20, and Democratic President-elect Joe Biden, they have reported progress.

But enough differences remained – including a new dispute over a Republican-backed plan to rein in Federal Reserve lending programs intended to ease the pandemic’s economic sting – that talks looked likely to stretch into the weekend.

That would force Congress to pass a stopgap spending bill – known as a continuing resolution, or CR – to keep the government operating for a few days after current funding expires at midnight to avoid a government shutdown starting after midnight (0501 GMT on Saturday).

Senator John Thune, the chamber’s No. 2 Republican, said an agreement was coming together, but disagreement over the Fed rules was a major sticking point.

“That’s a big one,” he told reporters at the Capitol. “There are various ideas about how to resolve that, but it’s something that’s a very big priority for a lot of our members.”

Some Republicans accused Democrats of using the lending authorities as a backdoor way to provide aid to state and local governments that Republicans dismiss as a “slush fund” for Democratic-controlled local governments.

Other sticking points include disagreements over the extent of relief for arts venues closed by COVID-19 restrictions and a dispute over whether to increase reimbursements from the Federal Emergency Management Agency to local governments like personal protective equipment for schools.

Many issues have been settled. The coronavirus legislation is expected to include onetime checks for most Americans of about $600 each, extended unemployment benefits of $300 per week, help for states distributing the vaccine, and assistance for small businesses struggling through the pandemic.

Congressional leaders plan to attach the COVID-19 aid to a $1.4 trillion funding bill to keep the government open through September 2021.

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Republican Senate Majority Leader Mitch McConnell said talks remained productive. “I am even more optimistic now than I was last night that a bipartisan, bicameral framework for a major rescue package is close at hand,” McConnell said.

He said the Senate would remain in session through the weekend if necessary to reach a deal.

Multiple lawmakers have floated the possibility the federal government would run out of money early Saturday if Congress cannot pass a CR in time. A CR would be impossible if some lawmakers object, and a few have said they will do so.

The prospect of a government shutdown increased pressure to come up with a relief plan. An extended shutdown would force thousands more people out of work and disrupt services just as the country is ramping up distribution of coronavirus vaccines, though the effects would not be fully felt over the weekend.

“I am so frustrated by the inability of us to act like adults, with responsibility,” Representative Steny Hoyer, the No. 2 House of Representatives Democrat, told reporters. “We have a government of 2 million people that are waiting every hour to find out if they are going to be working.”

Congress was spurred to action by an alarming increase in hospitalizations and deaths. The U.S. coronavirus death toll, now over 311,000, is by far the world’s highest and many Americans – who do not receive government aid that is automatic in many other nations – are at risk of homelessness or inability to feed their families.

Biden has said he wants COVID-19 relief for Americans passed now, promising to do more after he is sworn in.

Republicans also have a wary eye on the impact inaction might have on a pair of Jan. 5 runoff elections in Georgia, which will determine whether their party maintains control of the Senate for the next two years or hands it over to Democrats.

Democrats say Republican Senator Pat Toomey is promoting his plan to rein in the Fed’s emergency lending authority in an effort to make it more difficult for Biden’s incoming administration to handle the COVID-19 crisis.

Toomey denied this, saying the lending authorities were expiring anyway.

Larry Kudlow, director of Trump’s National Economic Council, told reporters at the White House that the Trump administration was “strongly in support” of Toomey’s plan.

Brian Deese, Biden’s pick to succeed Kudlow, issued a statement saying the incoming administration was encouraged by the bipartisan effort to provide relief to Americans, but that it should not include Toomey’s provision.

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