Toomey told reporters he was motivated to secure legislative language that would bar the Fed from reviving the corporate credit, municipal liquidity and Main Street lending programs because he feared Democrats would push to subsidize credit more generously if allowed to do so.
The whole fight over the last 24 hours came down to the actual technical language to achieve this goal. Toomey conceded his first pass at the language late last week might have been "too broad" by limiting activities that he didn't intend to constrain.
The compromise is designed to ensure the Biden administration and the Powell Fed cannot restart the programs "by creating a clone and calling it something different" without congressional authorization. "These programs were never intended to hang around indefinitely."
Q: Does his concerns re: Dems' desires to repurpose the facilities infer a lack of trust in Yellen & Powell to properly use them?

Toomey: "It's not like I'm criticizing the character of Janet Yellen." House Ds wanted to do something totally different, and Biden might agree.

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More from @NickTimiraos

20 Dec
A com­pro­mise preserves the Fed and the Treasury’s existing authority to start crisis-lending programs but prevents them from creating a copycat or “clone,” says Toomey, of two business loan programs or a muni market backstop wsj.com/articles/congr…
The exact wording of the statute will be important, of course, in determining what this means going forward.

But a potentially bigger issue is that Republicans have signaled there will be a political fight for any active use of this new dimension of Fed credit policy
Consider: if there’s broad political support for a lending program, there’s less risk of second-guessing when loans default, especially for something with more credit risk

Political risk to the Fed grows as it entertains riskier lending w/out broad political support
Read 5 tweets
20 Dec
Both parties are near agreement on the $900 billion Covid relief bill

Republicans secured a provision to close and keep closed the Fed’s most novel emergency lending programs with language that says they can’t be duplicated after funding expires on Dec 31 wsj.com/articles/mccon…
Toomey and Schumer agreed to revise an earlier proposal Toomey backed to restrict the Fed from ever again creating programs “similar” to its Main Street lending program and two others that bought longer-dated corporate and municipal debt without congressional approval
The new language prevents the Fed from duplicating these programs after they close but doesn’t otherwise place a further constraint on their emergency-lending powers, something that had drawn objection from Democrats and raised concerns among business groups
Read 6 tweets
18 Dec
The Federal Reserve's authority to establish emergency-lending programs has emerged as a late sticking point in negotiations on the latest Covid relief package wsj.com/articles/covid…
Sen. Pat Toomey (R., Pa.) wants language included that would bar the Fed from using that authority to start any program "that is similar to any program" established in March and April using funds from the Cares Act
Earlier, he sought to rescind $429 billion in funds Congress approved earlier this year for the Treasury to backstop these programs.

The latest language would go one step further by preventing a future Treasury secretary or Fed chair from starting new programs w/out legislation
Read 13 tweets
16 Dec
The Fed has updated its plans for bond buying by pledging to continue them until “substantial further progress has been made,” but made no changes to its asset purchases wsj.com/articles/fed-u…
12 of 17 officials see appropriate policy requiring interest rates near zero at least through 2023
Growth and unemployment forecasts for 2020 and 2021 were revised up somewhat, but most officials don't see inflation returning to 2% before 2023
Read 4 tweets
20 Nov
By asking the Fed to return unused Treasury capital, Mnuchin is effectively preventing the Biden administration from being able to use or revamp central bank loan backstops that were made possible by the bipartisan Cares Act passed in March wsj.com/articles/mnuch…
Could a new Treasury secretary bring these back? The easy answer is yes, it doesn’t take much to start a 13(3) facility.

But what made these facilities special was that Congress had provided a huge slug of funding so the Fed could make riskier investments than it otherwise would
So without the Cares Act funding, the Fed might be reluctant to resume the loan programs unless Treasury can make some new funding available.

This becomes a question of not only what is legally possible but how much political risk is the Fed and Treasury willing to take
Read 7 tweets
17 Nov
Judy Shelton failed to secure the votes needed to advance to Senate confirmation on Tuesday due to two absences of Republican senators who are quarantining from the coronavirus wsj.com/articles/judy-…
Tuesday's vote showed there are as many as 50 Republicans who could support Shelton, but only 48 of them were able to vote.

There are as many as 50 senators, including three Republicans, who oppose Shelton. One of them also did not vote Tuesday.
If Rick Scott is able to get back to Washington this week, that would allow McConnell to bring up Shelton's nomination again, with Pence breaking a 49-49 tie.
Read 4 tweets

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