Lawmakers reach compromise over GOP proposal to rein in Fed’s powers, clearing path for a stimulus package deal

Senior lawmakers resolved a major standoff late Saturday night, clearing the way for Congress to pass a nearly $1 trillion economic relief package, after Democratic leaders and Sen. Patrick Toomey, R-Pa., struck a compromise over his proposal to rein in the lending powers of the Federal Reserve.

Toomey had created a major impasse last week by demanding new limits on the central bank’s emergency lending authority. His proposal, supported by Republican leadership, threatened the delicate negotiations over the relief package. But after hours of frenzied negotiations and meetings in the Capitol, a compromise between Toomey and Senate Minority Leader Chuck Schumer, D-N.Y., was brokered around 9:30 p.m., aides in both parties said.

The revised language bars the Federal Reserve from creating precise copies of the lending programs created through the $2 trillion Cares Act passed by Congress. It affirmatively shuts down as of Jan. 1 those programs, which were seeded with a $500 billion appropriation by Congress in March. As congressional negotiators have discussed for weeks, the $429 billion in unspent funds will be redirected to other programs in the new $900 billion bill.

Toomey made his original proposal to make sure that the emergency Federal Reserve facilities created by Congress would shut down at the end of the year. Democrats worried that Toomey’s initial proposal went too far in restricting the central bank’s ability to use its long-standing emergency lending authority to respond to future economic calamities.

Republicans believe the new language will still prevent the Fed from pursuing vast new lending programs on its own without permission – and new appropriations—from Congress. At the same time, it gives the incoming administration of President-elect Joe Biden the clear authority to pursue new tools in conjunction with the central bank to confront threats to the economic recovery from the pandemic.

The compromise language was described by three congressional aides familiar with its drafting who were not authorized to comment publicly.

Leaving his office just before midnight Saturday, Schumer declared a deal “very close” and predicted a resolution on Sunday.

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

However, at 12:18 a.m. on Sunday, President Donald Trump tweeted that Congress needs to give “more money in direct payments.” The Washington Post reported last week that White House aides talked Trump out of issuing a public statement demanding stimulus checks as big as $2,000, telling the president such a move could derail negotiations on the broader relief package. His tweet early Sunday signals that the president may not have given up on his demand.

The breakthrough with Toomey came after two days of scrambling that sent tremors across Capitol Hill, as lawmakers realized that a deal badly desired by both sides could fall through at the last minute.

The intensifying dispute had threatened to stymie talks over the relief package that would provide hundreds of billions in emergency aid to the unemployed and small businesses; funding for vaccine distribution and health-care facilities; and another round of stimulus checks to millions of Americans.

The need for such a package has only grown as the virus rampages across the nation and several emergency programs protecting tens of millions of Americans are set to expire in days.

The holidays, looming Senate runoff elections in Georgia and the prospect of a partial government shutdown on Monday are adding to the pressure for negotiators to complete a deal this weekend.

House Speaker Nancy Pelosi, D-Calif., earlier on Saturday called the dispute over Toomey’s proposal “the big thing” holding up an agreement.

Congressional leaders had given themselves until midnight Sunday to close out talks. Trump on Friday night signed a two-day spending bill to keep the government open until midnight Sunday. If no deal is reach on the stimulus package, lawmakers would have to pass another temporary measure before Monday. Otherwise, parts of the federal government would shut down.

The compromise between Toomey and Democratic leaders came together over the course of six frantic hours Saturday afternoon. As senators headed to the floor for a nomination vote shortly before 3 p.m., the dispute was threatening to turn into a partisan inferno.

Toomey had been arguing that the Fed’s programs, initially funded with a $500 billion congressional appropriation under the March relief bill, were of marginal utility earlier in the pandemic and no longer necessary.

Democrats had countered that the Toomey proposal represented an unusual political intervention into the independence of the Fed, limiting emergency lending powers it has possessed since 1932.

“It’s no surprise that Republicans are drawing a line in the sand over their ability to sabotage the economy, and tie the Biden administration’s hands,” Sen. Ron Wyden of Oregon, the ranking Democrat on the finance committee, said in a statement.

As debate intensified on Capitol HIll, former Federal Reserve chair Ben Bernanke weighed in on the dispute in an unusual public statement on Saturday, saying that the central bank’s emergency lending authorities should be at minimum as robust as they were before passage of the Cares Act in March. Bernanke said it was “vital” that the central bank’s ability to “respond promptly to damaging disruptions in credit markets not be circumscribed.” The Fed did not release a public statement Saturday on the matter.

In the late afternoon on the Senate floor, lawmakers met to directly work out the dispute after days of sputtering staff-level talks. Toomey and Sen. Mark Warner, D-Va. – both senior members of the Senate Banking Committee—sat facing each other, flanked by nearly a dozen other senators. After about 10 minutes of sometimes animated discussion, Toomey and several other senators retreated to Schumer’s office.

After a half-hour meeting, Toomey emerged cautiously predicting a deal was possible. After a second meeting with Schumer later in the evening, the two senators traded draft legislation and finally agreed shortly before 9:30 pm, tentatively ending the standoff.

Earlier in the evening Schumer had indicated in a call with Democratic senators that Toomey said he was willing to modify his proposal to reach a compromise and that talks would continue into the night, according to two people on the call spoke on the condition of anonymity. While Schumer said the Senate could vote as soon as Sunday on a final deal, others were cautious that the bill could be written and passed by Congress that quickly.

Lawmakers still have to resolve other issues. Those include eligibility for small-business relief; how to structure unemployment aid; and the criteria for sending out a $600-per-person stimulus check. Pelosi told House Democrats during a call on Saturday that lawmakers remained divided over the amount of money necessary for food assistance, according to a person who spoke on the condition of anonymity to share the speaker’s private remarks.

Many aides close to talks had expressed optimism that these issues could be addressed fairly quickly with the dispute over the Fed resolved. Sen. John Thune of South Dakota, the No. 2 ranking Republican, said earlier Saturday that the “probably more likely scenario” is that negotiations continue into Monday.

“But I think we’re in the homestretch; we’re on the glide path,” Thune said. “I think we’re going to get this done and help out the American people.”

Senate Majority Leader Mitch McConnell, R-Ky., has said lawmakers will not leave Washington for the holidays until a deal is done.

After the compromise was reached between Toomey and Schumer, McConnell’s office released a statement.

“Now that Democrats have agreed to a version of Sen. Toomey’s important language, we can begin closing out the rest of the package to deliver much-needed relief to families, workers, and businesses,” said Doug Andres, spokesman for McConnell.

Likely to run many hundreds of pages, the package is not only expected to carry a nearly $1 trillion virus relief deal but also $1.4 trillion in year-long appropriations for federal agencies; the extension of tens of billions of dollars in expiring tax breaks; a bipartisan energy bill; a long-delayed bipartisan solution to surprise medical billing; and dozens of other potential add-ons that lobbyists and congressional aides are hoping to include in this last legislative vehicle of the year.

Lawmakers will almost certainly be asked to vote on a broad piece of legislation with only hours to review it.

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