Federal Reserve Chair Jerome Powell stressed to Congress Tuesday that getting the coronavirus under control was vital as the U.S. economy rebounds from the sharpest contraction on record.

”We have entered an important new phase and have done so sooner than expected,” Powell told the House Financial Services Committee while wearing a face mask in a joint appearance with U.S. Treasury Secretary Steven Mnuchin. “While this bounceback in economic activity is welcome, it also presents new challenges -- notably, the need to keep the virus in check.”

Parts of the U.S. are taking steps to scale back reopenings amid a fresh surge in infection rates, with Arizona closing bars and New Jersey halting plans for indoor dining. Massive monetary and fiscal policy stimulus have been unleashed to support the U.S. economy during the pandemic, but signs the crisis may linger longer will increase pressure for more aid.

Small Business
Lawmakers pressed Mnuchin on government support for small businesses through the Paycheck Protection Program. The deadline to apply for a forgivable loan under PPP is Tuesday and the Treasury Secretary said that money left in the fund can be re-purposed by Congress for restaurants and hotels. The travel and leisure industry is among those hardest hit by the pandemic, he said.

The Fed has slashed interest rates to zero and worked with Treasury to launch nine emergency lending programs aimed at providing a credit backstop to everything from municipalities to medium-sized businesses. Those actions helped lower borrowing costs and keep the financial system liquid in a time of stress, while propelling the stock market higher. The Standard and Poor’s 500 stock index is up about 37% from its March lows.

In addition to monetary stimulus, U.S. lawmakers have also approved almost $3 trillion in taxpayer support including direct assistance to small businesses and enhanced unemployment insurance for the many millions of workers who’ve lost jobs since the virus struck.

Main Street
House Democrats questioned Powell and Mnuchin on ways to find more aid for state and local governments and how to more strongly tie government support to jobs.

“We can see ourselves possibly lowering the threshold again,” Powell said in reference to the Fed’s Main Street lending facility for small and medium-sized businesses. “Just logistically for us to be making very, very small loans would be difficult.”

Earlier this month the Fed expanded its Main Street program, which was slow to start, to let more companies participate. The central bank lowered loan minimums to $250,000 from $500,000 and extended the loan term to five years from four.

Dozens of corporations that raise funds in financial markets have benefited from the Fed programs even though they didn’t ask the Fed for a loan. Meanwhile, many are also determining that they will need less staffing for the near future, and are firing workers.

More Stimulus
Mnuchin reiterated at the hearing the administration’s goals to pass another round of fiscal stimulus by the “end of July.”

Congressional Republicans have delayed any talks on additional stimulus for a month and half in the hopes that an improving economy would lessen the need for more deficit spending.

The House in May passed a $3.5 trillion partisan bill with nearly $1 trillion in aid for states, expanded unemployment insurance through January, another round of $1,200 stimulus checks as well as funds for Covid testing, broadband Internet expansion and housing assistance among other provisions.

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