Via Financial Times

US senators failed to pass a motion to advance fiscal stimulus legislation worth nearly $2tn to help America weather the coronavirus pandemic, after congressional Democrats said it gave big business an overly generous bailout.

Only 47 out of 100 senators voted in favour of the procedural motion when 60 were needed to move the bill forward.

The vote in the upper chamber of Congress on Sunday evening marked a setback for the chances of quick passage. But negotiations among White House officials and congressional leaders from both parties were continuing, raising hopes that a deal could still be struck in the coming hours. 

“The legislation had many, many problems,” Chuck Schumer, the top Democrat in the Senate, said on Sunday afternoon. 

“At the top of the list, it included a large corporate bailout provision, with no protections for workers and virtually no oversight. It also significantly cut back on the money our hospitals, our cities, our states, our medical workers and so many others needed during this crisis,” Mr Schumer said.

In an urgent attempt to limit the fallout from the coronavirus pandemic, which has shut large parts of the global economy, Congress and the White House have been working on a deal to rapidly provide direct government payments to US households and aid to large and small companies. But finalising an agreement has proved complicated, despite pressure on all sides to deliver swift assistance to the rapidly deteriorating US economy. 

At a press briefing on Sunday evening, Donald Trump, the US president, said he was still optimistic about the potential for an agreement. “I don’t think anybody actually has any choice,” Mr Trump said.

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“Our goal is to get relief to Americans as quickly as possible,” he added.

The main features of the stimulus would be loans to small businesses so they could retain their workers, which would be forgiven if it was used to retain their employees, and direct payments to US households, worth $3,000 for a family of four. 

The most controversial element of the package — which Democrats have balked at — provides for up to $500bn that could be used to rescue large companies stricken by the coronavirus outbreak, in addition to $50bn set aside to help the airline industry. 

Democrats have been looking for assurances that the companies receiving government help would not be able to buy back stock, and would restrict executive compensation. They also objected to a provision proposed by Republicans that would delay disclosure of the companies receiving state aid, saying it amounted to “secret bailout authority”. 

“The overall view is that they want to create a slush fund for giant corporations. No help for employees and no help for the hospitals, and that cannot be where we are,” said Elizabeth Warren, the Massachusetts senator and former Democratic presidential contender. 

Finally, Democrats were unhappy that certain non-profit organisations, such as mental health providers, rape crisis centres, and family planning facilities, would not be eligible for loans directed to small businesses. 

But Mitch McConnell, the Senate majority leader and Kentucky Republican, said it was time to overcome the final hurdles. “This national crisis is not going to wait around if Congress slips back into conventional politics or haggles endlessly over the finer points,” he said. 

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Earlier in the day, Steven Mnuchin, the US Treasury secretary, had noted that another component of the deal would ensure “broad-based” lending to the US economy through the Federal Reserve, which has revived tools used during the 2008 financial crisis to boost credit. The legislation is expected to provide funds through the US Treasury department’s Exchange Stabilisation Fund to help backstop the Fed’s facilities. 

“We’ll have up to $4tn of liquidity that we can use to support the economy,” the Treasury secretary said. 

Economists have predicted a dramatic slowdown in economic activity in the coming weeks, with Goldman Sachs forecasting a 24 per cent drop in US gross domestic product in the second quarter. This has pushed the White House and Congress to consider an increasingly large stimulus package. 

US lawmakers and administration officials were eyeing legislation worth about $800bn less than a week ago, but the pricetag has now grown to nearly $2tn. Mr Mnuchin said he expected the measures to work over the next 10 to 12 weeks, but more fiscal support might be needed if the coronavirus crisis persisted. 

“If, for whatever reason, you know, 10 weeks from now, this virus, we haven’t won this, we’ll go back to Congress again,” the Treasury secretary said. 

Even as they have pushed for more aggressive stimulus, Donald Trump and his top officials have continued to insist that the US economy would rebound quickly once the coronavirus threat has been overcome later in the year. 

“When we get through this virus as I’ve said, I think you’re going to see the US economy come back to strength,” Mr Mnuchin told Fox. “We have great companies. We have great workers. What we need to do is have a bridge to get through this, and this isn’t the financial crisis that’s going to go on for years,” he added.

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