WASHINGTON – Treasury Secretary Steven Mnuchin on Wednesday said he believes the U.S. economy will need more help to pull out of the recession, but added that the next round of support should be more targeted to the hardest hit parts of the economy.
Mnuchin, testifying before the Senate Small Business Committee, said the administration plans to spend the next 30 days looking at what measures should go in the next relief bill.
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Congress has already approved close to $3 trillion in support to deal with the impact of the coronavirus, which has resulted in millions of layoffs and has pushed the country into recession.
“There is no question that small businesses in many industries will need more help,” Mnuchin said. “Small businesses and larger businesses are going to need more help.”
New support measures will need to encourage business owners to rehire workers, especially those in the hardest hit industries like restaurants and travel, he said.
“You can’t get hotel capacity up to speed without hiring people first,” Mnuchin said.
Mnuchin and Small Business Administrator Jovita Carranza were generally praised by lawmakers for their efforts to get relief to small businesses under the Paycheck Protection Program, which has so far processed 4.5 million loans worth $511 billion. The loans are forgivable if the business uses the money to keep employees on the payroll or rehire workers who have been laid off.
Congress passed legislation last week that allowed companies to use 60% of the money for payroll and 40% for other expenses, such as rent payments and utilities. That was a modification from an initial requirement that 75% of the funds be used for payroll. The legislation, which was signed into law by President Donald Trump on Friday, also extended the time for companies to use the loans from eight weeks to 24 weeks.
Senators had a number of questions about a separate program administered by the SBA that provides Economic Injury Disaster Loans. Those are typically given to companies that suffer financial losses during hurricanes and other disasters, but have not necessarily suffered physical damage.
The applications require more paperwork from small businesses than the paycheck protection loans. Businesses have complained that it has taken too long to process the applications, and that loans were being approved at amounts much lower than what they were seeking.
The program has also had glitches that slowed processing — including a change in applications in late March that forced many companies to start the process over again. Separately, on March 25 the EIDL system suffered a data breach that potentially exposed personal information of nearly 8,000 applicants.
Carranza assured the Senate panel that SBA was working to ease the backup on loans and that the disaster loans now in the SBA system would be processed by next week.
The SBA had processed just 1.1 million loans of the disaster loans totaling nearly $80 billion as of June 6.
At a separate event, Bharat Ramamurti, a member of the Congressional Oversight Commission, criticized the Treasury and the Federal Reserve for not moving faster to combat the adverse effects of the pandemic. He said the two institutions were sitting on hundreds of billions of dollars that could be used to help struggling businesses and individuals deal with the pandemic.
Ramamurti said that only two of the emergency programs that Treasury and the Fed proposed setting up in early April are fully operational and they have produced only $5.5 billion of support out of a pool totaling nearly $500 billion.
While the Fed has cut its benchmark interest rate to a record low near zero and has purchased $2 trillion in Treasury bonds and mortgage-based securities to lower long-term interest rates, it has been much slower to get a variety of emergency loan programs up and running.
As of last week, the Fed's Secondary Market Corporate Credit Facility had purchased $4.3 billion worth of corporate bonds and its Municipal Liquidity Facility has made just one loan of $1.2 billion to the state of Illinois, Ramamurti told the Congressional Progressive Caucus.
Ramamurti, a former aide to Sen. Elizabeth Warren, was appointed to the congressional oversight panel by Senate Democratic Leader Chuck Schumer of New York. The panel was established to provide oversight over the nearly $3 trillion in support Congress has approved since March.
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AP reporter Matthew Daly contributed to this report. Rosenberg contributed from New York.