Fight over $500 billion corporate loan funding holds up coronavirus stimulus

Democratic leaders are objecting to an ambitious Republican proposal to spend up to $500 billion to leverage loans to a variety of industries, ranging from airlines and energy companies to car manufacturers, as part of a coronavirus stimulus package.

As a result of this and other disagreements, Democratic leaders say they don’t have a deal ahead of a key procedural vote at 3 p.m. Sunday to proceed to consideration of the package.

“From my standpoint, we’re apart,” Speaker Nancy PelosiNancy PelosiNRCC turns up heat on vulnerable Democrats over Omar's call to abolish police Shocking job numbers raise hopes for quicker recovery Engel primary challenger hits million in donations MORE (D-Calif.) said Sunday morning before walking into a meeting with Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellOvernight Energy: US Park Police say 'tear gas' statements were 'mistake' | Trump to reopen area off New England coast for fishing | Vulnerable Republicans embrace green issues The Hill's Campaign Report: Trump juggles three crises ahead of November election Vulnerable Republicans embrace green issues in battle to save seats MORE (R-Ky.), Senate Democratic Leader Charles SchumerCharles (Chuck) Ellis SchumerSheldon Whitehouse leads Democrats into battle against Trump judiciary GOP lawmaker calls on Senate to confirm Michael Pack as head of US media agency McConnell blocks resolution condemning Trump over treatment of protesters MORE (N.Y.) and House Minority Leader Kevin McCarthyKevin Owen McCarthyThe Hill's Morning Report - DC preps for massive Saturday protest; Murkowski breaks with Trump The Hill's Morning Report - Floyd eulogies begin; Trump-Esper conflict emerges The Hill's Morning Report - Protesters' defiance met with calls to listen MORE (R-Calif.).

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Treasury Secretary Steven MnuchinSteven Terner Mnuchin The Hill's Coronavirus Report: Association of American Railroads Ian Jefferies says no place for hate, racism or bigotry in rail industry or society; Trump declares victory in response to promising jobs report Trump signs bill giving businesses more time to spend coronavirus loans The Hill's Coronavirus Report: BIO's Michelle McMurry-Heath says 400 projects started in 16 weeks in biotech firms to fight virus, pandemic unemployment total tops 43 million MORE, who is pushing the massive infusion of cash to the Federal Reserve loan program, also attended the meeting in McConnell’s office.

Democrats say the corporate bailout fund falls short on several counts.

They argue that it doesn’t do enough to require companies to keep workers on payroll, urging them only to keep employees “to the extent possible,” which could result in mass layoffs after companies accept billions of dollars in taxpayer-guaranteed loans.

Democrats have countered with a proposal that corporate loans could be forgiven if major companies such as United Airlines, which has seen its market share plunge in recent weeks, retain more than 90 percent of their workers through the crisis.

They also are balking at the proposal’s weak restrictions on restricting corporate buybacks, which Mnuchin can waive.

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U.S. airlines, for example, spent tens of billions of dollars in recent years on stock buybacks to boost their share prices. American Airlines alone spent $12.4 billion on stock buybacks since 2014.

The proposed loan program would give Treasury Secretary Steven Mnuchin and the Federal Reserve broad discretion to hand out loans to industries that have been hit hard by the precipitous drop in economic activity.

The rescue fund, which the Senate Republican bill initially pegged at $208 billion, would extend beyond the airline industry, which has seen its stocks plummet in recent weeks, to other industries facing a credit crunch because of the health crisis.

Mnuchin on Sunday argued the proposed $500 billion appropriation to the Treasury Department to set up a capital buffer fund for the Fed would maximize the amount of liquidity Fed chair Jerome Powell can pump into the capital markets.

“We’ll have up to $4 trillion of liquidity that we can use to support the economy. And that’s —those are broad-based lending programs under Section 133. We can leverage our equity working with the Federal Reserve,” Mnuchin said on "Fox News Sunday," referring to a section of the Federal Reserve Act that gives the agency broad power to issue loans to borrowers who cannot secure loans.

But Democrats argue the fund has few restrictions, giving the Treasury Department and Federal Reserve broad discretion to hand out loans, perhaps even to President TrumpDonald John TrumpTwitter CEO: 'Not true' that removing Trump campaign video was illegal, as president has claimed Biden formally clinches Democratic presidential nomination Barr says he didn't give 'tactical' command to clear Lafayette protesters MORE’s own hotel and real estate empire.

Democrats also want to extend a proposed cap on executive compensation for companies that receive bailout loans beyond the two-year timeframe suggested by Republicans.