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 PelosiOvernight Health Care: Moderna to apply for emergency use authorization for COVID-19 vaccine candidate | Hospitals brace for COVID-19 surge | US more than doubles highest number of monthly COVID-19 cases House Democrats urge congressional leaders to support .1B budget for IRS Bipartisan Senate group holding coronavirus relief talks amid stalemate MORE (D-Calif.) said Sunday morning before walking into a meeting with Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSenate approves two energy regulators, completing panel On The Money: Biden announces key members of economic team | GOP open to Yellen as Treasury secretary, opposed to budget pick | GAO: Labor Department 'improperly presented' jobless data Senate GOP open to confirming Yellen to be Biden's Treasury secretary MORE (R-Ky.), Senate Democratic Leader Charles SchumerChuck SchumerOvernight Health Care: Moderna to apply for emergency use authorization for COVID-19 vaccine candidate | Hospitals brace for COVID-19 surge | US more than doubles highest number of monthly COVID-19 cases The five biggest challenges facing President-elect Biden Collins urges voters to turn out in Georgia runoffs MORE (N.Y.) and House Minority Leader Kevin McCarthyKevin Owen McCarthyDemocrats were united on top issues this Congress — but will it hold? Top Republicans praise Trump's Flynn pardon Richmond says GOP 'reluctant to stand up and tell the emperor he wears no clothes' MORE (R-Calif.).


Treasury Secretary Steven MnuchinSteven Terner MnuchinFinancial groups applaud Biden Treasury pick Yellen US sanctions Chinese company for conducting business with Maduro regime Monumental economic challenges await Biden's Treasury secretary 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.


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 TrumpGeraldo Rivera on Trump sowing election result doubts: 'Enough is enough now' Murkowski: Trump should concede White House race Scott Atlas resigns as coronavirus adviser to Trump 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.