By Ann Saphir and Dan Burns
(Reuters) - The heads of the U.S. Treasury Department and Federal Reserve on Wednesday renewed calls for legislators to reach agreement on additional funds to help small businesses get through the next few months before a coronavirus vaccine is in wide enough use to allow a broad-based economic recovery to take hold.
In a second day of testimony to congressional committees, Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell both told the House Financial Services Committee that additional fiscal action is needed as insurance against another contraction in activity in the near term. For months Congress has been at loggerheads over additional aid after lawmakers agreed to more than $3 trillion in relief in the early days of a pandemic that triggered the deepest recession since the Great Depression.
"It would be very helpful and very important that there be additional fiscal support for the economy, really to get us through the winter," Powell said. "I think we made a lot of progress faster than we expected, and now we have a big spike in COVID cases, and it may weigh on economic activity. People may pull back from activities they were being involved in or not engage in new activities."
"It would be helpful if we could get that done, if you could get that done," Powell said.
"I would encourage Congress, particularly over the next few weeks of the lame duck, let's try to get something done," Mnuchin said.
Wednesday's appearance followed a hearing before the Senate Banking Committee on Tuesday and featured much of the same partisan bickering over Mnuchin's decision to shut several Fed emergency lending programs at the end of this month, a move Democrats said seemed to contradict his call to help businesses that might have borrowed from those programs.
Mnuchin repeated that he was merely following the letter of law as spelled out in the CARES Act that had appropriated the funds and there no political motivation behind the move, which Democrats contend was made deliberately to hinder the ability of the incoming administration of President-elect Joe Biden to respond to an ongoing economic crisis.
Ahead of the hearing, Mnuchin told reporters that President Donald Trump was prepared to sign a relief measure favored by Senate Majority Leader Mitch McConnell. It remained unclear, however, whether genuine momentum was building toward a deal after McConnell began recirculating a $500 billion package he favors after a bi-partisan group of lawmakers floated a larger one, totaling $908 billion.
At its peak over the summer, expanded federal unemployment benefits under the CARES Act funneled some $12 billion weekly into individual bank accounts, money that propped up spending, padded savings accounts, and fueled rehiring as some parts of the economy bounced back faster than expected from an historic contraction in the second quarter.