- Mnuchin defended a new lending program for large corporations without many strings attached.
- “Stability in the markets allows companies to function, and raise money and allows them to keep and retain workers and get back to work,” he told The Washington Post.
- Federal aid to large corporations differs from programs for small businesses, which aim to restrict spending and carried job protections.
- Visit Business Insider’s homepage for more stories.
Treasury Secretary Steven Mnuchin defended a $500 billion lending program that doesn’t require large corporations to keep job levels steady or impose payment restrictions to corporations.
In an interview with The Washington Post published Tuesday, Mnuchin said the announcement of the initiative on April 9 helped encourage “stability in the markets.” It’s run by both the Treasury Department and the Federal Reserve.
“Even before these facilities are up and running, they’ve had their desired impact of having stability in the markets,” he told the newspaper. “Stability in the markets allows companies to function, and raise money and allows them to keep and retain workers and get back to work.”
Under the program, the central bank is set to buy up to $500 billion in bonds issued by the large corporations. But the businesses are required to pay it back with interest, and they’re exempt from rules compelling them to maintain job levels. The program also doesn’t require companies to limit dividends or executive compensation.
The top Trump administration official said Congress had reached an agreement on corporate aid and it had been “highly discussed on a bipartisan basis.” It formed a key part of the $2.2 trillion coronavirus stimulus law that lawmakers approved in March.
“What we agreed upon was direct loans would carry the restrictions, and the capital markets transactions would not carry the restrictions,” Mnuchin told The Post.
But critics argue the Fed program doesn’t do enough to keep businesses from increasing compensation for executives and shareholders or prevent them from laying off workers.
Bharat Ramamurti, a member of the Congressional Oversight Commission tasked with overseeing the corporate bailout fund, recently told Business Insider that corporations had poured money into stock buybacks in recent years, and said he had “significant concerns” about the Fed program.
“A big chunk of it comes with no requirement on payroll whatsoever — and similarly comes with no restrictions on executive compensation, share repurchases, or dividends,” Ramamurti said. “It’s essentially taxpayer-backed money from the Fed to companies that gives them free rein to decide what they want to do with it.”
The Fed program differs from the government aid being provided to small businesses as part of the Paycheck Protection Program.
That initiative imposed restrictions to protect jobs and limit spending. Most of the funds are supposed to go to covering worker paychecks, and the program outlined expenses like rent, lease, and utility payments that the money could be used for. The maximum loan size is $10 million.
On Tuesday, the federal government announced it would review every loan over $2 million after large corporations found ways to abuse the program.
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