The chair of the Federal Reserve and the secretary of the Treasury will paint starkly different visions of the challenges facing the United States economy in the months ahead on Tuesday, further exposing a rift that began to show earlier this month.
While Jerome H. Powell, the Fed Chair, will point to ongoing uncertainty over a vaccine, the economic dangers of a surge in virus cases and the persistent risks to economic prosperity during testimony before the Senate Banking Committee, Treasury Secretary Steven Mnuchin will blame state and local lockdowns as the threat to growth, according to their prepared remarks.
The contrast underlines the divide between two economic policymakers who, earlier in the crisis, worked closely as partners. Mr. Mnuchin announced earlier this month that he would end several Fed emergency loan programs, which are meant to keep credit flowing to state and local governments and medium-sized businesses alike. The Fed has suggested it is disappointed with that decision, and Mr. Powell will address it in his remarks.
Mr. Powell plans to note that the legislation gave “sole authority over its funds” to the Treasury secretary and that the Fed will give the money back. But he will nod to the fact that the Fed believes the programs should continue working.
“Our emergency lending powers require the approval of the Treasury and are available only in very unusual circumstances, such as those we find ourselves in today,” Mr. Powell will say, signaling that he does not believe conditions have returned to normal.
While he plans to reiterate that positive clinical trial results for several vaccine candidates spell good news for the medium term, he will warn that there are still big risks on the horizon.
“For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups,” Mr. Powell will say. “It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence.”
Mr. Mnuchin and Mr. Powell will be appearing jointly on Tuesday before the Senate Banking Committee, and on Wednesday they will testify before the House Financial Services Committee.
In his prepared remarks, Mr. Mnuchin touts the strength of the economic recovery but blames continuing economic shutdowns in some parts of the country for impairing progress and causing “great harm” to American businesses and workers.
Regarding the lending programs, Mr. Mnuchin reiterates his call for the $454 billion that is being clawed back…