Treasury Secretary Steven Mnuchin said he plans to use all of the $500 billion that Congress provided to help the economy through direct lending from his agency and by backstopping Federal Reserve lending programs.
Mnuchin said he has pledged to use $195 billion of those funds so far, and will use the rest after determining how best to deploy the money to help losses associated with the coronavirus pandemic.
“I expect to allocate all the capital as needed as was given to us,” Mnuchin said during a Senate Banking Committee hearing held online. “We are fully prepared to take losses in certain scenarios on that capital.”
Mnuchin’s plans to exhaust the funds underscore the depth of the crisis faced by the US after the coronavirus outbreak prompted social distancing policies and stay-at-home orders that shut down much of the economy.
Unemployment has soared to levels not seen since the 1930s Great Depression. In the first two months of the pandemic-induced economic shutdown, more than 35 million people lost jobs. Almost 40% of Americans in households making less than $40,000 a year lost a job in March, according to the Federal Reserve.
Of the loan fund, $454 billion is to backstop the Fed’s emergency lending facilities, while the rest is for direct lending to companies from the Treasury Department.
“The only reason I have not allocated it yet fully is we are just starting to get these facilities up and running,” Mnuchin said. “We want to have better idea as to which one of the facilities need more capital, as well as the potential for adding additional facilities.”
Mnuchin called for easing social distancing guidelines as soon as possible to restart the economy, echoing comments from President Donald Trump. To underscore the point, the Treasury chief told the senators he’s willing to go to the Capitol to answer questions in person, saying it’s safe enough to do so.
“There is the risk of permanent damage” to the economy if it remains closed, he said.
Mnuchin said he expects an economic rebound to begin in the second half of this year. Fed Chairman Jerome Powell, who testified at the same hearing, sees a longer road to recovery.
Powell said the scope and speed of the downturn “are without modern precedent and are significantly worse than any recession since World War II” and reiterated that a full recovery may take until the end of 2021.
Trump investing millions to bring drugmaking back to US
The Trump administration plans to pump millions of dollars into producing more medications in the US as Covid-19 pandemic heightens longstanding concerns about the fragility of the global drug supply chain.
The Biomedical Advanced Research and Development Authority (Barda) awarded a $345 million contract to a group led by Virginia-based drug company Phlow Corp. to make medicines that have fallen into short supply. Barda is an agency within Department of Health and Human Services that’s responsible for developing medical countermeasures to emergencies.
About 80% of the active ingredients in medications taken in the US come from overseas, mainly from India and China. A spike in demand for some drugs and supplies during the pandemic has increased concerns about shortages in the US.
BARDA made streamlining drug and vaccine production to fight Covid-19 a priority in March, part of a wider effort to make it easier for companies to manufacture in the U.S. rather than in countries with lower labor costs.
“Working with the private sector, HHS is taking a significant step to rebuild our domestic ability to protect ourselves from health threats by utilizing American-made ingredients and creating new American jobs in the process,” HHS Secretary Alex Azar said in a statement.
Before Covid-19 sickened millions worldwide and shut down much of the global economy, policy makers had already been concerned about China’s growing dominance of the pharmaceutical supply chain. A Pentagon official told a congressional U.S.-China advisory panel in August that the issue is a national-security risk.
Since then, the pandemic has highlighted how disruptions in trade can interrupt the U.S. drug supply. In the early stages of the outbreak, China’s ability to manufacture drugs was hobbled as it put far-reaching quarantines in place. India temporarily blocked the export of some medications to ensure its own citizens had enough.
BARDA officials say the agency plans to invest heavily in efforts that would bring more drug production back to the US.
“BARDA expects to make strategic and substantial investments in this area,” Gary Disbrow, the acting agency director, said in an email. Rick Bright, the agency’s former director, was recently re-assigned in what he has said was retaliation for criticizing the Trump administration’s handling of hydroxychloroquine.