Lawmakers hit major roadblock over GOP plan to limit Federal Reserve, imperiling weekend deal for emergency relief package

A late push from Sen. Patrick Toomey, R-Pa., to rein in the nation's central bank had already divided lawmakers over the last several days. But the impasse appeared to grow significantly wider on Saturday, as congressional leadership and rank-and-file senators on both sides of the aisle dug in over the issue, imperiling prospects for a deal before Monday.

Toomey, a conservative lawmaker on the Senate's banking committee, has demanded provisions be included in the covid relief package that would curb the ability of the Fed to restart emergency lending programs for localities and small businesses.

Senate Majority Leader Mitch McConnell, R-Ky., told Senate Republicans on a private call Saturday afternoon that the party should stick by Toomey's plan, according to two people who requested anonymity to share details of the call.

But Senior Democrats have balked at agreeing to what they see as a nakedly political attempt to limit the economic tools available to the Biden administration. Throughout Friday and Saturday, a chorus of Senate Democrats emerged urging party leadership not to budge on the issue. Democrats have already agreed to drop aid to state and local governments from the relief package, and some lawmakers have hoped the central bank could serve as a backstop for assisting ailing municipalities.

The Toomey proposal would amount to one of the most significant intrusions into the central bank's autonomy in years. Former Federal Reserve chair Ben Bernake weighed in on the dispute in an unusual public statement on Saturday, saying that the central bank's emergency lending authorities should be at a minimum as robust as they were before passage of the Cares Act in March. Bernake said that it was "vital" that the central bank's ability to "respond promptly to damaging disruptions in credit markets not be circumscribed."

The intensifying dispute threatened to derail delicate negotiations for a nearly $1 trillion relief package that would provide hundreds of billions in emergency aid to the unemployed and small businesses; funding for vaccine distribution and health care facilities; and another round of stimulus checks to millions of Americans.

The need for such a package has only grown as the coronavirus rampages the nation and several emergency programs protecting tens of millions of Americans are set to expire in a matter of days.

House Speaker Nancy Pelosi, D-Calif., on Saturday called the dispute over Toomey's proposal "the big thing" holding back an agreement.

Asked about the latest in negotiations, Sen. Richard Durbin, D-Ill., the No. 2 ranking Senate Democrat, said: "Toomey, Toomey, Toomey."

The approaching Christmas holiday, a looming pair of Senate special elections in Georgia and the prospect of a partial government shutdown also are adding to the pressure for negotiators to finalize a deal this weekend.

Congressional leaders had given themselves until Sunday midnight to close out talks. President Donald Trump Friday night signed a two-day spending bill to keep the government open until midnight Sunday. If no deal is reach on the stimulus package, lawmakers would have to pass another temporary measure before Monday, otherwise parts of the federal government would shut down.

In an ominous sign for the relief talks, rank-and-file senators in both parties signaled they would be unwilling to move forward if they did not get their way over the Toomey proposal.

Sen. Elizabeth Warren, D-Mass., on Saturday denounced the Toomey plan and said "Democrats should stay firm" to resist the changes. Sen. Angus King, I-Me., a moderate who caucuses with the Democrats, said such an idea would "cripple the next administration's ability to deal with a recession."

On the Republican side, Sen. Tom Cotton, R-Ark., tweeted that Democrats were seeking a "slush fund for their political cronies." Cotton added that Toomey's position "is in fact the position of the Republican Senate Conference." Sen. John Neely Kennedy, R-La., a member of the Senate Banking Committee, told reporters Democrats were trying to use the central bank's authorities "as a backdoor to do what they couldn't do through the front door."

Kennedy added of Republicans approach to the issue: "I think we ought to stand firm."

Sens. Toomey, Cotton, and Mitt Romney, R-Utah, met in Senate Minority Leader Charles Schumer's, D-N.Y., office Saturday afternoon to resolve the dispute. Toomey expressed optimism about the possibility of a compromise following the meeting. But Romney, who has sought a compromise, sounded more downbeat, telling reporters: "I can't predict what the result is going to be. I don't know whether they're going to be able to bridge the divide or not."

McConnell, the Senate majority leader, has said lawmakers will not leave Washington for the holidays until a deal is done. And on Friday night he expressed optimism that a deal would get done. But on Saturday, multiple lawmakers and aides on Capitol Hill who were not authorized to speak about the negotiations publicly, conceded that it was hard to imagine a swift resolution to the stalemate over the Federal Reserve.

Lawmakers have also yet to resolve several other lingering issues. Those include eligibility for small business relief; how to structure unemployment aid; and the criteria for sending out a $600 per person stimulus check. Pelosi also told House Democrats on a call on Saturday that lawmakers remained divided over the amount of money necessary for food assistance, according to a person who spoke on the condition of anonymity to share her private remarks.

However, many aides close to talks expressed optimism these issues could be addressed fairly quickly if the dispute over the Fed is resolved. Sen. John Thune, R-S.D., the No. 2 ranking Republican senator, said Saturday that the "probably more likely scenario" is that negotiations stretch into Monday.

"But I think we're in the homestretch, we're on the glide path," Thune said. "I think we're going to get this done and help out the American people."

Still, Treasury Secretary Steven Mnuchin told Senate Republicans on a 1 p.m. call on Saturday that Toomey's demands had not been resolved, a person familiar with the internal call said. McConnell also told Senate Republicans on the call that the GOP needed to support Toomey's efforts.

"I think we need to stick with where we are," McConnell said, according to two people familiar with the call.

Republicans say the Fed's programs, initially funded with a $500 billion congressional appropriation under the March relief bill, were of marginal utility earlier in the pandemic and are no longer necessary in any case. Toomey gave a floor speech Saturday afternoon aggressively defending his efforts.

Romney appears to be the only Republican to break with Toomey so far. Romney told reporters on Saturday that elements of Toomey's proposals could be resolved after the current relief package is passed.

Democrats have argued the Toomey proposal represents an unusual political intervention into the independence of the Federal Reserve, limiting emergency lending powers it has possessed since 1932. Senate Minority Leader Charles Schumer, D-N.Y., also said that Federal Reserve Chair Jerome Powell opposes the proposed changes.

The central bank declined to give a public response to the heated debate.

"It's no surprise that Republicans are drawing a line in the sand over their ability to sabotage the economy, and tie the Biden administration's hands," Sen. Ron Wyden, D-Ore., the ranking Democrat on the finance committee, said in a statement.

Democrats have signaled they might be willing to accept language that restricts use of Treasury funds appropriated under the March aid bill, but not language that would restrict the Fed from doing similar lending using its own assets.

"I think we could go with one part and not the other," House Majority Leader Steny Hoyer, D-Md., said Friday. "And that's the deal I think we ought to make."

Hoyer told House members Friday not to expect votes until 1 p.m. Sunday at the earliest - just 11 hours before the next shutdown deadline. House Democratic leaders have scheduled a noon videoconference Saturday to update members on the negotiations.

Likely to run many hundreds of pages, the package is not only expected to carry the $900 billion covid relief deal but also $1.4 trillion in year-long appropriations for federal agencies; the extension of tens of billions of dollars in expiring tax breaks; a bipartisan energy bill; a long-delayed bipartisan solution to surprise medical billing; and dozens of other potential add-ons that a vast corps of lobbyists and congressional aides are hoping to include in this last legislative vehicle of 2020.

Lawmakers will almost certainly be asked to vote on a sweepingly broad piece of legislation with only hours to review it.