A Network of the National Association of State Treasurers
Policy Update:

Congress Nears Spending Deal: Federal Reserve Language Presents Obstacle

U.S. Capitol Building in Washington, D.C.
Brian Egan, Policy Director, NAST

COVID-19 stimulus talks continue in Congress and negotiations will likely go through the night and into the weekend. Congress may pass a short term continuing resolution to address tonight’s pending funding lapse, but a short federal government shutdown is also a possibility. Leadership has expressed optimism that a deal is close. 

In terms of the bill’s key contents: the $160 billion in additional state and local aid as well as business liability protections will almost certainly be punted into next year. Language to renew funding for the Paycheck Protection Program (PPP), provide another round of direct payments to individuals, provide funds for COVID-19 testing and vaccine distribution, and an extension unemployment benefits expansion remain areas of general consensus, however. These components are expected to be included in a final deal. 

Last night, developments surrounding amendments to Section 13(3) of the Federal Reserve Act rose as yet another issue of disagreement that has slowed compromise. NAST expresses its concerns around the introduction of language that would indefinitely limit the Federal Reserve’s ability to create section 13(3) facilities in the future that are “similar” to those that were created this year using money under section 4029 of the CARES Act. This language would effectively bar the recreation of facilities such as the Municipal Liquidity Facility (MLF), or anything similar to it, without explicit Congressional approval in the event they are needed next year.