By Victor Reklaitis, MarketWatch
U.S. lawmakers on Thursday failed to advance legislation providing more money for small businesses hit by the coronavirus crisis, after the aid program ran out of money.
Analysts are predicting Democrats and Republicans could achieve an agreement next week on the Paycheck Protection Program.
A breakthrough deal didn’t materialize before the Senate held a brief pro-forma session on Thursday afternoon, so the chamber adjourned until Monday without taking any action on the program. There previously had been hopes the Republican-led Senate could approve a PPP deal on Thursday afternoon and the Democratic-run House could follow suit on Friday.
“Senate Democrats are still blocking funding. Every Senate Republican was ready to act today — today — but Democrats would not let us reopen the program,” said Senate Majority Leader Mitch McConnell, the Kentucky Republican, during the chamber’s short session. “I hope our colleagues will come around soon.”
Republican lawmakers and the Trump administration have sought an additional $250 billion for PPP. The loan program for small businesses initially received $350 billion in last month’s $2.2 trillion coronavirus package, known as the CARES Act or Washington’s “Phase 3” legislation to support the economy during the pandemic.
Democrats have pushed for that extra $250 billion for the PPP to get packaged with other provisions, such as $100 billion for health-care institutions, $150 billion for state and local governments, and extra help for food-stamp recipients. They also want more of the PPP loans channeled through community-based financial institutions that serve a diverse range of enterprises.
“We fully want to add money to the PPP,” House Speaker Nancy Pelosi, the California Democrat, said on Thursday in a conference call with reporters. But she also stressed that Democratic lawmakers don’t want a measure that would “perpetuate the disparity of access to credit for some of our businesses,” and she said there’s an immediate need for “more funding for the hospitals and for the state and local governments.”
Pelosi said additional talks were planned for Thursday afternoon, with Treasury Secretary Steven Mnuchin slated to meet with Democrats.
Meanwhile, the Small Business Administration said Thursday that the PPP was out of money, so the SBA could no longer accept new applications for loans and couldn’t enroll new lenders.
“The issue may be worked out next week, as both sides have incentives to fund the program,” analysts at Height Capital Markets said in a Thursday note. But the analysts warned that while most members of the Democratic-run House and Republican-led Senate are away from Washington, D.C., legislation must be passed with no opposition, which can be hard to come by.
When asked by a reporter on Thursday about making concessions or offering a “fig leaf” to Democrats, House Minority Leader Kevin McCarthy dismissed the need for that. “Why would you have to offer a fig leaf, if people are out of work, and here’s money to keep people employed in the small businesses?” the California Republican told reporters on a conference call. “Just say yes.”
President Donald Trump also has weighed in on the standoff, tweeting on Thursday that Democrats “are killing American small businesses. Stop playing politics Dems! Support Refilling PPP NOW — it is out of funds!”
In addition to boosting the PPP, which some analysts are describing as a “Phase 3.5” response, Democratic and Republican lawmakers and the Trump administration are working on “Phase 4” legislation targeting the coronavirus crisis. Analysts have predicted that next big spending package, also called CARES 2, could cost about $1 trillion and not become a reality for several weeks.
U.S. stocks /zigman2/quotes/210598065/realtime DJIA +1.85% /zigman2/quotes/210599714/realtime SPX +1.95% have been plunging for weeks on coronavirus-related worries but have pared some of their losses thanks in part to hopes surrounding Washington’s aid programs.
Robert Schroeder contributed to this report.