The Federal Reserve has lived to fight another day after its starring role in the economic relief negotiations. But its battle could get harder in the coming year.
A legislative compromise between Senate Minority Leader Chuck Schumer and Sen. Pat Toomey (R-Pa.) will limit the Fed’s ability to aid businesses, states and cities through emergency lending. In the short run, the deal heads off a political headache that the central bank would’ve faced next year anyway as Democrats pressured it to do more to help the pandemic-battered economy, while Republicans urged it to stop its lending programs entirely.
But it’s also a preview of the kind of scrutiny the Fed could face from Republicans going forward, particularly if Toomey takes the helm of the Senate Banking Committee, as the central bank looks for further ways to boost the economy.
Fed officials might no longer have to fear presidential tweets calling them “boneheads,” as President Donald Trump did last year in one of many missives mocking Chair Jerome Powell. But with millions out of work and the economic recovery beginning to falter, the stakes are much higher for the central bank to help the economy without running afoul of Congress.