May 19 (UPI) -- Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin told lawmakers Tuesday the economic slowdown brought on by coronavirus restrictions could last for a while, but the Trump administration is prepared for a recovery.
The two testified in a remote hearing of the Senate banking committee to address the impact of the $2 trillion CARES Act and further economic fallout.
Powell said the scope and speed of the downturn are "without modern precedent" and are "significantly worse than any recession since World War II."
The Federal Reserve, which lowered key interest rates to near zero at an emergency session in March, plans to maintain rates at their present level until the central bank is confident the economy has "weathered recent events" and is on track to achieve "maximum-employment and price-stability goals," Powell added.
Powell noted that the Fed's Main Street Lending Program will be ready to go by the end of May, providing fiscal aid directly to small- and medium-sized businesses hampered by the health crisis. He also said the central bank will use all "tools" to stabilize the U.S. economy in the coming months.
Mnuchin warned of "permanent damage" to the economy if states delay reopening.
"We are continuing to see large unemployment and other negative indicators," Mnuchin said in his testimony. "It is important to realize that the large numbers represent real people.
"As we listen to medical experts, we are optimistic about the progress being made on vaccines, antiviral therapies, and testing."
Much of the United States has loosened restrictions in recent weeks to reopen businesses, but weeks of closure has cost more than 30 million American workers their jobs over the past two months.
"Working closely with governors, we are beginning to open the economy in a way that minimizes risks to workers and customers. We expect economic conditions to improve in the third and fourth quarters," Mnuchin added.
Powell said that a plan to wider reopening will require controlling the spread of the virus as well as developing therapeutics and a vaccine.
"The number one thing, of course, is people believing that it's safe to go back to work and that's about having a sensible, thoughtful reopening of the economy, something that we all want -- and something that we're in the early stages of now," he said.
Further, Powell said the Fed might expand its program to buy municipal debt and warned state and local governments that laying off workers could slow recovery.
"We have the evidence of the global financial crisis and the years afterward, where state and local government layoffs and lack of hiring did weigh on economic growth," he said.
A four-member congressional panel reported Monday that $37 billion of the $454 billion allocated to the Treasury for business loans has made it to the Fed's Secondary Market Corporate Credit Facility.
Mnuchin disputed accusations that the aid is being distributed too slowly, noting that the Treasury has "committed up to $195 billion in credit support under the CARES Act."
The Treasury chief also said the Trump administration and the Federal Reserve are "fully prepared to take losses" on money given for relief aid and will distribute all $500 billion in funds earmarked for struggling businesses.