The law provides emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus (COVID-19) pandemic.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act, H.R. 748) passed both the House and Senate and was signed into law by President Donald Trump on Friday, March 27, 2020. The CARES Act is intended to provide emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic, and to provide emergency appropriations to support Executive Branch agency operations during the COVID-19 pandemic. The Act includes $1 billion in appropriations for Defense Production Act (DPA) purchases that respond to coronavirus. It authorizes resources for International Financial Institutions in order to allow the institutions to leverage hundreds of billions in supporting those economies that may be severely impacted. Also, the Act includes emergency assistance for housing needs and protections for homeowners and renters from foreclosure and eviction.
Comptroller of the Currency Joseph M. Otting commended Congress for passing and the President for signing "important legislation that will provide much needed support and clarity to the participants of the federal banking system and relief for the nation in response to the COVID-19 national emergency." Otting noted that several provisions of the law "will enable national banks and federal savings associations to assist the customers, businesses, and communities who rely on them to emerge from this public health emergency as financially strong as possible, and to contribute to the country’s economic recovery." The law will enable the OCC to exempt certain transactions from lending limit requirements, and allows for temporary adjustments to accounting rules and bank capital requirements.
President Donald Trump released a statement noting that the Act includes "several provisions that raise constitutions concerns." According to Trump, the requirement that the newly established Chairperson must consult with Congress regarding the selection of the Executives for the newly formed Pandemic Response Accountability Committee "violates the separation of powers by intruding upon the President’s power and duty to supervise the staffing of the executive branch." Trump stated that his administration "will treat this provision as hortatory but not mandatory." The second issue is with the creation of the Special Inspector General for Pandemic Recovery (SIGPR) within the Department of the Treasury to manage audits and investigations of loans and investments made by the Secretary of the Treasury under the Act. The Act authorizes the SIGPR to request information from other government agencies and requires the SIGPR to report to the Congress "without delay" any refusal of such a request that "in the judgment of the Special Inspector General" is unreasonable. Trump stated that this provision requires presidential supervision required by the Take Care Clause, Article II, section 3, and as a result, the Trump administration will not follow this provision.
Act provisions. The CARES Fund allocates $500 billion to what is called an Exchange Stabilization Fund (ESF), which is basically an emergency reserve fund that provides the Treasury Secretary with the authority to distribute emergency funding to assist companies of all sizes. These funds allow the Treasury to finance Fed facilities that will be used to provide liquidity to shore up business lending and allows the Treasury Secretary to provide loans and loan guarantees to businesses of all sizes. Treasury’s ESF for the money markets lifts any restrictions that applied to Treasury’s ESF in 2008 during this national emergency, allowing direct appropriations for any funds used for Treasury’s Money Market Fund Guarantee Program.
The CARES Act also includes the following provisions:
- establishing a Debt Guarantee Authority allowing the FDIC and NCUA to temporarily guarantee non interest bearing accounts of banks and credit unions without a maximum guarantee limit;
- providing community banks with relief and a grace period for complying with the Community Bank Leverage Ratio (CBLR);
- allowing banks and credit unions to provide relief to consumers and businesses by temporarily removing the Troubled Debt Restructuring (TDR) classification requirement; and
- exempting financial institutions from being forced to comply with the Current Expected Credit Losses (CECL) accounting standard until the end of the public health emergency declaration or the end of the year.
Financial Services Committee. House Committee on Financial Services Chair Maxine Waters (D-Calif) delivered a statement on the floor of the House in support of the legislation. Waters said the legislation will "protect and provide relief for consumers, renters, homeowners and people experiencing homelessness. The Act would address the shortage of key medical supplies and equipment by providing a $1 billion dollar appropriation to the Defense Production Act fund." Waters also highlighted that under the legislation, "most individuals and families across the country will receive a check or direct deposit for $1200 dollars for each adult and $500 dollars for each child to help our families who are struggling during this unprecedented crisis."
Financial Services Committee Ranking Member Patrick McHenry (R-NC) also commented on the House passage of the legislation, citing this "unprecedented time in our nation’s history." According to McHenry, "the CARES Act, while not perfect, is the appropriate action to provide necessary resources to get Americans and our economy through this national emergency." McHenry stated that his goal in supporting the legislation "is to keep Americans employed. Specifically, this bill will provide relief to our small businesses to help them keep employees on payroll and prepare those businesses to be up and running as soon as America is open for business again."
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