WASHINGTON — Treasury Secretary Steven Mnuchin was rebuked by a congressional oversight panel over his management of the economic relief effort on Thursday, with members questioning whether he politicized the handling of hundreds of billions of dollars in stimulus funds.
Mr. Mnuchin, at times defiant and defensive of his efforts, insisted that he was simply following the law and congressional intent in his decision-making. But the scrutiny could further complicate his role in trying to secure another pandemic-relief package with lawmakers, who have criticized the secretary’s stewardship of virus funds.
Republicans and Democrats on the oversight panel raised questions about whether Mr. Mnuchin awarded a $700 million loan to YRC Worldwide, a struggling trucking company, because of its ties to White House officials. And Democrats continued to press Mr. Mnuchin about whether he ended several of the Federal Reserve’s emergency lending programs to limit the incoming Biden administration.
“This was a political decision — one intended to hamstring the incoming administration even as Covid deaths are spiking and the economic recovery is slowing,” Bharat Ramamurti, an appointed member of the Congressional Oversight Commission, said at Thursday’s hearing. “Let me put it this way: Does anyone think the Treasury would have ended these programs if Donald Trump were re-elected?”
The central focus of the hearing was supposed to be the $17 billion that Treasury was allotted to support companies that are deemed critical to national security. The loan to YRC, which was struggling financially before the pandemic, has been a subject of concern for the commission since the Treasury Department approved it in June. Republicans on the commission, Senator Patrick J. Toomey of Pennsylvania and Representative French Hill of Arkansas, both raised questions about why the company was worthy of loan that was justified on the grounds that the company was critical to national security.
“It’s been hanging on by a thread since the global financial crisis,” Mr. Hill said.
Mr. Toomey said that YRC, which had been contracted by the Defense Department to provide meal kits, protective equipment and other supplies to military bases, appeared to be nearly insolvent and asked whether giving it money was a prudent use of taxpayer funds.
Mr. Mnuchin, a former banker, agreed that he would not have underwritten the loan if he was still in private industry but said the law gave the department the ability to help prevent financial problems and job losses at companies deemed critical to national security. He defended the loan, saying that it was granted to help prevent job losses and that, because the economy is recovering, the government would eventually turn a profit from the deal.
“There was a tremendous risk to the Department of Defense and a tremendous risk to the number of jobs,” Mr. Mnuchin said.
But Mr. Mnuchin was pressed about whether political favoritism was at play and if YRC got such a large loan so quickly because its largest financial backer is Apollo Global Management, a private equity firm with ties to the White House. Apollo, which spent nearly $1 million lobbying lawmakers this year about coronavirus relief funds, lent $184 million in 2017 to the Kushner Companies, a real estate firm run by the family of Jared Kushner, Mr. Trump’s son-in-law and senior adviser. The loan went to refinance the mortgage on a Chicago skyscraper.
Mr. Mnuchin said that Mr. Kushner had no input on the loan but said that lawmakers from both parties had urged him to find a way to help YRC, which he believed would have declared bankruptcy and laid off thousands of workers if not for the government support.
A new report from the Government Accountability Office said that the YRC loan was the only one of the 11 national security loans that the Treasury Department granted that was “fast-tracked” even though other businesses faced similar financial circumstances.
Officials from the Defense Department, which certified that YRC was critical to national security, declined to attend the hearing, drawing criticism from Mr. Toomey. The Defense Department, which stalled for weeks in providing the commission with a written response to its questions about the loan, will hold a separate teleconference with the commission about the loan program, but Mr. Toomey said the agency is resisting making the transcript of that teleconference public.
Mr. Mnuchin also parried more criticism of his decision to end five Fed lending programs. He insisted again on Thursday that he was following the intent of the law in ending the programs at year-end and in clawing back billions from the Fed. That position is at odds with what many legal experts and Democrats in Congress say was actually required.
On Nov. 19, Mr. Mnuchin declared that he believed all along that the programs could not continue past year-end and asked the Federal Reserve to give back the unused investments.
Mr. Toomey had floated the legal justification Mr. Mnuchin ultimately cited in ending the programs — the idea that Congress had meant for them to shut at the end of the year — before Mr. Mnuchin publicly embraced it. He did so at a time when a senior Treasury official told The New York Times that the department was still mulling extending some of the programs.
Mr. Toomey’s recollection of congressional intent contrasts with that of Senator Chuck Schumer, Democrat of New York, who was also involved in writing the law. Mr. Schumer takes the view that it was absolutely not the intent of Congress for the facilities to end in December, his spokesman said, adding that they were intended to exist through the crisis, which is clearly not over.
“We have some folks who think that these facilities should be used as a way to subsidize preferred borrowers — maybe municipalities who have been irresponsible,” Mr. Toomey said on Thursday. “That is absolutely not what these programs were for — they were for restoring a functioning market, and that’s why the statute called for them to come to an end. And that’s why the secretary did exactly the right thing by ending them.”
Mr. Toomey added that it “would be outrageous” for a future Treasury secretary to restart them — something Democratic senators have suggested that Janet L. Yellen, Mr. Biden’s pick for Treasury secretary, ought to do if and when she is confirmed. He suggested that a legal battle would ensue if Ms. Yellen seeks to restart the programs without congressional approval.
“We would be mired in litigation for who knows how long if someone were to go down that road,” Mr. Toomey said.