Treasury nominee Yellen warns of 'self-reinforcing' US downturn, vows to aid needy

President-elect Joe Biden's treasury secretary nominee Janet Yellen said on Tuesday the United States is experiencing a historic crisis due to the coronavirus pandemic and its economic fallout that requires urgent action to avert a "self-reinforcing" downturn.

Yellen, who previously served as US Federal Reserve Chair, spoke at an event in Delaware where Biden formally introduced his top economic policy advisers as he prepares to take office on Jan. 20 amid a battered economy and large-scale job losses.

"It's an American tragedy and it's essential that we move with urgency. Inaction will produce a self-reinforcing downturn, causing yet more devastation," Yellen said.

Yellen said the pandemic has disproportionately impacted the most needy Americans. Yellen said it is important to make sure the economic recovery leaves out no one as she pledged to "find collective purpose to control the pandemic and build our economy back better than before."

Earlier on Tuesday, outgoing Treasury Secretary Steven Mnuchin urged the US Senate to support $300 billion in new grants to small businesses to keep them from failing amid the intensifying public health crisis.

"These businesses cannot wait two or three months" for aid, Mnuchin said.

Mnuchin defended his action to end some Fed lending programs, a move that will limit Yellen's options in backstopping credit markets if she is confirmed to the post by the Senate after being nominated by Biden. Mnuchin said his action was not an "economic decision" but one based on the aid law passed by Congress.

Relief Proposal

Meanwhile, deadlocked negotiations over a new coronavirus economic aid package picked up some picked up momentum, as a bipartisan group of lawmakers floated a $908 billion relief proposal.

Senate Majority Leader Mitch McConnell also said he was circulating among his fellow Republicans the outlines of relief legislation that President Donald Trump would be willing to sign into law during his remaining weeks in office.

"I think we all know that after the first of the year there's likely to be a discussion about some additional package of some size," proposed by the new Biden administration, McConnell said.

It remains unclear whether Yellen would be the main negotiator for future coronavirus aid, a role that Mnuchin played this year for Trump's administration in talks with House of Representatives Speaker Nancy Pelosi.

Yellen and other Biden advisers have expressed support for government stimulus to maximize employment, reduce economic inequality and help women and minorities, who have been hurt disproportionately by the economic downturn.

"I pledge as treasury secretary to work every day towards rebuilding their dream for all Americans," Yellen said. "To the American people, we will be an institution that wakes up every morning thinking about you, your jobs, your paychecks, your struggles, your hopes, your dignity and your limitless potential."