Treasury Secretary Steven Mnuchin speaks during a virtual Senate Banking Committee hearing. Photo: Daniel Acker/Bloomberg via Getty Images

One takeaway from Tuesday's Senate coronavirus bailout hearing: The Treasury Department and Federal Reserve both think the worst could be yet to come for America's economy.

Why it matters: Fed Chair Jerome Powell reiterated his belief that a full recovery may not come until there's a vaccine, and Treasury Secretary Steven Mnuchin said there's the risk of "permanent damage" if states delay reopening.

In the virtual hearing, the Senate Banking Committee pressed Powell and Mnuchin on whether the economic programs were enough to support businesses or localities that are in need.

  • Powell said the Fed would continue to adjust the terms, and possibly the eligibility, of its lending programs “as we learn more.” It’s already expanded eligibility for its medium-sized business and its state lending programs.
  • Mnuchin also said the Treasury was “fully prepared to take losses” on the money it is extending to backstop the Fed’s lending programs. That’s a shift from comments last month, when he said the U.S. would recover the money.

The big picture: Many of the Fed's coronavirus lending programs have yet to launch.

  • Powell said he expected all of the programs to be up and running by the first week of June.

One fiery moment: Sen. Elizabeth Warren pushed Mnuchin on whether the businesses receiving relief from certain programs would be required to keep workers on their payrolls.

  • "Different facilities have different requirements," Mnuchin said. He also added that there is a provision in the Main Street Lending Program that "we expect people to use their best efforts to support jobs."

Between the lines: Mnuchin was pressed on the eight-week period that businesses are required to spend Paycheck Protection Program funds. Small businesses want it extended, but that fix would need to come from Congressional legislation, not the Treasury Department.

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Democrats and the Trump administration remain "miles apart" on negotiations over a coronavirus stimulus deal, House Speaker Nancy Pelosi (D-Calif.) said on Wednesday.

The latest: Around 3 p.m., Pelosi and Senate Minority Leader Chuck Schumer (D-N.Y.) issued a statement saying that Treasury Secretary Steven Mnuchin had initiated a phone call and made clear that the White House is "not budging from their position concerning the size and scope of a legislative package."

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Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 5 a.m. ET: 20,936,041 — Total deaths: 759,844— Total recoveries: 13,006,841Map.
  2. U.S.: Total confirmed cases as of 5 a.m. ET: 5,254,171 — Total deaths: 167,242 — Total recoveries: 1,774,648 — Total tests: 64,831,306Map.
  3. Politics: House Democrats to investigate scientist leading vaccine projectMcConnell says Senate won't vote until Sept. 8 unless stimulus deal is reached.
  4. 2020: Biden calls for three-month national mask mandateBiden and Harris to receive briefings four times a week.
  5. States: Georgia Gov. Brian Kemp to drop lawsuit over Atlanta's mask mandate.
  6. Public health: Fauci's guidance on pre-vaccine treatments.

The pandemic is hitting city budgets harder than the Great Recession

Data: National League of Cities; Chart: Axios Visuals

With tax revenue in free-fall and expenditures dramatically rising, the coronavirus pandemic is on pace to hit cities' finances even harder than the Great Recession.

Why it matters: Almost all cities are required to balance their budgets, and at this rate they'll have no choice but to cut more services, layoff or furlough more workers and freeze capital projects.