WASHINGTON (AP) – Treasury Secretary Steven Mnuchin on Friday denied that he was trying to limit options for President-elect Joe Biden to revive the pandemic-damaged economy by ending several emergency loan programs run by the Federal Reserve.
Mnuchin said the programs were not being used heavily and Congress could better use the money by reallocating it to small business grants and extended unemployment assistance.
“We’re not trying to hinder anything,” Mnuchin said in an interview with CNBC. “We don’t need this money to buy corporate bonds. We need this money to go and help the small businesses that are still closed. “
Mnuchin argued that the decision will allow Congress to reallocate $ 455 billion to other coronavirus programs.
After initially opposing the move, which will end the Fed’s business credit, municipal lending and Main Street lending programs as of December 31, the Fed has eased its stance.
The Fed released a letter from President Jerome Powell on Friday in which he said the central bank would comply with Mnuchin’s demand to shut down emergency lending programs and return unused money allocated by Congress to the Treasury.
Powell said in his letter to Mnuchin that he was “happy with everything we have accomplished together this year”.
Powell’s letter struck a more collegial tone than a one-sentence statement released Thursday by the Fed. The central bank had said it would have preferred all emergency facilities put in place during the pandemic to be maintained “to serve their import role as a safety net for our still strained and vulnerable economy.”
In his Friday letter, however, Powell said he agreed with Mnuchin’s assertion that the Fed could access much-needed funds from a separate Fed account to provide loans from. emergency.
But critics saw politics at stake.
“There is no doubt that the Trump administration and their congressional toads are actively trying to derail the US economy,” Sen. Sherrod Brown, D-Ohio, said in a prepared statement on Friday. “For months, they have refused to take the necessary steps to support workers, small businesses and restaurants. As a result, the only tool available to us has been these facilities. “
The American Chamber of Commerce also criticized this decision.
“A surprise end to the Federal Reserve’s emergency liquidity program, including the Main Street loan program, prematurely and unnecessarily ties the hands of the incoming administration and closes the door on important liquidity options for businesses when they need it most, ”said Neil Bradley, executive vice president of the chamber, in a prepared statement.
Private economists have also argued that Mnuchin’s decision to end emergency lending facilities poses an economic risk.
But after meeting with Mnuchin on Friday, Senate Majority Leader Mitch McConnell said he supported Mnuchin’s decision.
“There is obvious good use for these hundreds of billions of dollars in already allocated but unused funds,” McConnell said in a statement.
The future of municipal and Main Street loan programs took on greater significance with the victory of President-elect Joe Biden. Many progressive economists have argued that a Democrat-run treasury could help the Fed take more risk and make more loans to small and medium-sized businesses and cash-strapped cities under these programs. It would at least provide a way for the Biden administration to deliver stimulus without going through Congress.
None of these programs have so far lived up to their potential, with the municipal loan program providing only one loan, while the Main Street program has provided loans totaling around $ 4 billion to about 400 companies.
