Published: Sun, November 22, 2020
Economy | By

Secy Mnuchin asks Fed to return $455B of COVID relief funds

Secy Mnuchin asks Fed to return $455B of COVID relief funds

US Treasury Secretary Steven Mnuchin said that while the United States is waiting for the new coronavirus vaccine, lawmakers should redistribute unused stimulus funds, including funds he plans to withdraw from the Federal Reserve, to boost the US economy.

At the U.S. Chamber of Commerce, chief policy officer Neil Bradley said the "surprise termination" of the programs would "prematurely and unnecessarily tie the hands of the incoming [Biden] administration, and closes the door on important liquidity options for businesses at a time when they need them most".

Mnuchin and Senate Majority Leader Mitch McConnell discussed the strategy Friday, in the first sign in weeks of possible movement on stimulus in the waning days of the Trump administration.

Mnuchin said that most of the money provided by Congress to the Federal Reserve Bank had not been spent and with the programs scheduled to cease operations at the end of the year, the money should be used instead to support small businesses and the unemployed.

The Fed released a letter Friday from Chairman Jerome Powell in which he said the central bank would comply with Mnuchin's request to close out the emergency loan programs and return the unused money appropriated by Congress to Treasury.

Mnuchin said Congress had always intended for the lending programs to end on Dec 31, and sought to reassure markets that the Fed and Treasury had many tools left to support the economy.

"Those are the people we need to help the next few months", Mnuchin said. "This follows a disturbing pattern of this administration putting petty grievances ahead of the health and safety of the American people".

APBut the programs funded by the CARES Act, including the facilities purchasing corporate bonds or providing loans to small and medium-sized businesses and state and local governments, will expire on December 31. The White House reportedly wants to push for a deal to better position the Republican Party in the January runoff election in Georgia, but this state election may, as the Presidential election, again serve as an incentive for both sides to make it look as though they are trying to work for a deal, whilst actually negotiating in bad faith.

Talks between the Republicans and Democrats on stimulus have been stalled for months.

"We're not trying to hinder anything", Mr. Mnuchin said in an interview Friday on CNBC.

McConnell has repeatedly said the starting point for talks should be the $500 billion measure backed by Senate Republicans, which would not provide direct $1,200 stimulus payments to individuals or aid to state and local governments. The Congressional Budget Office assumes that loans will be repaid, so failing to offer the loans in the first place does not yield any measurable savings.

McCarthy on Thursday complained to reporters that small businesses across the country are struggling, and facing further lock downs "with no help from Washington".

Democrats assailed Mnuchin for not extending the programs.

"While the backstop measure have been little used so far, the deteriorating health and economic backdrop could shine a bright light on the Fed's diminished recession-fighting arsenal and prompt an adverse market reaction", said Gregory Daco, chief USA economist at Oxford Economics. The Fed quickly issued a statement urging that "the full suite" of measures be maintained into 2021.

Credit markets for corporations and municipalities froze up earlier this year because of the crisis.

But "for companies that are impacted by Covid - such as travel, entertainment and restaurants - they don't need more debt, they need more PPP money, they need more grants", he added.

Like this: