US Treasury Sec. Mnuchin: We have plenty of firepower left

Daniel Fowler
November 20, 2020

Treasury Secretary Steven Mnuchin requested that the Federal Reserve return unused coronavirus stimulus funds.

The decision, which prompted a protest from the central bank, means the facilities aimed at the inner workings of the USA financial system will expire at the end of the year.

Stock futures fell Thursday evening after an open dispute emerged between the Federal Reserve and Treasury Secretary Steven Mnuchin over covid emergency funds aimed at helping municipalities and small businesses.

In its response, the Fed said that it "would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy".

"This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds".

Mnuchin requested that, out of an "abundance of caution", four other Fed lending programs be extended for 90 days.

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Pfizer, Moderna COVID vaccines could be ready for United States use in weeks
While he suffered side effects such as fatigue and pain from the injection, it was worth contributing to the process, he says. By October, both trials had tens of thousands of participants and infections in the USA soared.

"I think given where the economy is, and there is so much uncertainty still out there, it is prudent to keep those things open", Atlanta Fed President Raphael Bostic said in an interview on Bloomberg Television.

The announcement could signal potential trouble for the incoming Biden administration.

In a letter to Fed Chair Jerome Powell, Mnuchin described the lending facilities as successful, saying their joint efforts had boosted the ability of large corporations and state and local governments, as well as consumers, to borrow money at reasonable rates from private markets, without needing to turn to the central bank.

The programs, particularly the "Main Street" and local government landing programs, raised the prospect of trillions of dollars in central bank credit flooding into an economy that had been partially shut down in the spring because of the pandemic.

If the Fed returns the CARES Act funds, it would shut down the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Loan Facility, the Municipal Liquidity Facility and the Main Street Lending Program on December 31. The Municipal Liquidity Facility had only issued about $1.7 billion in loans. Possible picks include Fed Gov. Lael Brainard and Sen. Republicans and Democrats have been deadlocked for months on approval of another round of coronavirus support measures.

"The liquidity and capital position of USA banks ensure that they can fulfill the financing requirements of their customers", Mnuchin wrote in the letter. Mnuchin added he will be able to help USA businesses without a new COVID-relief bill if the Fed returns its relief funds. "These facilities, which were established in response to the unprecedented market turmoil caused by the COVID-19 pandemic earlier this year, have successfully achieved their intended goal". "How many times will Washington trip on its shoelaces in response to this crisis?"

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