In a letter sent Thursday to Federal Reserve Chairman Jerome Powell, Mnuchin asked the central bank to return about $ 455 billion in unused funding for the programs due to expire December 31. He added that Congress would then be able to reallocate the funds for other purposes.
Mnuchin wrote that the Fed’s programs “clearly achieved their goals.” “Markets responded positively, margins tightened, and banks continued to lend.”
The move was immediately met with a backlash from US companies: The American Chamber of Commerce criticized the decision as closing the door to important liquidity options for companies at a time they most needed, “adding that it” unnecessarily tied their hands to the next administration. ”
The decision also puts the Treasury at direct disagreement with the Fed. The central bank, which is a typically apolitical institution, quickly responded to Mnuchin’s message in a statement saying it “prefers to continue the full suite of emergency facilities created during the coronavirus pandemic. To serve their important role. As a support for our economy, which is still suffering from stress and weakness. “
Mnuchin wrote in his letter that in the “unlikely event” that would need to recreate programs in the future, the Fed could seek approval from the Treasury secretary again.
Bradley pointed to the Main Street Lending Program, which is designed to support small and medium-sized businesses and nonprofits that were in a healthy financial position before the COVID-19 pandemic but now lack access to credit on reasonable terms.
Bradley said that the chamber urges “to extend these programs in the foreseeable future and call[s] Congress should pass an additional exemption from the epidemic targeting US companies, workers and industries that are still suffering. ”
Mnuchin’s move was supported by political allies. Republican Senator Mike Crabbo, chairman of the US Senate Banking Committee, praised the decision.
Crabbo said in a statement that returning unused funds “allows for the reallocation of these funds to other uses, such as reducing our national debt, or providing additional relief directed at the neediest sectors of the economy.”
Quinn analyst Jarrett Seaberg said Mnuchin’s decision “appears political.”
“This appears to be a political move by the Trump team to curb what President-elect Joe Biden can do next year to boost the economy, especially if Congress fails to pass a major stimulus,” he wrote in a research note on Thursday. But he added that there might be a way to continue the programs.
“The Treasury can refuse to commit to new capital, but we don’t see how it can call in capital that has already been committed,” Seiberg wrote. “These programs will remain open after December 31, which is positive for cash-strapped small businesses and local governments.”
Meanwhile, US lawmakers have failed to reach agreement on a second economic stimulus package, despite months of negotiations. Talks between Mnuchin and House Speaker Nancy Pelosi have stalled ahead of the elections earlier this month.
Democrats – including President-elect Joe Biden – have urged Republicans in the Senate to pass the House Democratic Champions Act, which has a total value of more than $ 2 trillion. But Republicans have made clear they are not prepared to spend much north of a trillion dollars.
Matt Egan contributed to this report.