Treasury wants CARES Act programs to expire. Fed says not so fast

Cornelia Mascio
Novembre 20, 2020

"The Fed will be strongly committed to using all of our tools to support the economy for as long as it takes until the job is well and truly done", he said.

As the lone Democrat remaining on the Fed Board of Governors, she has often staked out minority positions that draw attention, such as opposing moves that ease rules governing big banks.

In an emailed statement, the Fed said 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".

In his letter to Mr Powell, Mr Mnuchin said that in the "unlikely event" the lending programmes were again needed, the Fed could request the Treasury to re-establish them with funding from the Treasury's own stability fund or with new money from Congress.

Under law, the loan facilities required the support of the Treasury Department, which serves as a backstop for the initial losses the programs might incur.

U.S. Treasury Secretary Steven Mnuchin briefs reporters on President Donald Trump's newly signed executive order imposing new sanctions on Iran, at the White House on June 24, 2019 in Washington, DC.

He said the unused money, along with unused Treasury funds allocated for airlines and businesses critical to national security, would allow lawmakers to use $455 billion for other purposes.

Some Republicans in Congress now felt it was time for the Fed to retrench, even with coronavirus infections at record levels and deployment of a vaccine likely months off. Powell said Tuesday that he didn't think it was time yet to end the programs. "I've made that decision, we've made that decision, and you'll hear that either just before or just after Thanksgiving", Biden said. That would provide at least one avenue for the Biden administration to provide stimulus without going through Congress.

As of Thursday, the Fed had made just US$5.4 billion in Main Street loans, according to data released on Thursday.

Mnuchin's move comes as the resurgent virus and slowing consumer spending, as well as colder weather that will shut down outdoor dining, will cause more small and mid-sized businesses to struggle with lower revenue and potentially close.

"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.

"I was personally involved in drafting the relevant part of the legislation and believe the Congressional intent ... was to have the authority to originate new loans or purchase new assets (either directly or indirectly) expire on December 31, 2020", the Treasury chief added.

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