Mnuchin, McConnell Discuss 'Targeted' Aid Bill

Cornelia Mascio
Novembre 22, 2020

US Treasury Secretary Steven Mnuchin's decision to de-fund several Federal Reserve coronavirus lending programs on Dec 31 is "deeply irresponsible", President-elect Joe Biden's transition team said on Friday, and threatens to undermine the country's fragile economic state.

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. He argued it should be directed at "urgent, important, and targeted relief measures" that Republicans have sought for months over repeated Democratic objections they are not enough to stem the hardship among people and many sectors of the economy.

"I believe it will have a significant impact for people whose businesses have been impacted by Covid they can then get through to the beginning of next year when we will have vaccines broadly distributed and fully reopen the economy", Mnuchin said. "For months, they have refused to take the steps necessary to support workers, small businesses and restaurants".

While Mnuchin says the programs could be reinstated later if needed, the move to claw back the funding now could make it more hard for the next administration set up by President-elect Joe Biden to bring them back quickly. "We need this money to go help small businesses that are still closed or hurt, no fault of their own", he told CNBC.

Mnuchin defended the decision to let the programs expire at year end and noted the Treasury could reactivate them.

"With the Covid-19 crisis worsening and activity slowing in the absence of fiscal aid, the decision to curtail the Fed's firepower could unsettle markets and exacerbate economic stress", he said.

The official told Reuters in a phone interview that the Fed facilities will not be dissolved, and can be quickly recapitalized to a lending capacity of $750 billion to $800 billion with funds from Treasury's Depression-era Exchange Stabilization Fund. "Because they want to impede the ability of the administration to have everything available to them?"

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.

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.

Repurposing the funds may not be easy, however, given the rules of congressional budgeting.

On Thursday, aides to Pelosi, McConnell, Schumer and House Minority Leader Kevin McCarthy met to discuss a separate $1.4 trillion funding bill that's needed to keep the federal government open after December 11. "I think that's very important", Dallas Fed President Robert Kaplan said earlier on Thursday in an interview on Bloomberg TV, referring to the section of the Federal Reserve Act providing the authority for emergency lending.

Democrats assailed Mnuchin for not extending the programs. That would provide at least one avenue for the Biden administration to provide stimulus without going through Congress.

The 2020 Cares Act economic rescue package passed in March appropriated cash for the government to finance Fed backstops for everything from municipal to corporate finance after markets buckled when the pandemic hit. "We don't need this money to buy corporate bonds".

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