Feds cut off virus relief emergency lending programs

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

Mnuchin is focused, the official said, on additional paycheck aid to idled workers, unemployment compensation and grants to help businesses that have been struggling amid COVID shutdowns, as many firms can not take on more debt.

Treasury Secretary Steven Mnuchin said he will not extend a handful of the emergency lending programs the Federal Reserve implemented earlier this year to buoy the economy amid the coronavirus pandemic.

Mr Mnuchin said that the goal of his announcement was not to pit the Treasury against the Fed, and that he was merely carrying out the law prescribed by the Cares Act.

"Congress should repurpose this money toward the kinds of urgent, important, and targeted relief measures" Republicans have been advocating, McConnell said, without mentioning any of the initiatives Democrats have been seeking in new legislation.

"The economy has responded very strongly, but there are still areas of the economy that need more support", Mnuchin said in an interview. "For months, they have refused to take the steps necessary to support workers, small businesses and restaurants".

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

Mr. Mnuchin played down that concern Friday and noted that the central bank will remain capable of supporting credit markets to the tune of some $800 billion using existing funds.

The U.S. Treasury's decision not to extend the Federal Reserve's emergency lending facilities past their year-end expiry is disappointing, though it doesn't necessarily mean the central bank needs to add to monetary stimulus when it meets next month, Chicago Fed President Charles Evans said.


Critics pounce: The Fed issued a statement late Thursday expressing its criticism of Mnuchin's decision. "Because they want to impede the ability of the administration to have everything available to them?"

Treasury Secretary Steven Mnuchin denied on Friday that he is attempting to limit President-elect Joe Biden's options for reviving the pandemic-damaged economy by ending several emergency loan programs being run by the Federal Reserve.

Before the election, Mr. Mnuchin led talks for Republicans in discussing a roughly $2 trillion package with Mrs. Pelosi.

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.

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. He called on House Democrats to join with Republicans in freeing up $138 billion for the Paycheck Protection Program, which could help small businesses keep staff on payrolls. That would provide at least one avenue for the Biden administration to provide stimulus without going through Congress.

The Fed's intervention into corporate bond markets was particularly effective, staving off a massive wave of bankruptcies.

The central bank 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". It isn't clear how or whether the Treasury Department's decision not to use the money Congress created in March would push lawmakers closer to a deal.

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

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