Mnuchin Wants $580 Billion Injected Into Slowing US Economy

Jerome Powell right and Steven Mnuchin on Sept 24

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

Although the programmes were not used extensively, Fed officials felt their presence reassured financial markets and investors that credit would remain available to help businesses, local agencies and even nonprofits through the pandemic downturn.

Former Fed chair Janet Yellen, former deputy treasury secretary Sarah Bloom Raskin and TIAA chief executive Roger Ferguson are also said to be under consideration.

Asian shares staged a mixed open and futures for the S&P 500 fell 0.66 per cent, erasing the firmer lead from a strong Wall Street session overnight.

The dollar halted its week-long slide and the 10-year Treasury yield slipped to the lowest in 10 days to 0.818%.

He did however approve 90-day extensions for four programs including those related to major financial institutions known as primary dealers, commercial paper, which finances things like auto loans and home mortgages, as well as the Paycheck Protection Program of loans and grants to small businesses.

In his letter to Powell, Mnuchin said that in the "unlikely event" the lending programs 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.

"While portions of the economy are still severely impacted and in need of additional fiscal support, financial conditions have responded and the use of these facilities has been limited", Mnuchin said.

Mnuchin's decision added to market anxiety about broader economic growth as data shows the early fast recovery from a historic plunge in the US economy is fading, with more than 10 million who had jobs in January still out of work.

Neither program has lived up to its potential so far, with the Municipal Lending program making just one loan, while the Main Street program has made loans totaling around $4 billion to about 400 companies.

In an unusual action, the Fed issued a statement in response saying.

Democratic U.S. Representative James Clyburn, chairman of the House Select Committee on the Coronavirus Crisis, said there was "absolutely no justification" for Mnuchin to shelve the Fed's lending programs in the midst of the health crisis, and asked him to reverse the decision. Pat Toomey (R-Pa.), the likely chair of the Banking Committee if the GOP holds the Senate, who said the programs had served their objective.

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.



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