The Trump administration plans to pull the plug on five loan programs that supported the economy during the coronavirus crisis — prompting a rare objection from the Federal Reserve. Treasury
The Trump administration plans to pull the plug on five loan programs that supported the economy during the coronavirus crisis — prompting a rare objection from the Federal Reserve.
Treasury Secretary Steven Mnuchin said his department won’t renew the emergency programs — which shored up the corporate bond market, municipal governments and struggling Main Street businesses — after they expire on Dec. 31.
Mnuchin also asked the Fed on Thursday to return all unused funding for the programs that came from the CARES Act stimulus bill, which he said would allow Congress to “re-appropriate” $455 billion for other coronavirus aid efforts.
But the usually staid central bank issued a blunt statement opposing the move, saying 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.”
Fed Chairman Jerome Powell and other bank honchos have argued in recent months that the economy needs more government support to fuel the fragile recovery from the massive economic downturn the pandemic has caused.
Powell said Tuesday that it was not yet time to wind down the emergency lending programs amid a nationwide surge in coronavirus infections, adding that the economy had “a long way to go” before it’s fully healed.
But Mnuchin argued that the facilities “have clearly achieved their objective” of reducing pressure on banks and improving access to credit. He said the Fed could seek approval to restart the programs if they’re needed again and expressed support for extending other programs that weren’t funded by the CARES Act.
The secretary also noted that “use of these facilities has been limited” — the municipal lending program has made just one loan and the Main Street lending initiative has loaned just about $4 billion to roughly 400 companies.
Sen. Pat Toomey, a Pennsylvania Republican who sits on the Senate Finance Committee, backed Mnuchin’s move, saying the programs were only meant as a short-term backstop.
“Congress’ intent was clear: These facilities were to be temporary, to provide liquidity and to cease operations by the end of 2020,” Toomey said in a statement.
But Rep. James Clyburn (D-South Carolina) said there was “no justification” for Mnuchin’s decision to cut off the programs on his way out of the White House.
“These programs are part of a comprehensive set of tools Congress gave the Federal Reserve to combat the pandemic-related economic crisis, and ending them in the midst of the crisis would undermine the economic recovery,” said Clyburn, who chairs the House’s Select Subcommittee on the Coronavirus Crisis.
With Post wires