Mnuchin seeks to end several Federal Reserve emergency lending programs

Mnuchin seeks to end several Federal Reserve emergency lending programs

However key provisions of that act - such as a program of loans and grants to small businesses as well as expanded unemployment payments - expired over the summer, raising fears that the United States will endure a new slowdown in growth as virus cases spike nationwide.

Democratic Representative James Clyburn of SC, chairman of the House Select Subcommittee on the Coronavirus Crisis, said the facilities that will no longer be able to purchase new assets beyond December were "part of a comprehensive set of tools Congress gave the Federal Reserve to combat the pandemic-related economic crisis".

In an interview with CNBC Friday morning, Mnuchin defended his actions, saying that it was "not a political issue".

"A surprise termination. prematurely and unnecessarily ties the hands of the incoming administration, and closes the door on important liquidity options for businesses at a time when they need them most", U.S. Chamber of Commerce Chief Policy Officer Neil Bradley said.

"Steve Mnuchin is removing critical support from a weak economy against the Federal Reserve's wishes", Wyden tweeted.

The programmes, particularly the "Main Street" and local government landing programmes, raised the prospect of trillions of dollars in central bank credit flooding into an economy that had been partially shut down in the spring because of the pandemic.

"While the backstop measure have been little used so far, the deteriorating health and economic backdrop could shine a bright light on the Fed's diminished recession-fighting arsenal and prompt an adverse market reaction", said Gregory Daco, chief US economist at Oxford Economics.

Mnuchin said the programs are no longer needed, but the move goes against the Fed's desire to keep them going, according to a statement from the central bank, in a rare show of public disagreement between the two government agencies.

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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.

Mnuchin said that he is requesting that the Fed return to Treasury the unused funds appropriated by Congress for operation of the programs.

Some Republicans in Congress feel it is time, however, for the Fed to retrench, even with coronavirus infections at record levels and deployment of a vaccine likely months off.

The future of the Main Street and Municipal Lending programs has taken on greater importance with President-elect Joe Biden's victory.

"When the right time comes, and I don't think that time is yet, or very soon, we'll put those tools away", he said in an online discussion with a San Francisco-based business group.

"We only have $25 billion in loans outstanding".

A senior Democratic aide told Reuters there had been a mid-afternoon meeting on Thursday among congressional aides that discussed coronavirus relief and efforts to pass a $1.4 trillion bill to keep government agencies operating beyond December 11 when current funding expires. Pat Toomey of Pennsylvania supported Mnuchin's move.

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.

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