The Trump administration plans to get a grip on five loan programs that helped the economy during the coronavirus crisis – leading to a rare objection from the Federal Reserve.
Treasury Secretary Steven Mnuchin said his department would not be renewed the emergency programs – which propped up the corporate bond market, local government and troubled business on Main Street – after it expires on December 31st.
Mnuchin also called on the Fed on Thursday to return any unused funds for the programs that came from the CARES Act stimulus plan. He said this would allow Congress to “reuse” $ 455 billion for other coronavirus relief efforts.
However, the normally quiet central bank made a blunt statement against the move, saying it would prefer the full range of emergency facilities put in place during the coronavirus pandemic to continue to play its vital role as a setback to our still strained and fragile economy.
Fed Chairman Jerome Powell and other bank honchos have argued for the past few months that the economy needs more government support to fuel the fragile recovery from the massive economic downturn caused by the pandemic.
Powell said Tuesday that it is not yet time to end emergency loan programs amid a spike in coronavirus infections nationwide, adding that the economy “has a long way to go” before it is fully healed .
However, Mnuchin argued that the institutions “clearly achieved their goal” of easing pressure on banks and improving access to credit. He said the Fed could seek approval to restart the programs if they are needed again, and expressed support for expanding other programs not funded by the CARES bill.
The secretary also noted that “the use of these facilities was limited” – the municipal loan program has only issued one loan and the Main Street Loan Initiative has loaned nearly 400 companies for nearly $ 4 billion.
Senator Pat Toomey, a Republican from Pennsylvania who sits on the Senate Finance Committee, supported Mnuchin’s move, saying the programs were intended only as a short-term setback.
“The intention of Congress was clear: These facilities should be temporary, provide liquidity and cease operations by the end of 2020,” Toomey said in a statement.
But Rep. James Clyburn (D-SC) said there was “no justification” for Mnuchin’s decision to abandon programs on his way out of the White House.
“These programs are part of a comprehensive set of tools that Congress has made available to the Federal Reserve to combat the pandemic-related economic crisis, and ending in mid-crisis would undermine economic recovery,” said Clyburn, chairman of the House Select subcommittee on the coronavirus crisis.
With postal wires