Mnuchin defends closure of Fed emergency lending programs
WASHINGTON – Treasury Secretary Steven Mnuchin is defending his decision to shut down a number of Federal Reserve emergency loan programs at a time when coronavirus cases are on the rise.
Democrats weren’t convinced, however, saying Mnuchin’s actions were politically motivated and aimed at removing tools the Biden administration could use to support the economy.
Mnuchin argued that the programs he decided not to extend next year were underutilized. He said the $ 455 billion allocated to these Fed loan programs could be better spent elsewhere if Congress moved the funds to small business and unemployed assistance programs.
Democrats voiced their criticism on Tuesday as Mnuchin and Federal Reserve Chairman Jerome Powell testified at a Senate Banking Committee oversight hearing on the $ 2,000 billion CARES bill approved by Congress in last march.
Powell, as he had previously urged Congress to allow additional economic support, which lawmakers have struggled to do for months.
A bipartisan group of lawmakers on Tuesday pressured congressional leaders to agree to a compromise to end the deadlock before Congress adjourned for the holidays.
The group comprising Senate centrists such as Joe Manchin, DW.Va. -hit businesses like restaurants.
It would revive a special unemployment benefit, but at a reduced level of $ 300 per week, half of the amount enacted in March. State and local governments will receive $ 160 billion, and there is money for vaccines as well.
Senator Mark Warner, D-Va., And one of the lawmakers involved in the centrist effort, got Mnuchin and Powell to agree that the proposal under discussion was something that would help the economy.
Powell told the committee to view the additional relief as a “bridge” to shift the economy from the current situation with increasing cases of the virus, to a time when vaccines will be widely distributed. “
“We see the end. We just need a way to make it happen, ”Powell told lawmakers. In his opening testimony, Powell described the country’s economic outlook right now as “extraordinarily uncertain.”
Powell again pledged that the Fed will do everything possible to support an economic recovery.
As for the five loan programs that Mnuchin ended, he insisted that the CARES law which authorized the creation of the five loan programs did not give him the power to extend them beyond December 31.
While the Fed initially said after Mnuchin’s announcement on November 19 that it would have preferred the loan programs to be extended, Powell, during his appearance on Tuesday, was careful not to criticize Mnuchin, who was backed by Republican senators on the committee, including the banking committee. President Mike Crapo, R-Idaho.
But Democrats accused Mnuchin of blocking the Biden administration from giving the economy a much-needed boost.
“You seem to be trying to sabotage our economy by going out,” Senator Sherrod Brown, D-Ohio, told Mnuchin. He said there was “no legitimate justification” for Mnuchin’s action. He said Mnuchin was wrong in his interpretation of Congress’ intention, which was to continue to provide support.
The Treasury and the Fed announced Monday that four other loan programs used by the Fed would be extended until March. These facilities helped stabilize short-term funding markets when the coronavirus hit last spring, sending shock waves through the financial system.
The five programs that will be allowed to expire after Dec. 31 included safety nets for corporate and municipal debt and the purchase of loans for small businesses and nonprofits.
Countering Mnuchin’s statement that the programs were not being used, Democrats said the loan terms were too strict and should have been relaxed so more businesses could take advantage.
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