Mnuchin defends move to end Treasury’s COVID-19 loan programs

 Mnuchin defends move to end Treasury’s COVID-19 loan programs

Treasury Secretary Steven Mnuchin defended his decision to wind down five emergency loan programs, even as the Federal Reserve and other critics warned it could remove an important support beam for the pandemic-battered economy.

In a Friday interview, Mnuchin insisted he was merely following Congress’s instructions by not renewing the credit facilities that shored up the corporate bond market, municipal governments and struggling Main Street businesses during the coronavirus crisis.

He revealed the decision in a Thursday letter to Fed chairman Jerome Powell that asked the central bank to return all unused funding for the programs from the CARES Act, which he said would let lawmakers to “re-appropriate” $455 billion for other coronavirus aid efforts.

“It was very clear that the congressional intent is that it expires on Dec. 31 of this year,” Mnuchin told CNBC. “That was merely simply following the intent of the law. It wasn’t a decision on whether we needed these or we didn’t need these.”

Mnuchin spoke up after the typically staid Fed 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.”

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. He and other Fed honchos have argued that the economy needs more government support to fuel the fragile recovery from the massive economic downturn the pandemic has caused.

Mnuchin’s announcement riled liberals and conservatives alike. Democratic lawmaker Sen. Sherrod Brown said “the Trump administration and their congressional toadies are actively trying to tank the US economy.” The right-leaning US Chamber of Commerce, meanwhile, said the move “prematurely and unnecessarily ties the hands” of President-elect Joe Biden.

“Even in the storied annals of Washington, this is a uniquely puerile and political maneuver,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading. “We believe the Biden administration will be able to restart any programs that sunset at the end of the year, which should provide some comfort, but the decision to allow expiration is simply nonsensical from a market stability perspective.”

Any perception that Mnuchin is playing political games with stimulus money will cause discomfort on Wall Street, whose honchos have emphasized that more federal funding is needed.

“Now we have this big debate, ‘Is it $2.2 trillion, $1.5 trillion?’ You gotta be kidding me!” JPMorgan Chase CEO Jamie Dimon exclaimed during an interview at a financial conference this week. “I mean, just split the baby and move on! This is childish behavior on the part of our politicians.”

But Dimon also went out of his way to praise the Treasury secretary minutes later, saying “I think Steven Mnuchin did one outstanding job there for a bunch of reasons.”

In his Thursday letter, 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.

He found at least one ally in Sen. Pat Toomey, a Pennsylvania Republican who sits on the Senate Finance Committee.

“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.

With Post wires

Noah Manskar Thornton McEnery

Leave a Reply

Your email address will not be published. Required fields are marked *