- Mnuchin asked the Fed to return unused funds in the emergency loan program.
- The Fed opposed this and stated that the plan played a vital role.
- U.S. Treasury Department asks the Fed to hand in unused stimulus funds
US Treasury Secretary Steven Mnuchin said that while the United States is waiting for the new coronavirus vaccine, lawmakers should redistribute unused stimulus funds, including funds he plans to withdraw from the Federal Reserve, to boost the US economy. The Fed opposed this and stated that the plan played a vital role.
“I hope that Congress will seriously consider reallocating $580 billion of funds that have already been appropriated that wouldn’t cost taxpayers an additional penny,” he said in a telephone interview on Thursday.
Earlier in the day, Sec. Mnuchin asked the Fed to return unused funds in the emergency loan program.
Sec. Mnuchin said in an interview that the economy was partially shut down this spring to fight the epidemic, and the US economy has since recovered “strongly.”
He mentioned that companies with healthy balance sheets can obtain capital through the private equity market.
But “for companies that are impacted by Covid — such as travel, entertainment and restaurants — they don’t need more debt, they need more PPP money, they need more grants,” he added.
He also said it is recommended that the funds be used for extended unemployment insurance.
“I believe it will have a significant impact for people whose businesses have been impacted by Covid they can then get through to the beginning of next year when we will have vaccines broadly distributed and fully reopen the economy,” Mnuchin said.
Treasury Department Asks the Fed to Hand in Unused Stimulus Funds
The White House took action on Thursday to end several emergency anti-epidemic loan programs of the Federal Reserve, which triggered a rare public conflict: the latter opposed the Treasury Department’s instructions.
In a letter to Federal Reserve Chairman Jerome Powell, Sec. Mnuchin sought to extend the Fed’s four emergency loan projects for 90 days, but required other projects to expire on December 31 as planned.
The Fed then returned the unused funds to the Treasury Department, allowing Congress to redistribute $455 billion and spend the money elsewhere.
The background of this rare conflict between the Treasury Department and the Federal Reserve is that the United States’ recovery is under increasing pressure from the coronavirus outbreak, and Republicans and Democrats have been deadlocked for months on the size and type of additional fiscal stimulus measures.
At the moment, when President-Elect Joe Biden is preparing to take office in January, the cancellation of some emergency plans may make the economy more vulnerable.
The yield on the 10-year U.S. Treasury bond fell about two basis points on Thursday to close at 0.83%.
US stock index futures gave up gains at the close, and the contract for the e-mini S&P 500 index fell by about 0.9% in early Asian trading on Friday.
The Bloomberg Dollar Spot Index rose 0.2% on Friday, after falling for five consecutive days.
The Fed’s emergency plans were created under the CARES Act, signed by President Trump earlier this year, and were originally scheduled to expire at the end of the year.
What Sec. Mnuchin seeks is the termination of corporate credit facilities, municipal liquidity facilities, public loan schemes, and term asset-backed securities loan facilities in the primary and secondary markets.
Sec. Mnuchin seeks to extend the 90-day extension of commercial paper financing instruments, primary dealer credit instruments, money market mutual fund liquidity instruments, and salary protection plan liquidity instruments.
The Fed’s plans were launched this spring with the COVID-19 epidemic, aiming to stabilize the market and provide credit to American companies. They helped quell the panic, but the usage rate was relatively low-the Fed said this shows that they have worked.