Has a war begun brewing between the Federal Reserve and outgoing Treasury Secretary Steve Mnuchin? In the waning days of the Trump administration, Mnuchin wants to clean up the accounts used to provide non-appropriated COVID-19 relief to businesses. Yesterday, Mnuchin announced that certain Fed-related programs could maintain their funds, but that several programs would be closed out — and directed the Fed to return the money.
Not so fast, the Fed responded in a rare public rebuke. They see risks developing across the board and want to maintain those relief facilities into the new year. And they may not have to buckle under, either:
In a letter to Fed Chair Jerome H. Powell, Mnuchin not only said that several of the programs would wind down at the end of the year, but he also requested that unspent money allocated to the Fed under the first stimulus effort, the Cares Act, be reallocated by Congress. However, the Treasury Department does not have the sole authority to reallocate the funds and would need to secure Fed agreement.
The letter triggered a rare public statement from the Fed on Thursday evening.
“The Federal Reserve 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,” the central bank said.
The Treasury Department’s move would end most of the Fed’s emergency lending facilities, as well as two highly-scrutinized programs — the Main Street lending program and the municipal liquidity facility — which issue loans to struggling businesses and local governments. Mnuchin also requested a 90-day extension for a few of the programs that operate through the markets.