Mnuchin rejects renewal of some Fed emergency loan programs
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Treasury Secretary Steven Mnuchin said Thursday he will not to extend several emergency loan programs set up with the Federal Reserve to support the economy in the midst of the coronavirus pandemic.
The decision drew a terse rebuke from the Fed.
The central bank said 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.”
Under law, the loan facilities required the support of the Treasury Department, which serves as a backstop for the initial losses the programs might incur.
Mnuchin said that he is requesting that the Fed return to Treasury the unused funds appropriated by Congress for operation of the programs.
He said this would allow Congress to re-appropriate $455 billion to other coronavirus programs. Republicans and Democrats have been deadlocked for months on approval of another round of coronavirus support measures.
In public remarks Tuesday, Powell made clear that he hoped that the loan programs would remain in effect for the foreseeable future.
“When the right time comes, and I don’t think that time is yet, or very soon, we’ll put those tools away,” he said in an online discussion with a San Francisco-based business group.
The future of the Main Street and Municipal Lending programs has taken on greater importance with President-Elect Joe Biden’s victory. Many progressive economists have argued that a Democratic-led Treasury could support the Fed taking on more risk and making more loans to small and mid-sized businesses and cash-strapped cities under these programs. That would provide at least one avenue for the Biden administration to provide stimulus without going through Congress.
Neither program has lived up to its potential so far, with the Municipal Lending program making just one loan, while the Main Street program has made loans totaling around $4 billion to about 400 companies.
Mnuchin’s move comes as the resurgent virus and slowing consumer spending, as well as colder weather that will shut down outdoor dining, will cause more small and mid-sized businesses to struggle with lower revenue and potentially close.
However, Republican Sen. Pat Toomey of Pennsylvania said in a statement that he approved of Mnuchin’s decision.
“Congress’ intent was clear: These facilities were to be temporary, to provide liquidity and to cease operations by the end of 2020,” Toomey, a member of the Senate Finance Committee, said. ”With liquidity restored, they should expire, as Congress intended and the law requires, by Dec. 31, 2020.”
COVID-19 Economy FAQs
Are states ready to roll out COVID-19 vaccines?
Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.
How is the service industry dealing with the return of coronavirus restrictions?
Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.
How are hospitals handling the nationwide surge in COVID-19 cases?
As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.
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