Treasury Secretary Steven Mnuchin said Thursday he would not extend the majority of emergency lending programs run with the Federal Reserve, earning a rare public criticism from the Fed, which cited the country's fragile economy amid the worst COVID-19 spike since the start of the pandemic.
In letter to Federal Reserve Chair Jerome H. Powell, Mnuchin said several of the programs would come to a close at the end of the year, including the controversial Main Street lending program and municipal liquidity facility, which issue loans to struggling businesses and local governments, according to The Washington Post. Mnuchin also requested a 90-day extension for some of the programs that operate through the markets and asked that the unspent money allocated to the Fed under the Cares Act be reallocated by Congress. The Treasury Department cannot reallocate these funds alone, but has to have full agreement from the Fed to proceed.
This letter prompted a rare public statement from the Federal Reserve, showing the divide in the government when it comes to pandemic response. "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 agency said.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, confirmed to the Post just how rare these disagreements playing out in public is. "There have been disagreements in the past, but they're usually handled out of public sight," he said. "It's unusual. But then these are really unusual times."
Mnuchin's statement is being criticized also by Democrats accusing the Treasury Secretary of attempting to damage the economy ahead of President-elect Joe Biden taking office in January. "Secretary Mnuchin is removing critical support from a weak economy against the Federal Reserve's wishes. This is economic sabotage," Sen. Ron Wyden (Ore.) of the Senate Finance Committee, said in a statement, as per The Post. "Secretary Mnuchin is salting the earth in an attempt to inflict political pain on President-elect Biden."
Despite Mnuchin's attempts, the Federal Reserve has publicly indicated it has no plans to end these programs, with Powell reportedly saying earlier this week that the Fed was committed to using its tools "for as long as it takes until the job is well and truly done" and that "when the right time comes, and I don't think that time is yet or very soon, we will put those tools away."