Treasury Secretary Steven Mnuchin (left) and Federal Reserve Chair Jerome Powell (right) have disagreed on whether emergency lending programs should be extended
Washington (AFP) - US Treasury Secretary Steven Mnuchin on Friday defended a decision to halt a series of emergency lending programs after Democratic lawmakers claimed Donald Trump’s administration was trying to sabotage the economy following his loss in the presidential election.
Mnuchin said he was following congressional intent in phasing out at year’s end Federal Reserve programs intended to help the US financial system weather the shock of the Covid-19 pandemic, adding that the funds unused by the central bank should be repurposed to other pandemic relief efforts.
But the move drew scathing criticism from congressional Democrats and skepticism from a major business group, which questioned the wisdom of reining in the central bank in the weeks before Democrat Joe Biden takes over following a contentious election Trump refuses to accept.
Executive Vice President at the US Chamber of Commerce Neil Bradley called the Treasury move a “surprise,” saying it “prematurely and unnecessarily ties the hands of the incoming administration, and closes the door on important liquidity options for businesses at a time when they need them most.”
Senator Jack Reed was among the Democratic legislators who went further, accusing the Trump administration of deliberately sabotaging the economy.
“Secretary Mnuchin knows pulling the plug on these economic support programs now will make it harder to resuscitate the economy,” Reed said.
“The incoming Biden administration will have to clean up President Trump’s economic mess.”
In an appearance on CNBC, Mnuchin said Congress was “very clear” in its intent about having the programs expire at the end of December and added that financial markets have steadied significantly compared with the turmoil when the programs were announced.
The treasury secretary had the day before notified Fed Chair Jerome Powell that programs targeting the corporate credit market, municipal lending and small and medium-enterprises through the Main Street Lending Program would not last beyond the end of 2020.
Mnuchin requested that the Fed return $455 billion in unused funds allocated for the program.
Minutes after the announcement, the Fed on Thursday night sent out its own statement, 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.”
Mnuchin brushed aside a question on whether the move was an attempt to tie the hands of the incoming Biden administration in the Friday interview.
“This is not a political issue,” Mnuchin said. “This is very simple, and really that the story is, let’s go reappropriate $500 billion.”
Trump has not conceded the election and is pushing state officials to overrule the will of voters, after his numerous attempts to claim voting irregularities were dismissed by courts or withdrawn by his attorneys.
Republican Senate Majority Leader Mitch McConnell praised Mnuchin’s plan as “fully aligned” with congressional intent.
He said the extra funds should go as “targeted relief measures that Republicans have been trying to pass for months, but which Democrats have repeatedly blocked with all-or-nothing demands.”
In a letter to Mnuchin on Friday, Powell said the central bank would send the money back, as requested.