(PresidentialWire.com)- The Federal Reserve is not happy after Treasury Secretary Steven Mnuchin notified the central bank that funding for emergency lending programs has been pulled.
Mnuchin sent a letter to Jerome Powell, the Fed chairman, on Thursday asking them to return almost $455 billion in funding for lending programs that are set to expire on December 31. This funding, which was allocated as part of the CARES Act passed in March, has not been used yet.
In his letter, Mnuchin said this funding could be used by Congress for other necessary purposes.
Some of the programs that this will affect are lending programs that were designed to aid businesses that have experienced economic troubles during the pandemic.
Mnuchin wrote that these programs “have clearly achieved their objective. Markets responded positive, spreads tightened, and banks continued lending.”
The Federal Reserve typically stays out of political issues, but it chose not to do so this week. In a statement, 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.”
Earlier in the week, Powell had said he believed it was too early to stop these lending programs. At an event Tuesday, he said:
“When the right time comes, and I don’t think that time is yet or very soon, we will put those tools away.”
In a rare occurrence, this move by the Trump administration puts the White House in opposition to businesses in America.
The U.S. Chamber of Commerce said Mnuchin’s decision is one that “closes the door on important liquidity options for businesses at a time when they need them the most.” The organization also said it “unnecessarily ties the hands of the incoming administration.”
Businesses “need the government’s full support by providing the resources necessary for broad-based economic recovery,” Neil Bradley, the chamber’s executive vice president and chief policy officer, said in the statement.
One particular program that Bradley is concerned about is the Main Street Lending program. It was created to support both small- and medium-sized businesses as well as nonprofits that were doing well financially before the outbreak of the pandemic.
Bradley went further, saying the Chamber urges “these programs to be extended for the foreseeable future and call[s] on Congress to pass additional pandemic relief targeted at the American businesses, workers and industries that continue to suffer.”
Plenty of people backed Mnuchin’s move, though. Republican Senator Mike Crapo, who serves as the chairman of the U.S. Senate Committee on Banking, fully backed the move.
Crapo said returning the money that is unused “allows those funds to be re-appropriated for other uses, such as reducing our national debt, or providing additional targeted relief to sectors of the economy most in need.”
Some people have even questioned whether the Treasury Department can, indeed, recall money that it has already committed. It’s something that is sure to play out in the public eye over the next few weeks.
