Mnuchin, McConnell Want to Tap Unused Fed Funds for Stimulus

Secy Mnuchin asks Fed to return $455B of COVID relief funds

The central bank had said it would have preferred all the emergency facilities set up during the pandemic be maintained "to serve their import role as a backstop for our still-strained and vulnerable economy". Weinberg said. "These are the lifeboats for the economy, these are the places for companies to go when there is no place else to go, whether they are small business or medium-sized businesses, not the big ones that can go to the capital markets, but the little ones".

Underscoring the success of the programmes the Fed established, Mr Mnuchin argued that some can be allowed to stop buying new assets at the end of next month.

But the programs funded by the CARES Act, including the facilities purchasing corporate bonds or providing loans to small and medium-sized businesses and state and local governments, will expire on December 31.

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"A surprise termination of the Federal Reserve's emergency liquidity program, including the Main Street Lending Program, 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", said Neil Bradley, the chamber's executive vice-president, in a prepared statement.

A senior Treasury official later told Reuters that up to US$600 billion in cash would be available from repurposing Fed loan funds, unused money from aid for airlines and defense firms as well as US$130 billion left over from the Paycheck Protection Program.

Private economists also argued that Mnuchin's decision to end the emergency loan facilities represents an economic risk. Mr. Mnuchin said on CNBC that they hoped "to come up with a plan to sit down with [House Speaker Nancy] Pelosi and [Senate Minority Leader Chuck] Schumer and try to get a targeted bill done for the people that really need it".

The future of the Main Street and Municipal Lending programs has taken on greater importance with President-elect Joe Biden's victory. That would provide at least one avenue for the Biden administration to provide stimulus without going through Congress.

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"With liquidity restored", the programs should expire, "as Congress intended and the law requires", Toomey said in a statement.

Treasury Secretary Steven Mnuchin on Friday defended his decision to terminate more than $450 billion worth of emergency lending programs that extended credit to businesses and local governments amid the coronavirus crisis.

The decision drew a terse rebuke from the Fed. But policymakers at the Fed and Treasury agree that their presence helped to restore liquidity and instill confidence in financial markets severely rattled in the early days of the pandemic, allowing businesses and municipalities to continue to borrow.

Uncertainties regarding United States politics and the Fed's emergency lending facilities, coupled with further lockdown concerns weighed.

In a research note, Gregory Daco, chief USA economist at Oxford Economics, said the Fed's emergency lending facilities "have been little-used, but their existence has been key in ensuring a credible safeguard against financial market stress".

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.

Senate Finance Committee Ranking Member Ron Wyden, D-Ore., however, called the move "sabotage".

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