By Nick Timiraos and Paul Kiernan 

WASHINGTON -- Treasury Secretary Steven Mnuchin defended his decision to allow a suite of emergency lending programs to expire at the end of the year against criticism from Democrats who said he had misinterpreted the law that enabled them.

At a House oversight hearing on Wednesday, Mr. Mnuchin said the $2 trillion Cares Act pandemic relief bill that Congress approved on a bipartisan basis in March didn't allow him to extend five emergency loan programs. The Fed and Treasury had established those programs with some of the $454 billion Congress had made available in the law.

"This was not a political decision. I was merely implementing the Cares Act," Mr. Mnuchin said, echoing comments he made on Tuesday before the Senate Banking Committee.

Mr. Mnuchin also said that the programs weren't needed anymore and that the money he hadn't approved for the programs, as well as other funds that wouldn't be needed, would be better used on another pandemic relief bill.

The Treasury Department's decision last month to allow loan backstops for corporate, municipal and other credit markets, as well as a program to support lending to small and midsize businesses and nonprofits, to expire on Dec. 31 touched off a partisan fight over whether and how the Biden administration should be allowed to use the programs.

"There is simply no justifiable reason to take these tools away," said Rep. Maxine Waters (D., Calif.), chairwoman of the House Financial Services Committee, before which Mr. Mnuchin and Federal Reserve Chairman Jerome Powell appeared.

She said Mr. Mnuchin's legal interpretation was flawed. Legislative proposals Republicans have made in recent months to rescind the lending programs wouldn't have been necessary if the Cares Act required the programs to end, Ms. Waters said. Democrats see the programs as a potential tool for the Biden administration to deliver more aid to hard-hit businesses, cities and states if Congress doesn't act to approve more spending.

The Fed issued a rare objection to Treasury's decision last month, saying it would have preferred to extend the programs until the pandemic crisis had passed.

"We were concerned that the public might misinterpret [the Treasury's decision] as the Fed stepping back and thinking our work is done," Mr. Powell said on Wednesday before the same committee. "We needed to send a signal to the public to that effect."

Mr. Powell declined to say if the Fed agreed with the Treasury's reading of the law. "We don't have a role in reading it," he said.

Write to Nick Timiraos at nick.timiraos@wsj.com and Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

December 02, 2020 12:19 ET (17:19 GMT)

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