By Nick Timiraos and Paul Kiernan
WASHINGTON -- President-elect Joe Biden's transition team
sharply criticized Treasury Secretary Steven Mnuchin's decision to
allow funding for several emergency Federal Reserve lending
programs to expire, escalating a political fight.
"The Treasury Department's attempt to prematurely end support
that could be used for small businesses across the country when
they are facing the prospect of new shutdowns is deeply
irresponsible," said Kate Bedingfield, a Biden spokeswoman, in a
The Treasury Department announced Thursday that it would allow
the funding to expire after Dec. 31. Mr. Mnuchin also asked Fed
Chairman Jerome Powell to refund more than $70 billion in capital
that had already been transferred from the Treasury to cover losses
in Fed loan programs.
That prompted a rare statement of objection from the Fed, which
wants to maintain the lending programs as a backstop in the face of
the coronavirus pandemic.
While the Fed may not have had any legal obligation to refund
the Treasury its investment, Mr. Powell said in a letter Friday to
Mr. Mnuchin that the central bank would "work out arrangements with
you for returning the unused portions of the funds."
Mr. Mnuchin earlier in the day defended his decision not to
renew five Fed lending programs to extend credit to businesses,
cities and states beginning next year. He said the programs were no
longer necessary and that he lacked the legal authority to extend
He also denied the action was intended to impede the incoming
administration. "We're not trying to hinder anything," Mr. Mnuchin
said in an interview Friday on CNBC.
Mr. Mnuchin and congressional Republicans said the unused
Treasury funds for Fed lending programs -- around $429 billion --
should be used to provide grants to businesses and unemployed
workers instead. "We don't need to buy more corporate bonds," Mr.
President Trump was informed about Mr. Mnuchin's policy decision
late Thursday afternoon in a brief phone call but wasn't otherwise
involved in the process, according to a person familiar with the
Negotiations between the Trump administration, Senate
Republicans and House Democrats over the terms of additional
economic relief have been deadlocked for months.
Congressional Democrats strongly objected to Mr. Mnuchin's
decision, suggesting it isn't clear how, or whether, the Treasury
Department's decision not to use the money Congress created in
March would push lawmakers closer to a deal.
House Speaker Nancy Pelosi (D., Calif.) said Mr. Mnuchin's
decision would impede the Biden administration's flexibility to
shore up the economy and markets.
Republicans leaders in the Senate applauded Mr. Mnuchin's
decision and said it could help rekindle stimulus talks during the
so-called lame-duck session of Congress.
"Congress should repurpose this money toward...urgent,
important, and targeted relief measures," Senate Majority Leader
Mitch McConnell (R., Ky.) said in a statement Friday.
Staff for the top four leaders in Congress -- Mr. McConnell,
Mrs. Pelosi, Sen. Chuck Schumer (D., N.Y.), and House Minority
Leader Kevin McCarthy (R., Calif.) -- met on Thursday afternoon to
discuss an agreement on spending. As part of that discussion, the
staff also discussed possible coronavirus aid, according to
Mr. Mnuchin spoke with White House chief of staff Mark Meadows
and Mr. McConnell on Friday about another stimulus package.
Mr. Mnuchin's decision, expressed Thursday in a letter to the
Fed, was criticized by some market analysts, who said the
Treasury's action -- and the public dispute with the Fed -- could
make markets more volatile.
"If the letter is a negotiating ploy to add urgency to lame-duck
negotiations, the pandemic's roar through the upper U.S. suggests
artificial urgency isn't needed," said Jim Vogel, an interest-rate
strategist at FHN Financial.
Congress approved a $2 trillion relief package in March that
provided $454 billion to the Treasury to use to cover losses in Fed
lending programs. The Treasury argued that the authority for the
Fed to make new loans expired at year-end. Other lawyers in
Congress and at the Fed believed the Treasury could have approved
an extension of existing loan programs, even though the law
prevented the Treasury from funding new Fed lending vehicles.
Mr. Mnuchin played down any public dispute with the Fed on
Friday. "All of the things being equal, the Fed always likes to
keep their tools outstanding," he said.
Before the election, Mr. Mnuchin led talks for Republicans in
discussing a roughly $2 trillion package with Mrs. Pelosi. But
Senate Republicans have repeatedly expressed opposition to a deal
as large as the one Mr. Mnuchin discussed with Democrats. Mr.
McConnell, who has taken the lead in negotiating on the GOP's
behalf, has instead pointed to a roughly $650 billion Senate
measure as the appropriate fiscal response.
The latest effort to pass a coronavirus-relief bill comes as
lawmakers are also working to craft must-pass spending legislation
before the end of Dec. 11. Lawmakers and aides see attaching
coronavirus-relief measures to the spending bills as the most
likely avenue for providing more aid this year.
--Andrew Duehren contributed to this article.
Write to Nick Timiraos at email@example.com and Paul Kiernan
(END) Dow Jones Newswires
November 20, 2020 18:16 ET (23:16 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.