Powell Says Fed Actions Unlocked $2 Trillion to Support Economy
By Nick Timiraos
Federal Reserve Chairman Jerome Powell said the central bank's
actions to backstop a range of credit markets after the coronavirus
convulsed Wall Street this past spring had unlocked almost $2
trillion to support businesses, cities and states.
In testimony prepared for delivery at a congressional hearing
Tuesday, Mr. Powell said the Fed's unprecedented steps to stabilize
financial markets had largely succeeded in restoring the flow of
credit from private lenders.
Treasury Secretary Steven Mnuchin on Nov. 19 told Mr. Powell
that he would not grant extensions for five lending programs that
have backstopped markets for corporate and municipal debt and to
purchase loans made to small businesses and nonprofits when those
programs expire on Dec. 31.
Mr. Powell didn't elaborate in his testimony, released on Monday
afternoon, about the central bank's disagreement with Mr. Mnuchin's
decision. The Fed had earlier said it would have preferred the
lending programs had stayed open because the pandemic emergency
Mr. Mnuchin is slated to testify alongside Mr. Powell at
Tuesday's hearing and didn't address the conflict in his prepared
Mr. Mnuchin's decision to allow the programs to expire on Dec.
31 intensified a partisan divide over the Fed's lending activities,
which both parties supported as part of the $2 trillion stimulus
package known as the Cares Act approved in March.
Mr. Mnuchin says the programs are no longer needed because
markets have healed. Second, he says he lacks the authority to
extend the programs because he believes the Cares Act doesn't allow
for the programs to continue. Third, Mr. Mnuchin says the money
would be better spent on other relief measures for which Congress
can't agree on funding.
Earlier Monday, the Fed said it had extended through next March
four backstop lending programs that helped to stabilize short-term
funding markets when the coronavirus pandemic hit this past
The extensions were widely expected and don't apply to any of
the lending programs that Mr. Mnuchin declined to renew.
Mr. Mnuchin had indicated he would agree to extend four
programs, including the Paycheck Protection Program Liquidity
Facility, which made it more attractive for small banks to fund PPP
loans this past spring. The Fed agreed to extend that program on
The Fed also extended the Commercial Paper Funding Facility,
which backed a critical market for short-term corporate IOUs that
seized up this past March, and the Money Market Fund Liquidity
Facility, which had likewise curtailed potential runs on
money-market mutual funds.
The fourth program extended by the Fed is the Primary Dealer
Credit Facility, which allows Wall Street banks the ability to
pledge a broader range of collateral to the Fed.
Write to Nick Timiraos at firstname.lastname@example.org
(END) Dow Jones Newswires
November 30, 2020 16:59 ET (21:59 GMT)
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