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“Markets should be very comfortable that we have plenty of capacity left,” Mnuchin said Friday on CNBC. He said he is “merely, simply following the intent of the law. It was not a decision on whether we needed these or didn’t need this.”
In a letter to Fed Chair Jerome Powell released on Thursday, Mnuchin sought a 90-day extension for four of the central bank’s emergency lending programs, while requesting that five other programs expire on schedule on Dec. 31. He said the Fed must return unused funds, allowing Congress to re-appropriate $455 billion and spend the money elsewhere.
The move sparked a rare public rift between Treasury and the Fed, when minutes later the central bank responded in a short statement, saying 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.”
Mnuchin also faced wider backlash, with some outside critics saying he was blocking a smooth transition with President-elect Joe Biden’s administration during a time of crisis.
“We’re not trying to hinder anything. We followed the law as we’re supposed to,” Mnuchin said. He added that he was with lawmakers in March when they wrote the Cares Act and that “the law was very clear” that the money would need to be returned on Dec. 31.
One possible reason for the Treasury Department to make the announcement this week is to avoid releasing market-sensitive decisions in December, when markets tend to be less liquid and more susceptible to swings as it absorbs new information.
Mnuchin, and his successor in the Biden administration, can still work quickly with the Fed to renew lending facilities that may be necessary. The agency has roughly $75 billion available to use toward Fed facilities that can be used without Congress’s approval.
In an interview with Bloomberg News on Wednesday, Mnuchin said that lawmakers should redirect the $580 billion in unspent stimulus funding, including money he’s pulling back from the Fed, to buoy the economy as the U.S. waits for a coronavirus vaccine.
Mnuchin also said he will discus fiscal stimulus efforts with Senate Majority Leader Mitch McConnell later Friday.
©2020 Bloomberg L.P.
