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Treasury Requests Cessation of Several Fed Emergency Lending Programs and Return of Unused Funds; Senate Republicans Want Funds Repurposed for Pandemic Relief

  • November 20, 2020

Federal Reserve Building DC

Treasury Secretary Steven Mnuchin sent a letter to Federal Reserve Chairman Jay Powell yesterday requesting that five emergency lending facilities, including the Main Street Lending Program (MSLP), should not be extended past their scheduled expiration on December 31, 2020. Mnuchin also requested the Fed to return unused Treasury loan funds from the programs for Congress to re-appropriate. (Treasury letter and The Wall Street Journal, Nov. 19)

  • The MSLP has the capacity to issue up to $600 billion in loans, yet has only completed approximately 400 loans totaling $3.7 billion. (Washington Post, Oct, 30)

  • The programs were created as part of the CARES Act coronavirus aid package passed in March, which included funding for all the Fed’s emergency lending facilities. (The Hill, Nov. 19)

  • Mnuchin’s Nov. 19 letter stated, “I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds.”

  • The decision to end the lending facilities operations cannot be done unilaterally by Treasury; it would require cooperation by the Fed.

  • Chairman Powell issued a statement after markets closed yesterday that signaled disagreement. “The Federal Reserve 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.” (Wall Street Journal, and CNBC interview with Mnuchin, Nov. 20)

  • Powell also said on Nov. 17 that “I don’t think it is time yet, or very soon” to close down the programs and that the Fed was “using all of our tools to support the recovery for as long as it takes until the job is well and truly done.” (Reuters, Nov. 17)

  • If the Trump administration decides not to extend the Fed programs, the new administration’s Treasury Department could reestablish them after Biden is inaugurated on Jan. 20. (Wall Street Journal, Nov. 10)

Pandemic Relief Package

Capitol Building in Washington, DC side view

The request for the Fed to return unused funds from the lending programs comes as Congress remains at an impasse over costs for a pandemic relief package – the Trump administration offered a ceiling of $1.8 trillion, House Democrats passed a $2.2 trillion bill, and Senate Republicans favored a $500 billion measure. (Roundtable Weekly, Nov. 6)

  • Mnuchin and Senate Majority Leader Mitch McConnell (R-KY) today discussed a strategy for reviving talks between Republicans and Democrats over the stalled pandemic stimulus package. McConnell commented after the meeting about utilizing the unused Fed funds for a relief package, stating, “Congress should repurpose this money toward the kinds of urgent, important, and targeted relief measures that Republicans have been trying to pass for months, but which Democrats have repeatedly blocked with all-or-nothing demands.” (AP, Nov. 20)

  • President-elect Joe Biden on Monday urged Congress to advance the $2.2 trillion HEROES Act (H.R. 925) passed by the House. "Right now, Congress should come together and pass a COVID relief package like the HEROES Act that the House passed six months ago. Once we shut down the virus and deliver economic relief to workers and businesses, then we can start to build back better than before,” Biden said. (BGov, Nov. 16)

  • A report issued Wednesday by The Century Foundation shows that approximately 12 million Americans will lose unemployment insurance by the end of the year due to deadlines set by Congress early in the pandemic. (Washington Post and GlobeSt, "12M Workers Set to Lose Unemployment Benefits," Nov. 19)

Lawmakers also face the added pressure of passing a government funding bill to avoid a Dec. 11 partial shutdown. Congress may choose to merge some COVID-19 aid measures into a sweeping multi-trillion-dollar omnibus funding bill during the lame-duck session to address both issues – or attempt to pass separate bills.

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