Wednesday, 25 November, 2020

Steven Mnuchin rejects renewal of some Fed emergency loan programs

Secy Mnuchin asks Fed to return $455B of COVID relief funds Steven Mnuchin rejects renewal of some Fed emergency loan programs
Ginger Lawrence | 22 November, 2020, 07:51

Minutes later, the Fed issued a statement urging that "the full suite" of measures be maintained into 2021.

The Fed released a letter Friday from Chairman Jerome Powell in which he said the central bank would comply with Mnuchin's request to close out the emergency loan programs and return the unused money appropriated by Congress to Treasury. There are 107 active infections in the territory, which just confirmed its first case a little more than two weeks ago.

Mnuchin extended four of the programs, including those that support money markets and short-term borrowing markets for companies, for 90 days beyond the end of the year.

"A surprise termination of the Federal Reserve's emergency liquidity program, including the Main Street Lending Program, prematurely and unnecessarily ties the hands of the incoming administration and closes the door on important liquidity options for businesses at a time when they need them most", said Neil Bradley, the chamber's executive vice-president, in a prepared statement.

"We need all the arms of government working together and instead we're seeing a complete breakdown".

"The strains from COVID are hitting medical systems in the Midwest and it is nearly certain that mobility is down and will likely remain" that way through the holiday shopping season, said Boris Schlossberg, managing director at BK Asset Management, in a note.

Republicans in Congress have used that to argue that they are no longer needed and the billions of dollars sent to the central bank to set them up can be deployed better elsewhere. He added, "markets should be very comfortable that we have plenty of capacity left", indicating that there are $750 billon of funds to help the markets should problems arise again. "The good news is, the markets have recovered significantly". "We're following the intent of Congress", Mnuchin said on "Squawk on the Street".

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The gathering also comes at a time of deep political tension within the United States , with a doubt over whether or not Trump will address the attendees.

"It appears the Fed may be reading the legislation differently", given its statement on Thursday evening, said Mr Michael Feroli, chief United States economist at JPMorgan Chase & Co.

Federal Reserve Bank of Dallas president Robert Kaplan said on Bloomberg TV on Thursday that there is the potential for gross domestic product (GDP) to shrink this quarter and even the next. Mr. Mnuchin said on CNBC that they hoped "to come up with a plan to sit down with [House Speaker Nancy] Pelosi and [Senate Minority Leader Chuck] Schumer and try to get a targeted bill done for the people that really need it".

After a week in which stock investors reverted to old trends of buying large-capitalization, technology-related stocks on the back of fresh coronavirus restrictions, the market on Friday focused on an apparent rift between the Treasury Department and the Federal Reserve as another possible source of friction.

"Given where the economy is - and there's so much uncertainty still out there - it's prudent to keep those things open so that when people, if they do have stress, they can draw upon it". They helped to unfreeze that market even before the effort was up and running, and businesses have since logged record amounts of debt issuance.

During a separate interview on CNBC Friday, Chicago Federal Reserve President Charles Evans described Treasury ending the Fed's emergency lending funding as "disappointing."

He has repeatedly praised the Cares Act for what he has described as essential support amid the historic collapse in GDP in the spring.

"Congress should repurpose this money toward the kinds of urgent, important, and targeted relief measures" Republicans have been advocating, McConnell said, without mentioning any of the initiatives Democrats have been seeking in new legislation.