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Munchin's Move Doesn't Sit Well With the Fed

Treasury, central bank differ on pandemic relief
By Newser Editors and Wire Services
Posted Nov 20, 2020 10:25 AM CST

(Newser) – The Treasury Department and the Federal Reserve are suddenly at odds over pandemic relief. On Thursday, Treasury Secretary Steven Mnuchin said he will not extend emergency loan programs set up with the Fed, an action that could hamper the ability of the incoming Biden administration to gain important economic support from the central bank to deal with the pandemic, per the AP. The decision drew a terse rebuke from the Fed. The central bank said 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.” But in a letter to Fed Chairman Jerome Powell, Mnuchin said that the Fed’s corporate credit, municipal lending, and Main Street Lending programs would not be renewed when they expire on Dec. 31.

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On Friday, Mnuchin downplayed the significance of the move, telling CNBC that "this was a very simple thing. We’re following the intent of Congress." He added that the plenty of other resources were available from which to draw. "Markets should be very comfortable that we have plenty of capacity left," he said. But an analysis at Axios lays out the implications if the worsening pandemic leads to a steeper economic backslide. "Treasury’s move all but ensures the economy and financial markets are flying solo: Congress hasn’t made progress on another aid package—and now the Fed has been hampered in offering support of its own," writes Courtenay Brown. (Read more Steven Mnuchin stories.)

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