As coronavirus cases continue to soar across the United States, Treasury Secretary Steven Mnuchin said Thursday that he would not extend a handful of Federal Reserve emergency pandemic programs—largely credited with cushioning the stock market during a volatile sell-off in the early days of the pandemic—and asked for the central bank to return unused CARES Act funds to Treasury so Congress can reappropriate the money.
The programs that will expire are facilities related to corporate credit purchases, municipal bond purchases, and the Main Street Lending program, which was intended to prop up small- and mid-sized businesses not eligible for the popular Paycheck Protection Program.
Those facilities were set up under the $2.2 trillion CARES Act in March, which allocated nearly half a billion dollars from the Treasury Department to backstop the Fed’s emergency loans and debt purchases.
The Federal Reserve, said in a statement Thursday that 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.”
Under Chairman Jerome Powell, the central bank has consistently pledged to “use its full range of tools” to support the U.S. economy for as long as necessary during the pandemic, and Powell noted Tuesday that he didn’t believe that time is “yet, or very soon.”
Mnuchin also requested that the Fed return CARES Act funds amounting to $455 billion so they can be reallocated by Congress—the New York Times noted that this could make it difficult for the Treasury Secretary under President-elect Biden to restart the programs in 2021.
“The Federal Reserve facilities supported by the Treasury’s contribution of CARES Act funds have clearly achieved their objective,” Mnuchin wrote in a letter Thursday to Powell. “While portions of the economy are still severely impacted and in need of additional fiscal support, financial conditions have responded and the use of these facilities have been limited.”
Ernie Tedeschi, an economist at Evercore ISI and a former Treasury Department economist during the Obama administration, noted on Twitter on Thursday that even though some of the Fed programs might not have been widely used, eliminating them now, while coronavirus cases continue to surge to record levels, is “adding on even more risk.”
The Fed lending and bond-buying facilities aren’t the only pandemic relief programs that will expire at year’s end. Unless Congress acts to pass more economic relief legislation, two key pandemic unemployment programs will lapse on December 26, leaving 12 million unemployed workers without benefits. A national moratorium on evictions will end on December 31, as will forbearance on federal student loan payments. Withdrawals up to $100,000 (with a valid reason related to Covid-19) from certain retirement accounts will no longer be free, and a handful of pandemic tax credits for businesses will also disappear from the books.