US Treasury Secretary Steven Mnuchin has decided to pull the plug on emergency Federal Reserve lending programs drawing heavy criticism from the central bank, which argued the funding was necessary to support the economy as the pandemic rages on.
According to CNN, Mnuchin sent a letter to Fed Chairman Jerome Powell on Thursday and asked the central bank to return some $455 billion in unused funding for programs set to expire on December 31st. He added that Congress would then be able to use the money for other purposes as well.
This decision would force several federal programs intended to help businesses that have been struggling as the pandemic wreaks havoc on the US economy to end, including the $2 trillion set aside as part of the CARES act.
Mnuchin claimed the Fed programs “have clearly achieved their objective,” he wrote. “Markets responded positively, spreads tightened, and banks continued lending.”
The Fed responded with immediate criticism saying in a statement 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.”
Powell explained earlier this week that it was too soon to shut down the lending programs. “When the right time comes, and I don’t think that time is yet or very soon, we will put those tools away,” he said during an event on Tuesday.