WASHINGTON (Reuters) – US Treasury Secretary Stephen Mnuchin on Friday backed criticism of his decision to co-finance several coronavirus lending programs from the Federal Reserve on December 31, saying the next administration would still have $ 800 billion in bazookas. to quell the financial disaster in the market.
Mnuchin and another Treasury official insisted the move would not tie the hands of the next finance minister, and that company grants, more workers̵
Mnuchin told CNBC that the Treasury Department could quickly recapitalize the Federal Reserve’s programs if necessary, using some of the $ 84 billion that will remain in underused stabilization funds along with the Fed’s residual capital.
“As long as they need to be reactivated, we have over $ 800 billion in capacity, so I think that’s a pretty good bazooka,” Mnuchin said, adding that the markets need to be comfortable.
Federal Reserve Chairman Jerome Powell and Federal Reserve Bank of Chicago President Charles Evans have criticized the Treasury Department’s move, saying the programs – though little used – provide important support for the economy.
“I think the role of backup operator can be quite important for a long time, so it’s disappointing,” Evans told CNBC. “The spread of the virus is increasing and so there are risks of this … it would be good to have more support from all directions.”
Mnuchin said Congress had always planned lending programs to end on December 31 and sought to reassure markets that the Fed and the Treasury had many tools left to support the economy.
Mnuchin has denied the move was aimed at hampering the administration of Democrat President-elect Joe Biden, who will take office on January 20th.
“We are not trying to hinder anything,” Mnuchin said, adding that his department would work closely with the incoming administration “if things are certified.”
A senior Treasury official later told Reuters that up to $ 600 billion in cash could come from the diversion of Fed loans, unused aid money to airlines and defense companies, and $ 130 billion left over from The salary protection program.
Mnuchin said he and White House Chief of Staff Mark Meadows would speak to Republican congressional leaders later Friday and redouble their efforts to adopt additional incentives.
Senate Republican leader Mitch McConnell backed Mnuchin’s decision, as did some other Republican senators.
“Congress needs to redirect that money to the kinds of urgent, important, and targeted relief measures that Republicans have advocated,” McConnell said, without mentioning any of the initiatives Democrats are looking for in the new legislation.
It is unclear whether the inflow will make McConnell try to reduce the amount of coronavirus aid. He had previously advocated for a new spending package of about $ 500 billion, much less than the $ 2.1 trillion sought by Parliament Speaker Nancy Pelosi and the Democrats.
Report by Andrea Shalal David Lauder and Richard Cowan in Washington and Ann Sapphire in San Francisco, written by David Lauder; Edited by Chizu Nomiyama