On November 19, Treasury Secretary Steven Mnuchin announced that he would sunset five of the Federal Reserve’s emergency lending programs at year-end: the Primary Market Corporate Credit Facility, Secondary Market CCF, Municipal Liquidity Facility, Main Street Lending Program, and Term Asset-Backed Securities Loan Facility (TALF). His decision, expressed in a letter to Fed Chairman Jerome Powell, is based on the claim that the Coronavirus Aid, Relief, and Economic Security (CARES) Act requires that the programs be ended on December 31, 2020.
However, he also thinks that the five emergency lending programs, established under Section 13(3) of the Federal Reserve Act, are no longer needed. In particular, he contends that the mere announcement of substantial support for distressed corporate and municipal debt markets helped stabilize financial markets and reduce spreads.
The Fed has only funded about $25 billion of loans and assets for the five programs out of $454 billion Congress provided to establish the facilities under the CARES Act. Mnuchin would like the Fed to return the unused funds so that the incoming Congress could reallocate them, presumably for another stimulus package. In a proviso, Mnuchin argues that, if necessary, the Fed could request one or more of the rescinded facilities to be refunded using the Treasury’s exchange stabilization fund, “to the extent permitted by law,” or funds appropriated by the incoming Congress.
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