WASHINGTON (Reuters) – US Treasury Secretary Steven Mnuchin on Friday pushed back criticism of his decision to fund more Federal Reserve coronavirus lending programs on Dec. 31, saying the next government would still have $ 800 billion (£ 602 billion) ) “bazooka” to alleviate financial market distress.
Mnuchin and another Treasury official insisted the movement would not tie the hands of the next Treasury secretary, and that subsidies to companies, more wage support for workers and unemployment compensation were better uses for $ 455 billion in already borrowed funds.
Mnuchin told CNBC that the Treasury could quickly recapitalize the Fed programs, if necessary, using part of the $ 84 billion that would remain in the Treasury̵
“To the extent that these need to be reactivated, we have more than DKK 800 billion. $ Capacity, so I consider it to be a pretty good bazooka, ”Mnuchin said, adding that the markets should be comfortable.
Federal Reserve Chairman Jerome Powell and Chicago Federal Reserve Bank President Charles Evans have criticized the Treasury movement, saying the programs – although not used – were an important backstop for the economy.
“I think the backstop role can be pretty important for some time, so it’s disappointing,” Evans told CNBC about the move. “The virus spread is increasing and therefore there are risks … it would be good to have more support from all directions.”
Mnuchin said Congress had always intended lending programs to end on Dec. 31, trying to reassure markets that the Fed and Treasury had many tools left to support the economy.
Mnuchin denied that the transition was intended to prevent the administration of elected Democratic President Joe Biden, who will take office on January 20.
“We are not trying to prevent anything,” Mnuchin said, adding that his department would work closely with the incoming administration “if things get certified.”
A senior Treasury official later told Reuters that there would be up to $ 600 billion in cash from restored Fed loans, unused money from aid to airlines and defense companies, as well as $ 130 billion left over from the Paycheck Protection Program.
Mnuchin said he and White House Chief of Staff Mark Meadows would speak with Republican congressional leaders later Friday and would redouble their efforts to implement further stimulus measures.
Senate Republican leader Mitch McConnell supported Mnuchin’s decision, as did some other Republican senators.
“Congress should recycle that money for the kinds of urgent, important, and targeted relief efforts that” Republicans have advocated, McConnell said, not mentioning any of the initiatives Democrats have sought in new legislation.
It is unclear whether the influx of cash will prompt McConnell to seek to reduce the size of newly allocated funds for coronavirus assistance. He had previously called for a new $ 500 billion spending package, far less than the $ 2.1 trillion sought by House Speaker Nancy Pelosi and Democrats.
Reporting by Andrea Shalal David Lawder and Richard Cowan in Washington and Ann Saphir in San Francisco, written by David Lawder; Editing Chizu Nomiyama