Fed’s Bostic Says Treasury Ending Programs Would Remove Backstop

Federal Reserve Bank of Atlanta President Raphael Bostic said he opposed Treasury Secretary Steven Mnuchin’s move to let some Federal Reserve emergency lending programs expire on Dec. 31, which he warned would remove an important backstop to markets.

“I was a bit surprised,” Bostic said in a Bloomberg TV interview with Kathleen Hays on Thursday. “Given where the economy is -- and there is so much uncertainty that is still out there -- it is prudent to keep those things open so that when people, if they do have stress, can draw upon it.”

The Trump administration and Federal Reserve publicly disagreed Thursday over whether to extend the central bank’s emergency pandemic lending programs, with the Fed objecting to the Treasury Department’s move toward ending several facilities.

“The tools and their presence in and of themselves have been helpful” in restoring market confidence, Bostic said. “So the presence gave people some confidence and security that there was a backstop, and that is important.”

Fed’s Bostic Says Treasury Ending Programs Would Remove Backstop

The U.S. economic recovery continues to face risks from the Covid-19 crisis, with cases picking up and much of the fiscal stimulus having expired or ending soon, he said.

“A lot of the federal relief that has been initially offered is starting to expire.” Bostic said. “That is going to leave a bunch of people potentially at risk.”

Asked about changes in the asset purchase program, Bostic wasn’t specific but said, “We are committed to doing all that we can and I think we still have some powerful tools.”

“The best and most appropriate way for this to move forward is for this to be an all-hands-on-deck situation” with the Fed, fiscal policy makers and public-health policy makers contributing, he said.

Bostic said he was not forecasting a quarter in which U.S. growth would turn negative, but he said the level of growth depends on the virus. “If we don’t deal with the public health aspect, it is very hard to imagine how the economics are going to come back very robustly,” he said.

©2020 Bloomberg L.P.

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