Mnuchin Says Congress Must Redirect $455 Billion, Not Biden

Treasury Secretary Steven Mnuchin on Tuesday contended that he was required by law to move $455 billion in unspent emergency pandemic relief money into an account that would lock it away from President-elect Joe Biden’s administration.

“It is my intent to completely follow the law, and the law requires the amounts transferred,” Mnuchin said during a Senate Banking Committee hearing in Washington.

Mnuchin has come under fire for demanding that the Federal Reserve return $429 billion in unused funds from the Cares Act in hopes it would help break the logjam on Capitol Hill over additional relief spending. That money, along with an additional $26 billion for company loans that the Treasury Department hasn’t spent, will be placed in the department’s general fund, which can only be tapped with congressional approval.

If the Treasury funds instead remained in its Exchange Stabilization Fund, that would allow Janet Yellen -- Biden’s pick to succeed Mnuchin -- access without congressional action. But the Cares Act does not allow that.

When Democratic Senators said he was undermining the incoming administration, Mnuchin said it was “implausible” that Congress would have authorized him to make loans “in perpetuity.”

“You must read in this that there was a loophole in the law that I could invest the $500 billion forever,” he said. “I urge Congress that if you want to extend this, bring back legislation that authorizes me to do it.”

Federal Reserve Chair Jerome Powell, testifying at the same hearing, said that Congress had given the Treasury secretary “sole” authority over the Cares Act funding for the Fed facilities. “We accept that reading of the law,” he said, noting that the Treasury could still use money in its Exchange Stabilization Fund as the law allows.

While Republicans have applauded Mnuchin’s move, Democrats and the Federal Reserve have criticized it. The Fed said it should keep the emergency lending facilities intact, while Democrats accused Mnuchin of hamstringing the incoming Biden administration.

“You’ve killed the Cares Act loans that were supposed to be a tool to help smaller businesses and their workers, and buried the money,” Democratic Senator Sherrod Brown of Ohio said.

Senator Bob Menendez, urged Powell not to release the money back to Mnuchin unless the Treasury secretary agrees to keep it accessible to Biden’s administration.

In a phone interview later Tuesday, Mnuchin said his actions weren’t aimed at hindering the next administration.

“If I was being political, I would not have extended the four other facilities,” he said, referring to emergency lending programs that he approved the Fed to extend through March. Those programs weren’t part of the Cares Act.

Earlier Tuesday, a bipartisan group of senators unveiled a $908 billion stimulus proposal in an effort to break a months-long impasse that’s now threatening to tip the economy back into contraction.

©2020 Bloomberg L.P.

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