Mnuchin Wants $580 Billion Injected Into Slowing U.S. Economy
(Bloomberg) -- Treasury Secretary Steven Mnuchin said that lawmakers should redirect unspent stimulus funding, including money he’s pulling back from the Federal Reserve, to buoy the economy as the U.S. waits for a coronavirus vaccine.
“I hope that Congress will seriously consider reallocating $580 billion of funds that have already been appropriated that wouldn’t cost taxpayers an additional penny,” he said in a phone interview on Thursday.
Earlier in the day, Mnuchin requested the return of unused funds from the Fed’s emergency pandemic lending program, triggering pushback from the central bank, which said the programs served a vital role.
The U.S. economy had a “strong” recovery after a partial shut down this spring due to the pandemic, Mnuchin said in the interview. Companies with healthy balance sheets can access money through private markets, he noted.
But “for companies that are impacted by Covid -- such as travel, entertainment and restaurants -- they don’t need more debt, they need more PPP money, they need more grants,” he added, referring to the small-business lending program known as the Paycheck Protection Program. He also suggested the funding could be used to extend unemployment insurance.
Yields on 10-year Treasuries dropped about two basis points amid the news to end Thursday at 0.83% and fell slightly at the start of Friday’s trading in Asia. U.S. stock futures pared gains into the close, and S&P 500 emini contracts were down about 0.8% early in the Asia session Friday. The Bloomberg Dollar Spot Index rose 0.1% Friday after five straight days of declines.
The White House has largely abandoned earlier efforts to encourage lawmakers to strike a fresh stimulus deal, following months of stalled negotiations with House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell.
Redirecting the unused Fed money would allow officials to target parts of the economy that are still suffering, Mnuchin said. But the move would require congressional action.
“I believe it will have a significant impact for people whose businesses have been impacted by Covid -- they can then get through to the beginning of next year when we will have vaccines broadly distributed and fully reopen the economy,” Mnuchin said.
Mnuchin, in a letter to Fed Chairman Jerome Powell released Thursday, sought a 90-day extension for four of the central bank’s emergency lending programs, but requested other programs expire on schedule on Dec. 31.
The funds that Mnuchin is planning to ask Congress to redirect include unused money authorized by the Cares Act for the Treasury Department to make direct loans to companies deemed critical to national security and to airlines.
The Fed said in a statement that it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”
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