In another sign of the ‘big boy’ nature of the Trump administration, Treasury Secretary Steve Mnuchin is allowing funding programs for the Federal Reserve set up during the pandemic emergency to expire at the end of the year as Congress intended. Since the nature of the modern Fed is to spend America into oblivion, the move has caused sparks to fly on Wall Street and K Street…the Swamp is not happy.
Mnuchin announced Thursday he will not extend the Fed’s programs that used Congress’ CARES Act funds. Created in response to the financial panic that accompanied the lockdowns in the spring, those programs gave the Fed the ability to lend up to $4.5 trillion into various financial markets. Mnuchin argued it was the intent of Congress for the funds to expire, wrote CNBC.
“The Federal Reserve 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,” responded the Federal Reserve Bank of the United States whose balance sheet is approaching $10 trillion.
“A surprise termination of the Federal Reserve’s emergency liquidity programs, including the Main Street Lending Program, prematurely and unnecessarily ties the hands of the incoming administration, and closes the door on important liquidity options for businesses at a time when they need them most,” declared the U.S. Chamber of Commerce, an organization that has shown little regard for Main Street in recent decades.
“This was a very simple thing. We’re following the intent of Congress,” replied Mnuchin on CNBC’s Squawk Box.
“This is not a political issue. This is very simple.
“Markets should be very comfortable that we have plenty of capacity left,” he said.
“I find it kind of ironic now that I’m being prudent and returning the money to Congress like I’m supposed to that people are questioning that,” he added.
The move however may be good for stocks in the long run as the Fed may feel the need to intervene more in the markets directly.
Overnight, Ben Emons, head of global macro strategy at Medley shared a similar view, writing that “the Fed may boost Treasury purchases and/or extend maturities of the securities it buys through its main QE program because of the dispute,” reported Zero Hedge.