Fed extends emergency loan programs beyond December 31

The U.S. Treasury and Federal Reserve have extended four key COVID-19 safety net loan facilities until March 31, 2021.

The facilities include the commercial paper financing facility and the liquidity facility of money market mutual funds, which drew funds from the pre-existing balance of the Treasury’s foreign exchange stabilization fund, as well as the liquidity facility for protection. paychecks and the credit facility to primary brokers, who haven’t.

US Treasury Secretary Steven Mnuchin announced the extension, saying he approved it with “great caution”.

“I am pleased that the Federal Reserve voted unanimously to approve these extensions, and I am proud of the work our teams have done to successfully execute these programs,” said Mnuchin.

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The loan programs were created during the COVID-19 pandemic as a series of tools to help stabilize the then declining economy. Although the loan facilities have been little used so far, they were seen as vital support for the economy ravaged by the pandemic.

The initial expiry was set at the end of the year, and until recently Mnuchin insisted that the Treasury had enough tools to keep markets “comfortable.”

“As long as we have over $ 750 billion in firepower between what’s in the exchange stabilization fund and what the Federal Reserve can do in the future, the markets should be very convinced that it we still have a lot of capacity left, ”Mnuchin told CNBC’s“ Squawk Box ”. ”

Mnuchin had indicated that any money set aside to be used for Fed lending programs but which had not been used should be turned over to Congress for reallocation.

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The Federal Reserve previously said in a statement that it would prefer that “all emergency facilities established during the coronavirus pandemic continue to play their important role in supporting our still strained and vulnerable economy.”