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Treasury Secretary Steven Mnuchin will put $ 455 billion in unspent Cares Act funds into an account his alleged successor, former Federal Reserve Chairman Janet Yellen, will need Congressional clearance to use.
Mnuchin plans to put the money in the agency’s general fund, a Treasury Department spokesperson said on Tuesday. This fund can only be operated “with an authority based on legislation issued by Congress,” according to the Treasury website.
The money includes $ 429 billion that Mnuchin recovers from the Federal Reserve – which has backed some of the central bank’s emergency lending facilities – and $ 26 billion the Treasury received for direct business loans. Both initiatives were created as part of the sweeping Cares Act that was passed earlier this year as the coronavirus pandemic inflicted economic hardship on the United States.
The move will leave Yellen – selected by President-elect Joe Biden as his candidate for Treasury secretary – with just under $ 80 billion available in the Treasury’s Exchange Stabilization Fund, a pot of money that can be used with some discretion by the head of the Treasury. .
Mnuchin sent a letter to Powell last week requesting repayment of the money provided to the Fed by the Treasury as support for the central bank to lend to certain markets during times of stress. The Fed publicly opposed the move, but agreed to return the funds.
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Mnuchin said many markets are no longer at risk of seizing up and need no help beyond next month, when the programs are expected to expire. He said the funds can be best applied to specific areas of the economy with the greatest needs, through grants approved by Congress.
“For businesses affected by Covid – like travel, entertainment and restaurants – they don’t need more debt, they need more PPP money, they need more grants,” said Mnuchin in an interview last week.
Mnuchin is not obligated to transfer the money to the general fund – the Cares Act states that the Treasury Department can maintain access to the money by keeping it in its exchange stabilization fund until 2026.
Still, transferring the unspent money will make it virtually impossible for Yellen, if confirmed by the Senate as Secretary of the Treasury, to deploy on her own. Last week, Biden’s transition team called Mnuchin’s clawback of unspent Fed money “deeply irresponsible.”
“Biden will work with government leaders to ensure Main Street businesses and state and local governments have the support and access to credit they need to weather this storm, ”said spokesperson Kate Bedingfield.
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