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- Treasury Secretary Steven Mnuchin is transferring $ 455 billion in unspent stimulus funds to a fund the new Biden administration cannot deploy without Congress, Bloomberg reported on Tuesday.
- That will leave Mnuchin’s likely successor Janet Yellen with just $ 80 billion in relief funds at her discretion.
- Experts say Mnuchin’s decision severely limits the tools the Biden administration has to deal with the economic fallout from the pandemic.
- Visit the Business Insider homepage for more stories.
Treasury Secretary Steven Mnuchin is transferring $ 455 billion in unspent stimulus funds to a fund the new Biden administration cannot deploy without Congress, Bloomberg reported on Tuesday.
This amount includes the money Mnuchin draws from the Federal Reserve and unused business loans. The funds will be deposited into the general treasury fund, which requires legislative approval to use the money elsewhere. The Treasury Department did not immediately respond to a request for comment.
Experts say the move will likely jeopardize the ability of Mnuchin’s likely successor Janet Yellen to restart Fed lending programs on a similar scale early next year. Instead, it will only have $ 80 billion at its discretion.
Ernie Tedeschi, political economist at Evercore ISI, called Mnuchin’s decision a “dangerous move” as the US economy faces a perilous moment in the pandemic.
“This is another huge risk that we are piling on the winter in the United States on top of other risks already present,” Tedeschi told Business Insider. “We may need this support again as cases have now blown from their previous peaks, state and local governments are making cuts, and we are on the verge of taking millions of people off unemployment insurance.”
Bharat Ramamurti, a Democratic member of a congressional panel overseeing the funds, criticized the move.
“This is the Treasury’s latest clumsy effort to undermine the Biden administration,” he wrote on Twitter. “The good news is, it’s illegal and can be canceled next year.”
The development came after Mnuchin recently announced that he was not extending most of the Fed’s emergency lending programs past Dec.31, including those that support corporate bond markets and another granting loans. loans to medium-sized businesses and state governments.
The Treasury and the central bank jointly manage the lending programs under the CARES Act, which Congress approved in March. Pandemic relief law does not require Mnuchin to transfer the money to the general treasury fund – she could keep it on hand for President-elect Joe Biden in another pot of money until 2026 .
Mnuchin also last week demanded that Fed Chairman Jerome Powell return the unspent stimulus money. He objected and said loan programs should continue, sparking a rare public clash between two figures who had worked closely together to contain the economic devastation of the pandemic. The Fed later said in a letter that it would return the funds.
Mnuchin then called on Congress to reuse unspent money, and he drew support from Republicans like Senate Majority Leader Mitch McConnell.
“We don’t need this money to buy corporate bonds. We need this money to help small businesses that are still closed or injured, it’s not their fault, or people who are going. being unemployed and running out, ”he told CNBC last week.
Congress has been fiercely divided over passing another coronavirus relief bill that most economists believe is urgent. Nearly 12 million workers face losing all of their federal unemployment assistance next month, according to an analysis by the progressive Century Foundation.
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