Treasury takes action to end several programs in times of crisis, prompting Fed crackdown

The Treasury Department is looking to expand a handful of the Federal Reserve programs used to move markets in the early days of the coronavirus crisis, but will end several more that expire at the end of the year.

Among those that Treasury Secretary Steven Mnuchin has asked the Fed to pursue for an additional 90 days are programs that have provided short-term “commercial paper” loans to businesses, as well as another for the functioning of the money market and support for the paycheck protection program.

However, Mnuchin also called for other programs backed by Treasury capital to end for the time being. They include two institutions that bought corporate bonds as well as the Main Street Lending Program, which targeted small and medium-sized businesses.

The programs were to expire at the end of the year. They were instituted in early March to open markets that had froze during a panic-selling spree as fear of the pandemic increased.

However, they have been little used for the most part and have been the subject of some criticism, especially the installation on Main Street.

“While parts of the economy are still severely affected and need further support, financial conditions have reacted and the use of these facilities has been limited,” Mnuchin said in a letter to the president of the Fed, Jerome Powell.

Mnuchin nevertheless said that “with great caution” he would like the Fed to keep alive the Commercial Paper Financing Facility and the Money Market Lending Facility, which do not require Fed approval, and the Liquidity Facility. PPP.

While the Fed and Treasury worked closely during the crisis on programs, they differed on their fate.

“The Federal Reserve would prefer that all of the emergency facilities put in place during the coronavirus pandemic continue to play its important role in supporting our still strained and vulnerable economy,” the Fed said in a statement.

Programs that have received guarantees from the Treasury under the CARES Act will end.

They include the corporate credit facilities in the primary and secondary markets, under which the Fed has purchased corporate bonds, as well as the municipal liquidity facility for state and local governments, the Main Street program and the asset-backed term loan, aimed at maintaining the market for these liquid securities.

In addition, Mnuchin has asked the Fed to return the unused portion of those funds, which stands at $ 455 billion which he says will be reallocated.

The programs put together have not come close to their capacity of over $ 2 trillion.

In particular, the Main Street program, aimed at businesses with fewer than 15,000 employees, has undergone several changes, none of which have generated significant interest from borrowers or lenders. In early November, Main Street issued just under $ 4 billion in loans, compared to its capacity of $ 600 billion.

“The Main Street loan program, which was supposed to be low-interest loans to help people stay afloat, has been an absolute failure. I don’t know of a single hotelier in the United States who has received a loan from Main Street., “Chip Rogers, general manager of the American Hotel & Lodging Association, said Thursday on CNBC’s” Power Lunch. “

However, Mnuchin, along with Powell and other Fed officials, has repeatedly pointed out that the programs have been successful even with their low involvement. Markets operate efficiently and programs can be restarted if needed in the future.

“Do they need to be expanded? This is generating a lot of debate, but I’m going to argue that extending them or now maybe not as important to financial mrakets,” said the Fed chairman of St Louis, James Bularld earlier this week. “We can

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