US Treasury Secretary Steven Mnuchin tried to calm the markets on Friday after his department cut the Federal Reserve’s several emergency lending programs, stating they are needed to support American economy against COVID-19.
“Markets should be very comfortable that we have plenty of capacity left,” Mnuchin told News broadcaster, adding “This is not a political issue. This is very simple.”
Mnuchin asked the Fed Chairman Jerome Powell in a letter on Thursday that the central bank should return around $455 billion funding that are not used but set to expire on Dec. 31.
The programs “clearly achieved their objective. Markets responded positively, spreads tightened, and banks continued lending,” Mnuchin wrote in the letter.
The department’s move will end several Fed programs that aimed to help US businesses in a weak economic environment caused by the novel coronavirus by providing them loans and financial aid.
The Fed, however, criticized the decision and said in a statement it 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.”
Powell has repeatedly called for fiscal stimulus from Congress in recent months to support the economy along the central bank’s monetary policies, but lawmakers have so far failed to agree on a new relief bill.
“When the right time comes, and I don’t think that time is yet or very soon, we will put those tools away,” Powell said Tuesday, indicating that it is too early for the Fed to end its emergency lending programs.