Mnuchin Asks Fed to Return $455 Billion in Unspent Covid-Relief Funds
Treasury Secretary Steven Mnuchin on Thursday asked the Federal Reserve to allow a number of its emergency lending programs to expire as scheduled at the end of the year and return hundreds of billions of dollars in unspent funds from its emergency pandemic lending programs.
Mnuchin said that the programs were no longer needed. In a short but extraordinary response, the Fed disagreed, marking a rare public rift between the Treasury and the central bank.
“I am requesting that the Federal Reserve return the unused funds to the Treasury,” Mnuchin wrote in a letter to Federal Reserve Chair Jerome Powell. “This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds.”
Mnuchin asked that five programs for emergency loans to businesses and local governments expire as scheduled on December 31. “The Fed programs were launched this spring to stabilize markets and extend credit to U.S. companies as the Covid-19 pandemic took hold,” Bloomberg’s Saleha Mohsin and Catarina Saraiva note. “They helped quell the panic but take-up has been relatively low -- which the Fed says is a sign that they’ve worked.”
Mnuchin requested that, out of an “abundance of caution,” four other Fed lending programs be extended for 90 days.
In its response, the Fed said that 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 said Tuesday that he didn’t think it was time yet to end the programs.
Mnuchin’s letter said that, in the “unlikely event” that the shuttered lending facilities are needed again, the Fed could request approval from the Treasury to re-open them, using existing emergency funding from the Treasury new money from Congress.
Lawmakers Push Toward $1.4 Trillion Spending Package
Senate Majority Leader Mitch McConnell (R-KY) sent the Senate home Wednesday for its Thanksgiving break, allowing members to leave a day early, reportedly in part due to concerns about the spread of coronavirus after 87-year-old Sen. Chuck Grassley (R-IA) tested positive Tuesday.
It’s not like the Senate has any matters that require its urgent attention, anyway, right?
Well, there’s the stalled coronavirus relief legislation. And a spending package needed to avert a government shutdown after December 11. But neither of those is close to being ready for a vote.
On the spending bill, staffers for McConnell, Senate Democratic Leader Chuck Schumer (D-NY), House Speaker Nancy Pelosi (D-CA) and House Republican Leader Kevin McCarthy (R-CA) met Thursday. The lawmakers are reportedly working toward a $1.4 trillion omnibus spending bill that would fund the government through September 2021 rather than a stopgap measure that would extend 2020 funding into early next year. The White House is reportedly ready to accept such legislation, even though President Trump warned after signing an omnibus package in 2018 that he would “never sign another bill like this again.”
On the stimulus, Schumer suggested Thursday that negotiations might be starting up again. “There’s a little bit of good news, as of today,” he said. “They’ve agreed to sit down, and the staffs are going to sit down today or tomorrow to try to begin to see if we can get a real good Covid relief bill. So there’s been a little bit of a breakthrough in that McConnell’s folks are finally sitting down and talking to us.”
Republicans quickly burst that balloon, though, saying that the meeting was mostly about government funding. The Hill’s Jordain Carney reports that the stimulus stalemate is still very much in place: “Leaders on both sides disclosed this week that there had been no private conversations between congressional Democrats and McConnell about a fifth coronavirus relief bill even as cases climb across the country and some cities and states are reimposing restrictions to try to curb the spread.”
What’s next: When lawmakers return after the holiday, they will have about 10 working days before the House is scheduled to leave until January, Carney writes. "We've got time," Senate Appropriations Committee Chairman Richard Shelby (R-AL) warned, according to Carney. "But we've got to move."
Pelosi and Schumer are set to meet in person Friday with President-elect Joe Biden and Vice President-elect Kamala Harris.
Jobless Claims Jump as Recovery Risks Grow
The pace of layoffs increased for the first time in five weeks, raising concerns about the economic damage being caused by the resurgent coronavirus.
About 742,000 people filed initial jobless claims last week, the Labor Department announced Thursday, an increase of more than 30,000 from the week before. Another 320,000 filed for benefits through the Pandemic Unemployment Assistance program, which aids self-employed and gig workers, bringing the total of new filings to more than 1 million.
The report did have some good news, however. All told, the number of people receiving any kind of unemployment aid fell significantly, dropping by 840,000 to 20.3 million.
At the same time, though, that level of participation in jobless assistance programs remains exceptionally high, and the number of people falling into long-term unemployment is growing, with nearly 4.4 million people receiving aid in the Pandemic Emergency Unemployment Compensation program for those who have exhausted their state-level benefits.
Bumpy path for the labor market: Economists worry that ramped up restrictions enacted
to fight the virus surge could drive unemployment higher in coming months. “The road to recovery is likely to be quite rocky, unfortunately,” Nathan Sheets, PGIM Fixed Income’s chief economist, told Bloomberg News. “The virus and the restrictions being put in place to fight the virus are likely to take a bite out of economic activity over the next, say, three or four months.”
Warnings from analysts: The International Monetary Fund released a report Thursday that warns that the recovery is looking less robust. “While global economic activity has picked up since June, there are signs that the recovery may be losing momentum, and the crisis is likely to leave deep, unequal scars,” the report says. “Uncertainty and risks are exceptionally high.”
The G-20, a forum for central bankers from the leading industrialized nations, also expressed concerns. “The recovery is uneven, highly uncertain and subject to elevated downside risks, including those arising from renewed virus outbreaks in some economies,” the group said in a communique reported by Bloomberg.
IMF Managing Director Kristalina Georgieva told Bloomberg that the data underlines the need for more fiscal support. The recovery is “losing momentum, and in that context our first message to leaders is: do not withdraw support for the economy prematurely,” Georgieva said Thursday. “It’s so important that we don’t pull back until we see the health crisis in the rear-view mirror.”
White House Seeks Deal on Confederate Base Names: Report
Lawmakers are hoping to pass the annual defense authorization bill before the end of the year, but a provision that requires the Pentagon to remove the names of Confederate leaders from military bases could earn the legislation a veto from President Trump, who has expressed strong opposition to the idea, despite bipartisan support for the plan in Congress.
Sen. James Inhofe (R-OK) reportedly warned top lawmakers this week that the provision would have to be removed if they want the bill to pass. However, The New York Times reported Thursday that White House Chief of Staff Mark Meadows has “hinted” that Trump would accept the base renaming provision in exchange for a repeal of certain legal protections currently in place for social media companies.
Specifically, Meadows said the White House is looking for a repeal of Section 230 of the Communications Decency Act of 1996, which protects the likes of Facebook and Twitter from liability over writings posted by their users.
Democrats say the idea is unlikely to gain traction. “On its face, there’s issues of jurisdiction, lack of clarity on what the White House actually means when it says repeal Sec. 230, and also it’s unclear if congressional Republicans support this,” a Democratic aide told The Hill.
- States That Imposed Few Restrictions Now Have the Worst Outbreaks – Lauren Leatherby and Rich Harris, New York Times
- Washington Takes a Break With Major Economic Pain on the Horizon – Tory Newmyer, Washington Post
- Congress, Don't Forget the Long-Term Unemployed – Claudia Sahm, Bloomberg
- Our Covid-19 Polarization Will Only Get Worse. We Need to Find a Balance. – Gary Abernathy, Washington Post
- Why Congress Should Be Much More Worried About Covid-19 Than They Are – Chris Cillizza, CNN
- The Siren Song of Austerity – J. Bradford DeLong, Project Syndicate
- Joe Biden Could Shepherd a Massive, Pro-Family Package Through Congress – Henry Olsen, Washington Post
- How Joe Biden Can Use the Political Power of Obamacare to Expand It – Rahm Emanuel, Politico
- Even With a Vaccine, This Virus Will Take Time to Conquer – Michael S. Saag, Washington Post
- I Was Part of a Trial for Pfizer’s Covid-19 Vaccine. It’s a Miracle for Genetic Medicine. – Walter Isaacson, Washington Post
- Every American Should Be Tested for Covid-19 Once a Week – Faye Flam, Bloomberg
- We’ve Figured Out It’s Safe to Have Schools Open. Keep Them That Way. – Danielle Allen and Ashish Jha, Washington Post
- When Will We Throw Our Masks Away? I Asked Dr. Fauci – Elisabeth Rosenthal, New York Times
- Improving State Tax Collections Don’t Let Congress Off the Hook on COVID-19 Relief – Tracy Gordon, Tax Policy Center