Treasury Secretary Steven Mnuchin said Wednesday that he has spoken with Janet Yellen, President-elect Joe Biden's pick to lead the department next year, as part of the White House transition process.
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Mnuchin told the House Financial Services Committee during his second day testifying on Capitol Hill that he discussed with Yellen, the former chair of the Federal Reserve, the impending expiration of several central bank lending programs that have been used since their inception in the March CARES Act to stabilize the nation's pandemic-stricken economy.
His decision to allow the programs the end on Dec. 31 has emerged as a source of controversy in recent weeks. Democratic lawmakers accused Mnuchin during two hearings this week of trying to sabotage the incoming Biden administration by prematurely stopping the funding and denying them a vital tool to rehabilitate the economy.
But Mnuchin has maintained that he does not have the authority to extend the programs, citing portions of the law that indicate they are intended to lapse on Dec. 31, 2020. Republicans have applauded the move, arguing the programs were designed "to be temporary, to provide liquidity, and to cease operations no later than the end of 2020."
The unspent money, about $455 billion, will be placed in the Treasury Department's General Fund, a spokesperson told Bloomberg. That means if Mnuchin's successor — Yellen, if she is confirmed by Congress — wants to access that money, she will need to receive Congress' blessing.
Shifting the money to the General Fund leaves just under $80 billion available in the Treasury’s Exchange Stabilization Fund.
Mnuchin told lawmakers that he had spoken with Yellen about the matter and that "she didn't reflect an interpretation one way or another."
"I have discussed with her and am cooperating with the transition," Mnuchin said. "I had a good working relationship. I advised her my reading of this was nonpolitical and was just following the law."
The lending facilities helped to unlock almost $2 trillion in funding, Federal Reserve Chairman Jerome Powell said in his testimony. Still, the actual use of them was much smaller; the central bank deployed a little more than $100 billion through the programs, which provided financing to small- and medium-sized businesses, supported state and local governments and helped the corporate bond markets stay liquid.
“These programs serve as a backstop to key credit markets and have helped restore the flow of credit from private lenders through normal channels,” the Fed chief said. “We have deployed these lending powers to an unprecedented extent.”
The money is part of the $500 billion Treasury Department fund created at the end of March by the CARES Act. The Treasury Fund set aside $46 billion for loans and loan guarantees to the airline industry, and the remainder was designated to support Fed lending programs to businesses, states and municipalities.
Separately, Mnuchin advised Yellen to consider using sanctions as an economic foreign policy tool, saying he found them very "effective."
When she was formally introduced on Tuesday by Biden, Yellen made a plea to Congress to provide more relief to the nation's economy, echoing the same sentiment from Powell.
“Lost lives, lost jobs, small businesses struggling to stay alive are closed for good," she said. "So many people struggling to put food on the table and pay bills and rent. It’s an American tragedy. And it is essential we move with urgency. Inaction will produce a self-reinforcing downturn causing yet more devastation.”
Those comments came as a bipartisan group of lawmakers aimed to revive negotiations on another stimulus package, unveiling a $908 billion compromise bill that would provide more funding to small businesses, laid-off Americans and state and local governments.