The Treasury is looking to extend a few of the Federal Reserve programs used to connect markets during the early days of the Coronavirus crisis but will end many others that expire at the end of the year.
Among the programs that Treasury Secretary Steven Mnuchin asked the Federal Reserve to continue for another 90 days, there were programs that provided short-term “commercial paper” loans to companies, as well as another money market performance program and salary protection support.. a program.
However, Mnuchin also requested the termination of other programs that Treasury capital supports for the time being. It includes two facilities that have bought corporate bonds as well as the Main Street Lending Program, which was targeting small and medium-sized businesses.
The programs are set to be completed at the end of the year. It was set up in early March to open markets that froze during a panic selling spell as fear of the pandemic grew.
However, it was used sparingly most of the time and was the subject of some criticism, particularly the Main Street facility.
“While parts of the economy are still severely affected and in need of additional support, financial conditions have responded and use of these facilities has been limited,” Mnuchin said in a letter to Fed Chairman Jerome Powell..
Nevertheless, Mnuchin said he would “in a great deal of caution” would like the Fed to keep the commercial paper financing facility and money market lending facility alive, both of which require Fed approval, and a liquidity PPP facility..
While the Federal Reserve and Treasury worked closely during the crisis on the two programs, they fell out over their fate..
“The Federal Reserve prefers that the full suite of emergency facilities created during the coronavirus pandemic continue to serve their important role as a backstop for our still-stressed and vulnerable economy,” the Federal Reserve said in a statement.
Those programs that received Treasury guarantees under the CARES Act will expire.
They include the corporate credit facility in the primary and secondary market, under which the Federal Reserve bought corporate bonds, as well as the Municipal Liquidity Facility for state and local governments, the Main Street Program and the Term Asset Backed Loan Facility, which aims to keep the market for those securities liquid..
Additionally, Mnuchin asked the Fed to return the unused portion of this money, totaling $ 455 billion which he said would be reallocated.
In particular, the Main Street program, aimed at companies with fewer than 15,000 employees, has gone through several changes, none of which has generated much interest from borrowers or lenders.. During early November, Main Street issued $ 4 billion in shy loans, compared to its $ 600 billion capacity..
“The Main Street lending program, which was supposed to be low-interest loans to help people get back on their feet, was totally failing.. Chip Rogers, CEO of the American Hotel & Lodging Association, said Thursday at Power Lunch.
However, Mnuchin, along with Powell and other Fed officials, repeatedly emphasized that the programs were successful even with their mild intake.. Markets are running efficiently, and programs can be restarted if needed.
“Does it need extension? This raises a lot of controversy, but I will prove that whether we expand it or now this material may not be for the financial markets,”. Fed Chairman Lewis James Bullard said earlier this week. “We can always start liquidity programs again in the future.
The show’s end wasn’t a complete surprise. O. Pat Tommy (R-Pa. He publicly questioned whether Congress should continue to support the facilities.
However, markets have largely embraced the Fed’s moves, with the corporate bond-buying program being an integral part of stabilizing a massive market that became saturated in March.. Companies released debt at a record pace since then.
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US Treasury Department, Federal Reserve System, Joe Biden, Stephen Mnuchin, Democratic Party, Jerome Powell
News – United States – Treasury moves to end many crisis-era programs, pulled from Federal Reserve