The extraordinary steps taken by the Federal Reserve during this global health crisis have been credited with preventing the economic downturn from being worse, but now outgoing Treasury Secretary Steven Mnuchin is pulling the plug on the funding for several of the Fed's emergency lending programs.
Mnuchin on Friday defended that decision, which will end several of the lending programs on December 31st.
He says the money should not be used to prop up small businesses through lending, but rather through grants.
His decision will impact nearly half-a-trillion dollars allocated to the Treasury as part of the CARES act passed by Congress in the spring, which was set aside mostly to support loans through the Fed to businesses, nonprofits and local governments.
Democratic Speaker of the House Nancy Pelosi derided Mnuchin’s action as purely political.
“And another misguided act of irresponsibility: Secretary Mnuchin has said he would end many critical emergency lending initiatives at the end of the year.Now, why would they do that? [FLASH] Why? Because they want to impede the ability of the next administration to have everything available to them."
But in an interview on CNBC, Mnuchin denied the move was intended to handicap the administration of President-Elect Joe Biden, who will take office on January 20th
Members of the Federal Reserve are also not happy. Fed Chairman Jerome Powell criticized the move, saying the programs -though not being used extensively - provided an important backstop for the economy.
The timing comes at a critical juncture for the economy - new infections are soaring across the country - prompting state governments to mandate new restrictions that are forcing businesses to reduce hours or temporarily close their doors...unemployment is on the rise and more layoffs could be on the way, which are likely to dampen the recovery.
And all this is happening with no new stimulus package in sight.
Mnuchin said he will work with Republican leaders to get another round of stimulus... but his efforts will have to wait. The Republican-led Senate has gone home for the Thanksgiving holiday.