Steven Mnuchin asked the Fed on Thursday to return unspent funds for emergency loans.
Toni L. Sandys-Pool / Getty Images
This Thursday, Steven Mnuchin, Secretary of the Treasury, asked the Federal Reserve (Fed) get the money back that was assigned to him by the aid law for emergency loans to keep the economy stable. The decision could hamper President-elect Joe Biden’s ability to cushion the economic fallout of the coronavirus.
Even though the support programs will expire at the end of 2020, investors expected some of them to stay up and running as COVID-19 continues to pose a risk to the economy.
Support programs for the pandemic are run by the Fed but use Treasury money to insure against losses. The programs have provided important support that have calmed international markets since the coronavirus took hold of them in March.
Remove programs could cause vulnerability in the financial market and cause volatility out of fear that the number of coronavirus cases continues to rise.
By asking the Federal Reserve to return unused funds, Mnuchin could prevent the new Treasury secretary name president elect Joe Biden, quickly restart recovery efforts in 2021.
If the Fed returns the unused money as Mnuchin requested, the Biden administration will have less financial backing to help the economy and restarting the programs just as the new administration takes over.
Related: What can you expect if Congress manages to pass a new stimulus plan from today until Presidential Inauguration Day on January 20?
With the increase in the number of coronavirus cases, the economy could suffer a new disaster making programs more necessary. Just Tuesday, Jerome Powell, Fed Chairman, warned that the US economic recovery still has a long way to go and that the economy needs fiscal and monetary support. However, Treasury officials have expressed optimism that the economy is ready for a recovery due to the appearance of a vaccine by the end of the year that could improve the economic outlook.
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