A rare fight between the policymakers tasked with guiding America’s economy through the Covid-19 crisis could hit businesses at an already tense moment.
In a letter sent Thursday to Fed Chairman Jerome Powell, Mnuchin asked the central bank to return some $455 billion in unused funding for programs set to expire Dec.31. He added that Congress would then be able to use the money for other purposes. The Fed programs «have clearly achieved their objective,» Mnuchin wrote. «Markets responded positively, spreads tightened, and banks continued lending.» The central bank immediately blasted the decision. The Fed, which typically avoids commenting on sensitive political issues, responded in a statement saying 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 earlier this week that it was too soon to wind down the lending programs. «When the right time comes, and I don’t think that time is yet or very soon, we will put those tools away,» he said Tuesday. Businesses agree. The powerful US Chamber of Commerce said in a statement that the action «closes the door on important liquidity options for businesses at a time when they need them most,» adding that it «unnecessarily ties the hands of the incoming administration.» Investors are also feeling jittery. S&P 500 and Dow futures fell back slightly on Friday morning. Big picture: Powell has made clear that the risk during the pandemic is doing too little to support a struggling economy — not doing too much. And as the coronavirus surges again in the United States, forcing states to enact a wave of new mask mandates and restrictions, the timing of the Trump administration’s move is concerning. Covid-19 cases in the United States reached another daily high Thursday with more than 185,700 new infections, according to Johns Hopkins University.
