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.
