Treasury Secretary Mnuchin is moving $455 billion of unspent stimulus money into a fund the incoming Biden administration can’t deploy without Congress
- Treasury Secretary Steven Mnuchin is moving $455 billion in unspent stimulus money into a fund that the incoming Biden administration cannot deploy without Congress, Bloomberg reported on Tuesday.
- It will leave Mnuchin’s likely successor, Janet Yellen, with only $80 billion in relief funds at her discretion.
- Experts say Mnuchin’s move greatly limits the tools available to the Biden administration to manage the economic fallout of the pandemic.
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Treasury Secretary Steven Mnuchin is moving $455 billion in unspent stimulus money into a fund that the incoming Biden administration cannot deploy without Congress, Bloomberg reported on Tuesday.
That amount includes money that Mnuchin is yanking from the Federal Reserve and unused loans for companies. The funds will be deposited into the Treasury’s General Fund, which requires legislative approval to use the money elsewhere. The Treasury Department did not immediately respond to a request for comment.
The move, experts say, will likely undercut the ability of Mnuchin’s likely successor, Janet Yellen, from restarting the Fed’s lending programs at a similar scale early next year. Instead, she will have only $80 billion at her discretion.
Ernie Tedeschi, a policy economist at Evercore ISI, called Mnuchin’s decision “a dangerous move” as the US economy faces a perilous moment in the pandemic.
“It’s one more enormous risk we are piling onto the winter in the US atop of other risks already there,” Tedeschi told Business Insider. “We may need that backstop again as cases have now blown through their prior peaks, state and local governments are making cuts, and we’re about to kick off millions of people from unemployment insurance.”
Bharat Ramamurti, a Democratic member of a congressional panel overseeing the funds, criticized the move.
“This is Treasury’s latest ham-handed effort to undermine the Biden Administration,” he wrote on Twitter. “The good news is that it’s illegal and can be reversed next year.”
The development came after Mnuchin recently announced he was not extending most of the Fed’s emergency lending programs past December 31, including those supporting markets for corporate bonds and another providing loans to medium-size businesses and state governments.
The Treasury and central bank jointly operate the lending programs under the CARES Act, which Congress approved in March. The pandemic relief law doesn’t mandate Mnuchin move the money into the Treasury’s General Fund — it could keep it within easy reach for President-elect Joe Biden in another pot of money until 2026.
Mnuchin also requested last week that Fed Chair Jerome Powell return unspent stimulus money. He objected and said the lending programs should continue, sparking a rare public clash between two figures that had collaborated closely to contain the economic devastation from the pandemic. The Fed later said in a letter it would return the funds.
Mnuchin then called on Congress to repurpose the unspent money, and he drew support from Republicans like Senate Majority Leader Mitch McConnell.
“We don’t need this money to buy corporate bonds. We need this money to go help small businesses that are still closed or hurt, no fault of their own, or people who are going to be on unemployment that’s running out,” he told CNBC last week.
Congress has been fiercely divided on passing another coronavirus relief bill that most economists say is urgently needed. Nearly 12 million workers are at risk of losing all of their federal unemployment aid next month, according to an analysis from the progressive Century Foundation.