$455 Billion Unspent Bailout Ends -Stock Market Crash!?!
Treasury Secretary Steven Mnuchin recently announced that he was pulling funds from lending programs that the Federal Reserve was used to get the economy through the pandemic.
It has been heavily criticized since that $455 billion was an initiative vital to maintaining the stock market should the economy run into any issues as it did more than eight months ago.
Mnuchin is arguing that these funds could be better used elsewhere, while Fed officials worry that they will be forced to return the funding that is used to support key programs that the central bank used since March.
This week Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin spoke before Congress to both argue their case about where these funds should be allocated.
According to CNBC, “Powell emphasized the importance of the lending programs it has deployed during the pandemic, telling senators in testimony to be delivered Tuesday that they’ve been integral in keeping the economic fallout from being worse.”
However, Powell has agreed to return the unused money once the programs expire on Dec. 31st even though he has expressed disappointment that the programs will not be extending past that date.
These programs have been funneling loans to small and medium-sized businesses, buy corporate bonds, and help channel money to state and local governments.
Even President Trump expressed worry as he tweeted that this could have a potentially negative effect on the stock market since investors saw the funds as security.
The programs offered businesses a chance to receive money through a bond in the hopes that they can recover through this economic crisis and still help pay for their employees.
Mnuchin is arguing that the funds are not needed anymore and that the money could be better used for another stimulus relief package.
According to Associated Press, “Countering Mnuchin’s statement that the programs were not being used, Democrats said that the loan requirements were too stringent and should have been loosened so that more companies could take advantage of them.”
Since those requirements were too complicated it excluded those small businesses that urgently need help at the moment.
Since there is massive urgency for another fiscal stimulus package, the Fed and the Treasury are facing pressure to do more with that money that is just sitting there just reassuring investors.
At a time when unemployment is seeing a rise again and small businesses are being the most impacted during this Holiday season, that money could be used for another emergency fund.
Mnuchin argued, “Congress can reauthorize this money if you want to extend it, but I think those small businesses need grants.”
Congress could also use that money for other purposes without having to cost anything to taxpayers.
Throughout this senate hearing, lawmakers pressured congressional leaders to compromise on another stimulus package before they adjourn for Holiday.
Mnuchin has said, “he will put $455 billion of unspent Cares Act money into Treasury’s General Fund where after Dec. 31 the agency would need Congressional approval to tap.”
Sources:
https://www.nytimes.com/2020/11/20/business/economy/mnuchin-fed-covid.html