In the midst of a second wave of Covid-19, with cases increasing nationwide and new closures happening in several states, Steve Mnuchin decided not to extend the Federal Reserve's emergency lending programs that were helping to keep the economy afloat.
On Thursday, Treasury Secretary Steven Mnuchin's decision to allow key pandemic relief programs to expire on Dec. 31, will drastically reduce the ability to cushion the economic consequences of the pandemic.
Steve Mnuchin asked the Federal Reserve (Fed) to return the money allocated to it under the CARES Act for emergency lending programs.
Although the support programs were set to expire at the end of 2020, investors expected some of them to continue as COVID-19 still poses a risk to the economy.
The programs, that have provided important support and that have calmed international markets since the coronavirus took hold of them in March, are run by the Fed but use Treasury money.
Eliminating the programs could cause vulnerability in the financial market, cause volatility, and is expected to drastically reduce the central bank's ability to shore up the financial system.
By asking the Federal Reserve to return unspent funds, Mnuchin could prevent the new Secretary of the Treasury appointed by President-elect Joe Biden from quickly restarting recovery efforts in 2021.
Although Jerome Powell, the Fed chairman, has warned that the US economic recovery still has a long way to go and that the economy needs fiscal and monetary support, Treasury officials have expressed optimism that a vaccine by the end of the year could improve the economic outlook.