Mnuchin cuts off Fed's emergency aid programs

Secy Mnuchin asks Fed to return $455B of COVID relief funds

Steven Mnuchin rejects renewal of some Fed emergency loan programs

US Secretary of the Treasury Steven Mnuchin and Federal Reserve Chairman Jerome Powell testify during a Senate Committee on Banking, Housing and Urban Affairs hearing examining the quarterly CARES Act in Washington on September 24.

The major news on the final day of the week was US Treasury Secretary Steven Mnuchin's decision not to extend numerous Fed's government-funded emergency lending programmes beyond 31 December, a decision which the Fed immediately and publicly expressed their disagreement with.

McConnell backed Mnuchin's proposal to use $580 billion that was allocated for Fed loan guarantees, small business help and other coronavirus-relief programs that remains unspent. He argued it should be directed at "urgent, important, and targeted relief measures" that Republicans have sought for months over repeated Democratic objections they are not enough to stem the hardship among people and many sectors of the economy.

On Friday, Mnuchin told CNBC that the intent in pulling the plug on funding was to re-appropriate the funds to stimulus efforts and played down the apparent rift.

"American workers should not lose their jobs needlessly when a second round of the job-saving Paycheck Protection Program for the hardest-hit small businesses would make a huge difference", the Kentucky Republican said.

The possibility of this ugly scenario has led some to believe that Mnuchin's decision may be one of a few "parting blows" from the outbound Trump Administration to the incoming administration; note that the Trump Admin is still also refusing to engage with President-elect Joe Biden's transition team. "We need this money to go help small businesses that are still closed or hurt, no fault of their own", he told CNBC.

The Fed's emergency plans were created under the CARES Act, signed by President Trump earlier this year, and were originally scheduled to expire at the end of the year.

Mnuchin extended four of the programs, including those that support money markets and short-term borrowing markets for companies, for 90 days beyond the end of the year.

The conflict - a rare public rift between the Fed and the Treasury - comes as the United States recovery faces increasing pressure from a resurgent coronavirus pandemic and follows months of deadlock between Republicans and Democrats over the size and type of additional fiscal stimulus.

"They want to impede the ability of the next administration to have everything available to them", Mrs. Pelosi said Friday.

The Republican leader's offer Friday comes after a morning meeting with Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows. Democrats, as well as the Fed, say that removing the safety net of these programs as the virus surges again through the country is not a good idea.

But the programs funded by the CARES Act, including the facilities purchasing corporate bonds or providing loans to small and medium-sized businesses and state and local governments, will expire on December 31. That would provide at least one avenue for the Biden administration to provide stimulus without going through Congress.

The central bank said 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".

The secretary on Thursday sent Powell a letter demanding the return of money the government provides the central bank so it can lend to certain markets in times of stress.

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