By Nick Timiraos and Paul Kiernan 

WASHINGTON -- President-elect Joe Biden's transition team sharply criticized Treasury Secretary Steven Mnuchin's decision to allow funding for several emergency Federal Reserve lending programs to expire, escalating a political fight.

"The Treasury Department's attempt to prematurely end support that could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible," said Kate Bedingfield, a Biden spokeswoman, in a statement Friday.

The Treasury Department announced Thursday that it would allow the funding to expire after Dec. 31. Mr. Mnuchin also asked Fed Chairman Jerome Powell to refund more than $70 billion in capital that had already been transferred from the Treasury to cover losses in Fed loan programs.

That prompted a rare statement of objection from the Fed, which wants to maintain the lending programs as a backstop in the face of the coronavirus pandemic.

While the Fed may not have had any legal obligation to refund the Treasury its investment, Mr. Powell said in a letter Friday to Mr. Mnuchin that the central bank would "work out arrangements with you for returning the unused portions of the funds."

Mr. Mnuchin earlier in the day defended his decision not to renew five Fed lending programs to extend credit to businesses, cities and states beginning next year. He said the programs were no longer necessary and that he lacked the legal authority to extend them.

He also denied the action was intended to impede the incoming administration. "We're not trying to hinder anything," Mr. Mnuchin said in an interview Friday on CNBC.

Mr. Mnuchin and congressional Republicans said the unused Treasury funds for Fed lending programs -- around $429 billion -- should be used to provide grants to businesses and unemployed workers instead. "We don't need to buy more corporate bonds," Mr. Mnuchin said.

President Trump was informed about Mr. Mnuchin's policy decision late Thursday afternoon in a brief phone call but wasn't otherwise involved in the process, according to a person familiar with the matter.

Negotiations between the Trump administration, Senate Republicans and House Democrats over the terms of additional economic relief have been deadlocked for months.

Congressional Democrats strongly objected to Mr. Mnuchin's decision, suggesting it isn't clear how, or whether, the Treasury Department's decision not to use the money Congress created in March would push lawmakers closer to a deal.

House Speaker Nancy Pelosi (D., Calif.) said Mr. Mnuchin's decision would impede the Biden administration's flexibility to shore up the economy and markets.

Republicans leaders in the Senate applauded Mr. Mnuchin's decision and said it could help rekindle stimulus talks during the so-called lame-duck session of Congress.

"Congress should repurpose this money toward...urgent, important, and targeted relief measures," Senate Majority Leader Mitch McConnell (R., Ky.) said in a statement Friday.

Staff for the top four leaders in Congress -- Mr. McConnell, Mrs. Pelosi, Sen. Chuck Schumer (D., N.Y.), and House Minority Leader Kevin McCarthy (R., Calif.) -- met on Thursday afternoon to discuss an agreement on spending. As part of that discussion, the staff also discussed possible coronavirus aid, according to Democratic aides.

Mr. Mnuchin spoke with White House chief of staff Mark Meadows and Mr. McConnell on Friday about another stimulus package.

Mr. Mnuchin's decision, expressed Thursday in a letter to the Fed, was criticized by some market analysts, who said the Treasury's action -- and the public dispute with the Fed -- could make markets more volatile.

"If the letter is a negotiating ploy to add urgency to lame-duck negotiations, the pandemic's roar through the upper U.S. suggests artificial urgency isn't needed," said Jim Vogel, an interest-rate strategist at FHN Financial.

Congress approved a $2 trillion relief package in March that provided $454 billion to the Treasury to use to cover losses in Fed lending programs. The Treasury argued that the authority for the Fed to make new loans expired at year-end. Other lawyers in Congress and at the Fed believed the Treasury could have approved an extension of existing loan programs, even though the law prevented the Treasury from funding new Fed lending vehicles.

Mr. Mnuchin played down any public dispute with the Fed on Friday. "All of the things being equal, the Fed always likes to keep their tools outstanding," he said.

Before the election, Mr. Mnuchin led talks for Republicans in discussing a roughly $2 trillion package with Mrs. Pelosi. But Senate Republicans have repeatedly expressed opposition to a deal as large as the one Mr. Mnuchin discussed with Democrats. Mr. McConnell, who has taken the lead in negotiating on the GOP's behalf, has instead pointed to a roughly $650 billion Senate measure as the appropriate fiscal response.

The latest effort to pass a coronavirus-relief bill comes as lawmakers are also working to craft must-pass spending legislation before the end of Dec. 11. Lawmakers and aides see attaching coronavirus-relief measures to the spending bills as the most likely avenue for providing more aid this year.

--Andrew Duehren contributed to this article.

Write to Nick Timiraos at and Paul Kiernan at


(END) Dow Jones Newswires

November 20, 2020 18:16 ET (23:16 GMT)

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