Here’s Why Congressional Watchdogs Want To Investigate Mnuchin’s Decision To Cancel Emergency Fed Programs
Two Democratic appointees to the Congressional Oversight Commission are asking for a formal investigation into Treasury Secretary Steven Mnuchin’s controversial decision to terminate a handful of Federal Reserve emergency lending programs credited with cushioning the economy in the early days of the pandemic, arguing that he may have axed the facilities too soon without proper input from lawyers in the wake of President Trump’s election loss.
Last month, Mnuchin announced he would allow facilities related to corporate credit purchases, municipal bond purchases, and the Main Street Lending program for small- and medium-sized businesses to expire on December 31 because the sweeping $2.2 billion CARES Act passed in March required him to do so, soliciting a rare public rebuke from the central bank.
He also asked the Fed to return unused funds the CARES Act allocated to those facilities—nearly half a trillion dollars, some of which is now likely to be folded into the $900 billion stimulus package under discussion on Capitol Hill.
In a letter addressed to the Treasury Department’s Acting Inspector General, Bharat Ramamurti and Rep. Donna Shalala (D-Fla.) of the Congressional Oversight Commission said they were “concerned” that Mnuchin’s decision was made without thorough legal review of the CARES Act and possibly before he consulted legal counsel.
Ramamurti and Shalala also suggested that Mnuchin’s actions were in conflict with the Treasury Department’s prior position on the issue.
Mnuchin has said that the Treasury Department’s general counsel agrees with his interpretation of the CARES Act, but others have argued that the CARES Act makes it clears the unspent funds shouldn’t be returned to the Treasury until 2026.
He has also maintained that the termination of the emergency facilities was not politically motivated, though he has faced criticism that moving the funds out of the Fed and back to the Treasury means that the Federal Reserve under President-elect Biden will not be able to easily access them again.
“I just want to emphasize this was not a political decision,” Mnuchin told Rep. Maxine Waters, chairwoman of the House Financial Services Committee, during a hearing earlier this month. “I was merely implementing the CARES Act.”
As top lawmakers and officials in Congress continue to hash out the next federal aid bill, some Republicans including Sen. Pat Toomey (R-Pa.) are seeking to put further limits on the Federal Reserve’s emergency lending programs, the Washington Post reported Thursday, but Democrats are objecting because they believe the restrictions will hamstring the central bank under President-elect Biden. It’s one of a growing list of issues in the bill that Congress is still struggling to resolve.
The facilities Mnuchin plans to allow to expire were set up under the $2.2 trillion CARES Act in March to backstop the Fed’s emergency loans and debt purchases. Unless Congress acts, other critical CARES Act relief provisions will expire along with them at the end of the year, including emergency unemployment programs, a federal eviction moratorium, and forbearance on federal student loan payments.
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