Steve Liesman joins ‘Closing Bell’ to report the Treasury Department has declined to extend the Main Street Lending facility, corporate bond purchases, and municipal bond purchases. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
The Treasury Department is looking to extend a handful of the Federal Reserve programs used to get markets through the early days of the coronavirus crisis but is going to end several others that expire at the end of the year.
The move drew a swift rebuke from the Fed, which wanted to continue the programs.
Among those that Treasury Secretary Steven Mnuchin asked the Fed to continue for another 90 days are programs that provided short-term “commercial paper” loans to businesses, as well as another for money market functioning and a backstop related to the Paycheck Protection Program.
However, Mnuchin also asked that other programs that were supported by Treasury capital come to an end for now. They include two facilities that bought corporate bonds as well as the Main Street Lending Program, which was targeted towards small- and medium-sized businesses.
The programs were set to expire at the end of the year. They were instituted in early March to open markets that had frozen during a panic-selling frenzy as fear over the pandemic grew.
But they were sparsely used for the most part and the subject of some criticism, particularly the Main Street facility.
“While portions of economy are still severely impacted and in need of additional support, financial conditions have responded and the use of these facilities has been limited,” Mnuchin said in a letter to Fed Chair Jerome Powell.
Mnuchin nevertheless said that “in an abundance of caution” he would like the Fed to keep alive the Commercial Paper Funding Facility and the Money Market Lending Facility, neither of which required Fed approval, and the PPP Liquidity Facility.
While the Fed and Treasury have worked closely through the crisis on the programs, they differed on the fate of them.
“The Federal Reserve 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 Fed said in a statement.
Market participants also recoiled against the move, with Dow futures falling more than 200 points. Kathy Jones, chief fixed income strategist at Charles Schwab, described the move as “Mnuchin decides to quit and take his toys with him. Wow.”
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