WASHINGTON — Treasury Secretary Steven Mnuchin broke sharply with the Federal Reserve this week, choosing to end a variety of programs aimed at helping markets, businesses and municipalities weather the pandemic and asking the central bank to return the funds earmarked to support those efforts.
Mr. Mnuchin said his decision was driven by a deference to what he believed was Congress’s intent when it allocated the funding, a desire to repurpose the money toward better uses and a belief that markets no longer needed them. But his actions, which will limit the incoming Biden administration’s ability to use those programs at scale, seem driven by politics.
“The law is very clear,” Mr. Mnuchin said in an interview on CNBC Friday. He defended his decision and suggested that the programs were no longer needed, because market conditions “are in great shape.”
But that view is not shared by the Fed, which quickly issued a statement expressing disappointment with the decision, calling the economy “still-strained and vulnerable.” It is worth noting that Mr. Mnuchin only publicly took the position that Congress meant for the programs to end after Dec. 31 once it became clear that President Trump had lost the election to Joseph R. Biden Jr.
By ending the programs — which have been funneling loans to medium-sized businesses and backstopping municipal and corporate bond markets — Mr. Mnuchin is taking away a source of economic support just as the new administration comes into office and as rising virus cases dog the recovery. By asking the Fed to return the money that enables the emergency efforts,