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Let's talk about what is going down here.
My friend @arappeport and I wrote last week that Treasury might try to kill the novel Fed facilities. Now it is. (1/) https://www.nytimes.com/2020/11/09/business/economy/federal-reserve-emergency-loans.html https://twitter.com/stevenmnuchin1/status/1329539416306618368
My friend @arappeport and I wrote last week that Treasury might try to kill the novel Fed facilities. Now it is. (1/) https://www.nytimes.com/2020/11/09/business/economy/federal-reserve-emergency-loans.html https://twitter.com/stevenmnuchin1/status/1329539416306618368
Sec. Mnuchin isn't *just* not extending these. He's asking the Fed to give the money back. That matters hugely, because the $454 billion pot from CARES cannot make new loans.
No new loans and no money left in the facilities = a new Democratic administration can't just restart the programs. They need to find new $$$ to back them up.
Why do we care? Because when I talk to investors, they say that the reasons markets won't freak if these are taken away is that they know the Fed can just restart them.
But that is not actually obvious, now.
But that is not actually obvious, now.
To be clear, the Fed could find a creative way to protect against losses and revamp these little guys without an act of Congress, at least in theory. But they wanted the Treasury's backup earlier in the crisis. And they got it.
Update from Constitution Ave: "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."
More: The old ESF still hold an un-earmarked $74B. So the Fed and new Treasury could use that to restart some programs in 2021.
BUT Democrats had been eyeing making these more generous (esp. MLF + MS). Unclear if it would've worked, but this'll limit their capacity to try it.
BUT Democrats had been eyeing making these more generous (esp. MLF + MS). Unclear if it would've worked, but this'll limit their capacity to try it.
Sorry guys, still going. Very important to note that this money was scored as basically costless because loans get paid back. It isn't expected to add to the deficit. If you repurpose and spend-spend it, it will. https://twitter.com/SalehaMohsin/status/1329560870553325568
Also, the Fed avoids getting in fights with the Treasury. It has treated the $454B as Mr. Mnuchin's at every turn. It is likely to give the appropriation back, as asked.
