There is a dispute between the outgoing US government and the Federal Reserve Billions in aid flared up in the corona crisis: US Treasury Secretary Steven Mnuchin wants to go against the recommendations of the Fed terminate certain utilities. In a letter to Federal Reserve Chairman Jerome Powell late Thursday evening, Mnuchin called for some of the corona emergency programs launched by the Fed to be phased out.
Specifically, it’s about half a trillion dollars. Mnuchin wants to use the funds freed up, which were made available by the Ministry of Finance, for other purposes in the corona crisis, for example for another economic stimulus package. Negotiations have been stuck in the US Parliament for months.
The Fed immediately countered Mnuchin’s request. She advocates letting all emergency programs launched in the corona crisis continue for the time being.
These programs are about loans to small and medium-sized companies or the purchase of municipal securities to support cities and communities in the crisis. For some time now, the Fed had to defend itself against the fact that some of the programs were hardly used. The Fed, on the other hand, regards this as a success, as the programs have helped calm the situation.
Public dispute instead of a common crisis policy
The Ministry of Finance had backed the programs with substantial financial resources. This happened not least for the reason that the Fed would otherwise have been prohibited from taking any action, at least in some areas.
Public debates between the Treasury Department and the Federal Reserve are extremely rare in the United States. Usually, especially in times of crisis, the two institutions work closely together to avert damage to the economy.