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U.S. Treasury Secretary Steven Mnuchin. Photo: Caroline Brehman-Pool via Getty

The Treasury Department will not extend several Federal Reserve lending programs set to expire by year's end that were put in place at the start of the COVID-19 pandemic.

Why it matters: There is concern that pulling the plug on these loan programs will negatively impact the still-fragile economy. Eliminating the programs could hobble the Fed and make it harder to revive similar assistance under a new Congress.

The big picture: The Fed previously said in a statement that it preferred to retain the emergency facilities in full, but chair Jerome Powell wrote in a letter released Friday that the central bank will comply with Treasury Secretary Steven Mnuchin’s directive to return unused funds.

  • Mnuchin has said the move will allow Congress to re-appropriate more than $450 billion to other coronavirus programs, per the AP.
  • “We will work out arrangements with you for returning the unused portions of the funds allocated to the CARES Act facilities in connection with their year-end termination," Powell said.

The programs affected include:

  • Corporate bond buying.
  • Loans to state and local governments.
  • Loans to small- and medium-sized businesses.

What they’re saying: “By asking for the money back, what Mnuchin does is he makes sure it’s not there for Biden’s Treasury secretary," Krishna Guha, vice chair of independent research firm Evercore ISI, told the Wall Street Journal. "You’re greatly reducing the firepower that’s available to your successor. This is reckless politicization of market-stabilization policy.”

  • Sen. Sherrod Brown, (D-Ohio,) said in a statement: “There can be no doubt, the Trump administration and their congressional toadies are actively trying to tank the U.S economy,” per the AP. "For months, they have refused to take the steps necessary to support workers, small businesses and restaurants. As the result, the only tool at our disposal has been these facilities.”
  • But Mnuchin called the move a “very simple thing” and said it is “not a political issue” in an interview with CNBC on Friday. “Markets should be very comfortable that we have plenty of capacity left,” he said.
  • Up to $800 billion can be deployed as a remedy through the Exchange Stabilization Fund if needed, he added.

Go deeper

McConnell circulates revised GOP coronavirus stimulus plan

Senate Majority Leader Mitch McConnell talks with reporters today in the Mansfield Room at the U.S. Capitol. Photo: Chip Somodevilla/Getty Image

Senate Majority Leader Mitch McConnell circulated a new framework for coronavirus stimulus legislation to Republican members on Tuesday that would establish a fresh round of funding for the small-business Paycheck Protection Program and implement widespread liability protections, according to a copy of the draft proposal obtained by Axios.

Driving the news: The revised GOP relief plan comes after McConnell's meeting with House Minority Leader Kevin McCarthy, Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows, during which they went over in detail what provisions would get backing from President Trump.

Biden's economic team will write a new crisis playbook

Illustration: Eniola Odetunde/Axios

Joe Biden's economic team faces a daunting task helping the millions of Americans who have lost their jobs or otherwise been financially ravaged by the coronavirus. But most of them have first-hand crisis experience, dating back to when Barack Obama inherited a crumbling economy when he took office in 2009.

Why it matters: Most of President-elect Biden's economic nominees served in the Obama administration, and wish that they could have gone bigger to help America recover from the 2008 financial crisis. But it's not going to be easy for them to push through massive fiscal spending in 2021.

Biden plans to ask public to wear masks for first 100 days in office

Joe Biden. Photo: Mark Makela/Gettu Images

President-elect Joe Biden told CNN on Thursday that he plans to ask the American public to wear face masks for the first 100 days of his presidency.

The big picture: Biden also stated he has asked NIAID director Anthony Fauci to stay on in his current role, serve as a chief medical adviser and be part of his COVID-19 response team when he takes office early next year.