By Nick Timiraos and Paul Kiernan
WASHINGTON -- President-elect Joe Biden's transition team sharply criticized Treasury Secretary Steven Mnuchin's decision to allow funding for several emergency Federal Reserve lending programs to expire, escalating a political fight.
"The Treasury Department's attempt to prematurely end support that could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible," said Kate Bedingfield, a Biden spokeswoman, in a statement Friday.
The Treasury Department announced Thursday that it would allow the funding to expire after Dec. 31. Mr. Mnuchin also asked Fed Chairman Jerome Powell to refund more than $70 billion in capital that had already been transferred from the Treasury to cover losses in Fed loan programs.
That prompted a rare statement of objection from the Fed, which wants to maintain the lending programs as a backstop in the face of the coronavirus pandemic.
While the Fed may not have had any legal obligation to refund the Treasury its investment, Mr. Powell said in a letter to Mr. Mnuchin that the central bank would "work out arrangements with you for returning the unused portions of the funds."
Mr. Mnuchin earlier in the day defended his decision not to renew five Fed lending programs to extend credit to businesses, cities and states beginning next year. He said the programs were no longer necessary and that he lacked the legal authority to extend them.
He also denied the action was intended to impede the incoming administration. "We're not trying to hinder anything," Mr. Mnuchin said in an interview Friday on CNBC.
Mr. Mnuchin and congressional Republicans said the unused Treasury funds for Fed lending programs -- around $429 billion -- should be used to provide grants to businesses and unemployed workers instead. "We don't need to buy more corporate bonds," Mr. Mnuchin said.
Negotiations between the Trump administration, Senate Republicans and House Democrats over the terms of additional economic relief have been deadlocked for months.
Congressional Democrats strongly objected to Mr. Mnuchin's decision, suggesting it isn't clear how, or whether, the Treasury Department's decision not to use the money Congress created in March would push lawmakers closer to a deal.
House Speaker Nancy Pelosi (D., Calif.) said Mr. Mnuchin's decision would impede the Biden administration's flexibility to shore up the economy and markets.
Republicans leaders in the Senate applauded Mr. Mnuchin's decision and said it could help rekindle stalled stimulus talks during the so-called lame-duck session of Congress.
--Andrew Duehren contributed to this article.
Write to Nick Timiraos at nick.timiraos@wsj.com and Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
11-20-20 1751ET
