Yellen would need Congress to approve the use of reclaimed Fed loan funds, the Treasury Department says

U.S. Treasury Secretary Steve Mnuchin speaks during a press conference at the U.S. Department of State in Washington on September 21, 2020 about the Trump administration’s restoration of sanctions against Iran.

Patrick Semansky | Pool | Reuters

President-elect Joe Biden’s Treasury Secretary must pass Congress to reuse $ 455 billion of funds that the Trump administration is withdrawing from the Federal Reserve and other pandemic loan programs, the Treasury Department said Monday.

Biden is expected to appoint former Federal Reserve chairwoman Janet Yellen as his Treasury Secretary, putting a woman in the job for the first time since the department was founded in 1789.

Current Treasury Secretary Steve Mnuchin said last week he would allow some underutilized coronavirus loan programs at the Federal Reserve to expire on December 31 and allow Congress to spend the funds on other aid for businesses and individuals.

Biden’s transition team described the move that limits the new administration’s ability to halt financial markets during a deepening pandemic as “deeply irresponsible”.

A Treasury Department spokesman confirmed a Bloomberg report in which he said the reclaimed money will be placed into the Treasury Department’s General Fund, but denied that being removed from the Exchange Stabilization Fund would take the funds out of circulation.

The funds are tied to the phasing out of Fed loan programs for midsize businesses, municipal bond issuers and other borrowers, the spokesman said, adding that any new use, including facility renewal, would require Congressional approval.

Senator Ron Wyden, the top Democrat on the Senate Finance Committee, said Mnuchin’s move was “shameful” and a sharp contrast to his efforts to secure a major stimulus agreement before US President Donald Trump lost the election.

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“While the economy is falling behind in the skyrocketing Covid-19 cases, Secretary Mnuchin is involved in economic sabotage trying to tie the hands of the Biden government,” Wyden told Reuters in a statement.

A Treasury Department official said Friday that funds covering approximately $ 25 billion in existing facility loans would remain with the Treasury Department, but the money repaid from the loans could not be used for other purposes without the approval of Congress will.

At the end of 2025, according to the CARES law passed in March, all remaining aid funds must be transferred to the General Fund and used to reduce the budget deficit.

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