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Fed, Treasury Department Split On When To Cut Off Pandemic Loan Programs


The heads of the two most powerful federal agencies that oversee the economy rarely let their differences show. But right now Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell are having a very public spat. They're at odds over when to cut off lending programs for businesses and communities hurt by the pandemic. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: The dispute flared up yesterday when Mnuchin sent Powell a letter. In it, he says the Fed needs to begin unwinding some of the pandemic lending programs. These programs were started by Congress last spring as a backstop to keep the economy going through the end of the year. Here's Mnuchin on CNBC today.


STEVEN MNUCHIN: It was very clear that the congressional intent is it expires on December of this year.

ZARROLI: Mnuchin argues that the loan programs have done their job - the economy is rebounding, banks are lending, interest rates have stayed low. And he says the programs can be reinstated if necessary. Powell says, yes, the economy has improved, but it's still strained and vulnerable. And the future is murky. Coronavirus cases are surging again, and some states are reimposing lockdowns. Former Fed vice president Alan Blinder says it's simply too soon to think about withdrawing federal aid.

ALAN BLINDER: There's beginning to accumulate evidence - not huge evidence, but some evidence - that the economy is slowing badly as the pandemic surges.

ZARROLI: So, Blinder says, ending the programs now is a really bad idea.

BLINDER: I think it says that Secretary Mnuchin is out of his mind.

ZARROLI: Despite the disagreement between them, Powell appeared to give in to Mnuchin this afternoon. He conceded that the Treasury secretary has the sole authority to determine how much money goes into Fed lending programs. And in a letter to Mnuchin published on the Fed's website, he said the Fed would return any money that's left over in the programs to the government.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.

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