McConnell proposes shifting unspent small business funds to COVID-19 aid

Secy Mnuchin asks Fed to return $455B of COVID relief funds

Treasury Secretary Steven Mnuchin requested that the Federal Reserve return unused coronavirus stimulus funds.

Mnuchin's decision received support from Sen.

Use of the funds elsewhere limits the options for the incoming administration of Democratic President-elect Joe Biden to backstop financial markets after he takes office on Jan 20.

US President Donald Trump's administration on Thursday moved to end several emergency pandemic lending programs at the Federal Reserve, triggering a rare public rift when the central bank objected to the Department of Treasury's instruction.

"Congress should repurpose this money toward the kinds of urgent, important and targeted relief measures that Republicans have been trying to pass for months, but which Democrats have repeatedly blocked with all-or-nothing demands", McConnell said in a statement.

Mnuchin added he will be able to help US businesses without a new COVID-relief bill if the Fed returns its relief funds.

Ending support for Fed programs that "could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible", Biden's camp said in a statement.

"We're not trying to hinder anything", Mnuchin said in a CNBC interview. "This follows a disturbing pattern of this administration putting petty grievances ahead of the health and safety of the American people".

But in a letter to Fed Chairman Jerome Powell, Mnuchin said that the Fed's corporate credit, municipal lending and Main Street Lending programs would not be renewed when they expire on December 31.

Talks between the Republicans and Democrats on stimulus have been stalled for months. Mr. McConnell, who has taken the lead in negotiating on the GOP's behalf, has instead pointed to a roughly $650 billion Senate measure as the appropriate fiscal response.

Repurposing the funds may not be easy, however, given the rules of congressional budgeting.

On Thursday, outgoing Treasury Secretary Steven Mnuchin published a letter sent to Fed Chair Jerome Powell seeking the return of money allocated by Congress to fund the programs, which are available to midsize and large companies as well as state and local governments. Pelosi and Schumer rejected the plan as insufficient and said it lacked a way to combat the spread of the coronavirus, which has only become worse since then. "We need this money to go help small businesses that are still closed or hurt, no fault of their own". He called on House Democrats to join with Republicans in freeing up $138 billion for the Paycheck Protection Program, which could help small businesses keep staff on payrolls.

So far, though, markets have remained calm, potentially a sign that investors either believe credit markets are more stable or have faith the Biden administration will be able to provide support if needed, Perli said. "I think that's very important", Dallas Fed President Robert Kaplan said earlier on Thursday in an interview on Bloomberg TV, referring to the section of the Federal Reserve Act providing the authority for emergency lending. 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. The Fed quickly issued a statement urging that "the full suite" of measures be maintained into 2021.

Credit markets for corporations and municipalities froze up earlier this year because of the crisis.

"The people who really need this support right now are not the rich corporations - it's the small businesses; the people that are unemployed".

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