from Zero Hedge
As we reported yesterday, and as Rabobank senior strategist Philip Marey writes this morning in a note titled Mnuchin shoots the Fed in the back, “Treasury Secretary Mnuchin upset the markets yesterday when he announced that a number of the Fed’s special lending facilities should be terminated by the end of the year.”
In a letter to Fed Chairman Powell, Mnuchin said that the programs have clearly achieved their objectives. Credit markets have been rehabilitated and banks have the lending capacity to meet the borrowing needs of their corporate, municipal and non-profit clients. However, the Fed does not agree with Mnuchin’s decision and said in a statement that the Fed would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.
Earlier this week, Powell said that the time to discontinue the lending facilities was not soon, highlighting that typically the Fed keeps its backstops in place for some time after a crisis hits. Yesterday, Atlanta Fed president Bostic said that given where the economy is – and there’s so much uncertainty still out there – it’s prudent to keep those things open so that when people, if they do have stress, they can draw upon it.