When policymakers approved the CARES Act in March, the massive federal response to the coronavirus pandemic included several emergency lending programs to prevent deeper economic losses. With the economy still struggling, common sense suggests those programs should continue in the coming months, taking advantage of money that hasn't yet been spent.
The Trump administration, however, disagrees. Earlier this week, the Federal Reserve explicitly requested that Treasury Secretary Steven Mnuchin extend the lending programs beyond Dec. 31 -- a legal option under the CARES Act -- but the cabinet secretary refused, insisting instead on pulling the plug.
As Neil Barofsky, the former special inspector general for the Troubled Asset Relief Program, explained this week, "The decision appears intended to limit the incoming Biden administration's options to deal with the continuing crisis."
Yesterday, as Bloomberg News reported, Donald Trump's outgoing economic team made matters just a little worse.
Treasury Secretary Steven Mnuchin will put $455 billion in unspent Cares Act funding into an account that his presumed successor, former Federal Reserve Chair Janet Yellen, will need authorization from Congress to use. Mnuchin plans to place the money into the agency's General Fund, a Treasury Department spokesperson said Tuesday. That fund can only be tapped with "authority based on congressionally issued legislation," according to the Treasury's website. The money includes $429 billion that Mnuchin is clawing back from the Federal Reserve -- which backed some of the central bank's emergency lending facilities -- and $26 billion that Treasury received for direct loans to companies.
If Janet Yellen is confirmed as Treasury secretary, she'll able to use just under $80 billion in the department's Exchange Stabilization Fund to bolster the economy. Were it not for Mnuchin's latest actions, Yellen would have access to a pot of resources nearly six times larger to work with.
The outgoing Treasury secretary doesn't have to do this. As Bloomberg News' report added, "Mnuchin isn't required to move the money into the General Fund -- the Cares Act states that the Treasury Department can maintain access to the money by keeping it in its Exchange Stabilization Fund until 2026."
But Trump's cabinet secretary is doing it anyway.
In case this isn't obvious, recent history shows how horribly unnecessary this is. When the Bush/Cheney administration prepared for the incoming Obama administration's arrival, then-Treasury Secretary Hank Paulson made every effort to make crisis-era resources available to the new team. When the Obama administration prepared for Donald Trump's arrival, the outgoing Democratic team made the Republican's success their "number-one priority."
But on their way out the door, Trump and his team appear a little too eager to salt the earth behind them.
We'll probably never get a straight answer, but I'd love to ask Mnuchin, "Who, exactly, told you to do this? Was it your idea, or did someone give you direction?"