Treasury Seeks to Wind Down Emergency Credit Facilities

With several emergency credit facilities created to respond to the COVID-19 emergency scheduled to wind down by year’s end, Treasury Secretary Steven Mnuchin today asked the Federal Reserve to return unused funds in several facilities to the Treasury. The facilities Mnuchin sought to wind down are the Main Street Lending Program, the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Securities Loan Facility and the Municipal Liquidity Facility.

Treasury approved $195 billion in CARES Act funding for these facilities, supporting lending capacity of about $2 trillion, but just $25 billion has actually been lent. “While portions of the economy are still severely impacted and in need of additional fiscal support, financial conditions have responded and the use of these facilities has been limited,” Mnuchin said. Returning the funds would “allow Congress to re-appropriate $455 billion,” he added.

However, Mnuchin asked that the Fed extend two facilities that used Treasury funding—the Commercial Paper Funding Facility and the Money Market Mutual Fund Liquidity Facility—as well as the Primary Dealer Credit Facility and PPP Liquidity Facility, which did not use Treasury funding, for 90 days.

In a statement, the Fed responded that it “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.”