Yellen would need Congress to approve use of clawed-back Fed loan funds: Treasury

FILE PHOTO: Steven T. Mnuchin, Secretary, Department of the Treasury during the Senate’s Committee on Banking, Housing, and Urban Affairs hearing examining the quarterly CARES Act report to Congress, in Washington, DC, U.S., September 24, 2020. Toni L. Sandys/Pool via REUTERS

WASHINGTON (Reuters) – President-elect Joe Biden’s choice for Treasury secretary, Janet Yellen, will need congressional approval to re-use $455 billion in funds taken back from Federal Reserve and other lending programs, but the Treasury on Tuesday denied a report that the money will be put into a special fund specifically to keep it out of her reach.

Treasury Secretary Steve Mnuchin last week said he would allow some little-used coronavirus lending programs at the Federal Reserve to expire on Dec. 31 and allow Congress to spend the funds on other aid for businesses and individuals.

Biden’s transition team called the move, which restricts the new administration’s ability to backstop financial markets amid a worsening pandemic, “deeply irresponsible.”

A Treasury spokesperson confirmed a Bloomberg report saying that the funds will be put into the Treasury’s General Fund, but added that moving them from the Exchange Stabilization Fund will not further restrict their use.

The funds are tied to expiring Fed lending programs for mid-size businesses, municipal bonds and other borrowers, the spokesperson said, adding that any new use, including renewing the facilities, would require congressional approval.

At the end of 2025, according to the CARES Act legislation passed in March, any remaining relief funds must be transferred to the General Fund and used for budget deficit reduction.

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