President-elect Joe Biden’s selection of Janet Yellen to be Treasury secretary increases the odds the government will double down on pandemic recovery efforts, which include lending programs that enable banks to provide credit to households and businesses.
If confirmed, Yellen — a former head of the Federal Reserve — would inherit a shaky economy rattled by the coronavirus pandemic and growing division between Treasury and the Fed about how the recovery should proceed.
After Treasury Secretary Steven Mnuchin essentially ordered the central bank to shut down credit backstops such as the Main Street Lending Program, many experts expect Yellen would work with Fed Chair Jerome Powell immediately to revive its emergency lending programs and would even try to convince Congress that those programs need more fiscal support.
“Both Powell and Yellen believe that it's good to have a full toolbox, and that having those programs available is helpful even if you don't end up using them,” said Ian Katz, a director at Capital Alpha Partners.
Mnuchin last week called on the Fed to let programs meant to limit the economic effect of COVID-19
After the Fed initially resisted, saying it preferred "that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role,"
That means five programs, including the Main Street Lending Program and the Municipal Liquidity Facility, will shut down on Dec. 31. The $600 billion Main Street program provides banks financial backing to make loans to midsize firms meeting certain criteria that need pandemic relief. But the program has been criticized for a slow start and limited participation by banks and borrowers.
Brian Gardner, chief Washington policy strategist at Stifel, argued in a research note that replenishing the emergency lending programs will be one of Yellen’s top priorities once she is confirmed.
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Hannah Lang
