Steven Mnuchin

A federal watchdog is looking into former Treasury Secretary Steven Mnuchin’s decision to roll back the U.S. Federal Reserve’s emergency lending programs at the end of 2020, an issue that has become a point of partisan tension in Congress.

The agency that supervises Fannie Mae and Freddie Mac has pushed for revising an agreement with the Treasury Department allowing the mortgage giants to retain their profits. A deal could be out of reach once Joe Biden takes office.

Treasury Secretary Steven Mnuchin called on the Federal Reserve Thursday to let several of its emergency lending facilities expire at yearend and return unused funds provided by Congress. But the central bank wants the programs to continue.

The Financial Stability Oversight Council said the mortgage giants may need a bigger capital cushion than their regulator has proposed, but stopped short of designating them as “systemically important financial institutions.”

Commercial real estate companies are among those left out of the Federal Reserve’s middle-market relief program, but House members said they need government-backed financing to navigate the pandemic as much as anyone.

Individuals who received a coronavirus stimulus check earlier this year also qualify for the protection, as do couples who jointly file their taxes and expect to earn less than $198,000.

The council created by the Dodd-Frank Act to identify systemic risks launched a review of the market as part of an activities-based approach that shifts focus away from targeting individual firms.

The Senate had passed the bill Tuesday, shortly before the Small Business Administration was to stop accepting new loan applications.

The Treasury secretary said recent government moves will help the firms get through the risk of millions of borrowers missing their loan payments.

The head of the Senate panel overseeing Federal Reserve and Treasury Department efforts to boost the U.S. economy urged the agencies to remember their disclosure requirements.

The letter written by Rep. Maxine Waters, D-Calif., and Sen. Sherrod Brown, D-Ohio, was seen as a boost to Wall Street lobbying efforts seeking to quell the fallout of the coronavirus crisis on the mortgage market.

After budget cuts and a strategic transition, the interagency body conceived by Dodd-Frank to identify systemic threats has largely been silent as the pandemic roils the economy.

The $2 trillion deal passed by the Senate late Wednesday would aim to put banks and consumers alike on stronger financial footing as they weather the coronavirus pandemic.

The actions include cutting the federal funds rate to between 0% and 0.25% and other steps to ease economic stress from the spread of the coronavirus.

The lawmakers say they need more information about the administration’s plans in order to conduct proper oversight.

The Treasury secretary suggested a role for lawmakers in containing any fallout with financial contracts stemming from the transition to a new interest rate benchmark.

The Treasury secretary said he hopes lawmakers will back reforms of Fannie Mae and Freddie Mac within three to six months.

The Treasury Department made clear in a much-anticipated report that it prefers Congress take up reform of the government-sponsored enterprises, but it also recommended steps that federal agencies could take without legislation.

With officials putting finishing touches on presidentially directed reports on the future of the housing finance system, the Senate Banking Committee announced a hearing to examine the issue.

The mortgage industry will be looking for answers when Treasury and HUD unveil reports on housing finance reform, but the Trump administration’s plans could also raise a whole new host of questions.