5

Just edit this title if I didn't word it correctly.

  1. Why wouldn't Biden's renewal "imply a return to the status quo ante"? What does "seed funding from Congress" mean?

  2. Why can't Biden ask Congress to re approve "the unused portion of a $454bn account approved by Congress during the market meltdown in March"? Is the article implying that Conngress refuse because Biden's a Democrat?

Trump strips US Fed of emergency credit powers in latest scorched-earth move. I quote just the salient paragraphs. This post will be too long if I quote more.

The incoming Biden Administration will be able to renew the Fed’s Article 13 powers in late January but that does not imply a return to the status quo ante. The key lending facilities in question are anchored in seed funding from Congress.

The US Treasury Secretary, Steve Mnuchin, has told the Fed that he will not roll over five of its nine Great Depression powers under the Article 13 (3) of the Federal Reserve Act. There will be a suspension of its lending facilities for companies, local governments, and ‘Main Street’ loans at the end of the year.

The Treasury also instructed Fed Chairman Jay Powell to return the unused portion of a $454bn account approved by Congress during the market meltdown in March.

This seed money gave the Fed $4.5 trillion extra lending power under a policy of 10:1 leverage and had an electrifying effect on market confidence – avoiding the errors made in 2008.

Roughly $250bn remains and could be amplified into a real lending bazooka under Joe Biden if Congress blocks his reflation plan. It has therefore become a high stakes bone of contention.

Improve this question
2

The article explains its reasoning in an another para:

Mr Munchin has demanded that this money now be returned to Congress. Since the Republicans have no intention of funding Mr Biden’s Keynesian expansion and are likely to retain control of the Senate, there is little chance that the Fed’s credit tools will be revived.

Basically, they posit that the Republican-controlled Senate will block such a re-authorization. And they even paraphrase one Republican Senator's position in support:

Senator Patrick Toomey, the expected chair of the Senate banking committee, said emergency credit facilities were no longer needed now that there is ample liquidity. He says it was never the intention of the Senate that Joe Biden should be able to use residual funds to bail out insolvent state and local governments.

Improve this answer

You must log in to answer this question.