The U.S. Treasury Department and the Federal Reserve have extended four key COVID-19 safety net lending facilities until March 31, 2021.
These tools include commercial paper financing tools and money market mutual fund liquidity tools, the latter withdrawing funds from the foreign exchange stabilization fund balance previously existing by the Ministry of Finance, while salary protection liquidity tools and primary dealer credit tools do not.
US Treasury Secretary Steven Mnuchin announced the extension, saying that he approved it “very carefully”
Mnuchin said: “I am pleased that the Federal Reserve voted unanimously for these extensions, and I am proud of the work our team has done to successfully implement these plans.”
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The loan program was created during the COVID-19 pandemic and is a series of tools that can help stabilize the then sluggish economy. Although loan facilities are rarely used so far, they are seen as an important backing for a severely pandemic economy.
The initial validity period was limited to the end of this year, and until recently, Mnuchin insisted that the Ministry of Finance has enough tools to keep the market “comfortable.”
Munuchin told CNBC’s “Squawk Box”: “For now, we have more than $750 billion in firepower between the foreign exchange stabilization fund and the actions that the Fed can take, and the market should be very pleased with this.”
Mnuchin once suggested that any funds reserved for the Fed’s loan program should be handed over to Congress for reallocation if they are not used.
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The Fed previously stated in a statement that it is more willing to “continue to play an important role in the full set of emergency facilities established during the coronavirus pandemic and provide support to our still tense and fragile economy.”