- Janet Yellen indicated to senators on Thursday that she won't immediately revive expired Fed lending programs.
- "As mandated by Congress, the 13(3) facilities funded by the CARES Act will not be available," Yellen said in a written statement, according to Bloomberg.
- Five relief programs became the subject of controversy in November after the Treasury and the Fed butted heads on whether they should be extended past their year-end expiration date.
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Various Federal Reserve lending facilities left to expire under former Treasury Secretary Steven Mnuchin are likely to stay closed in the immediate future.
Janet Yellen, President Joe Biden's nominee for Treasury Secretary, indicated she won't work to reopen the closed 13(3) programs unless Congress allows for such action, Bloomberg reported on Thursday, citing Yellen's written responses to questions from the Senate Finance Committee.
"The Federal Reserve will continue to provide support to the economy through its ongoing programs and the use of its available tools but as mandated by Congress, the 13(3) facilities funded by the Cares Act will not be available," she wrote.
Five relief programs established by the Fed were phased out at the end of 2020 when the central bank returned funds allocated by the CARES Act. The facilities were introduced early last year in response to the coronavirus pandemic and targeted state and local governments, corporations, and small businesses, among other struggling entities.
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The facilities came under scrutiny in November when Mnuchin and Fed Chair Jerome Powell disagreed on some programs' futures. The Treasury Secretary said on November 19 that five facilities wouldn't be renewed past their end-of-year expiration, noting the programs are backed by Treasury funding allocated in the CARES Act. Mnuchin added that, instead of renewing the facilities, the Fed should return the funds and repurpose them for more targeted relief efforts.
The statement triggered a rare public rebuttal from the central bank. The Fed called on the Treasury to extend "the full suite of emergency facilities," adding they serve "as a backstop for our still-strained and vulnerable economy."
In the end, the Fed extended four programs through March 31 while allowing the remaining five to close. Biden's selection of former Fed Chair Yellen as his nominee to head the Treasury prompted some economists to wonder whether she would resurrect the expired facilities. Yellen's written statement, however, suggests she won't renew the programs with a smaller pool of funds allocated to the Treasury.
Yellen still emphasized the need for accommodative monetary conditions as the pandemic rages on. While vaccines continue to be distributed across the country, indicators such as weekly jobless claims point to lasting damage to the US economy.
"Right now, taking too little action poses the greatest risk to the health of our economy," she wrote, according to Bloomberg.
The Treasury Secretary-designate was less explicit in other responses. The ex-Fed chair pledged to "work with members of Congress" to determine whether households making less than $400,000 would be protected from any reversal of the 2017 tax cuts, according to Bloomberg. Yellen's answer, while vague, suggests households below that income level could avoid future tax hikes.
The written statement responds to follow-up questions asked by senators after Yellen's Tuesday confirmation hearing. The Senate is set to vote on Yellen's nomination on Friday.
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