WASHINGTON — Treasury Secretary Steven Mnuchin broke sharply with the Federal Reserve this week, choosing to end a variety of programs aimed at helping markets, businesses and municipalities weather the pandemic and asking the central bank to return the funds earmarked to support those efforts.
Mr. Mnuchin said his decision was driven by a deference to what he believed was Congress’s intent when it allocated the funding, a desire to repurpose the money toward better uses and a belief that markets no longer needed them. But his actions, which will limit the incoming Biden administration’s ability to use those programs at scale, seem driven by politics.
“The law is very clear,” Mr. Mnuchin said in an interview on CNBC Friday. He defended his decision and suggested that the programs were no longer needed, because market conditions “are in great shape.”
But that view is not shared by the Fed, which quickly issued a statement expressing disappointment with the decision, calling the economy “still-strained and vulnerable.” It is worth noting that Mr. Mnuchin only publicly took the position that Congress meant for the programs to end after Dec. 31 once it became clear that President Trump had lost the election to Joseph R. Biden Jr.
By ending the programs — which have been funneling loans to medium-sized businesses and backstopping municipal and corporate bond markets — Mr. Mnuchin is taking away a source of economic support just as the new administration comes into office and as rising virus cases dog the recovery. By asking the Fed to return the money that enables the emergency efforts, he could make it harder for Democrats to restart them at a large scale and on more generous terms.
Chair Jerome H. Powell indicated the Fed would return the funds, in a letter to Mr. Mnuchin on Friday afternoon.
“It’s not just closing the store down for Biden,” said Ernie Tedeschi, a policy economist at Evercore ISI. “It’s burning the store down.”
Mr. Biden’s transition team criticized the move as trying to hamstring his ability to help the economy.
“The Treasury Department’s attempt to prematurely end support that could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible,” Kate Bedingfield, a spokeswoman for the transition, said in a statement.
Mr. Mnuchin’s decision came as a surprise to Mr. Trump, who was alerted to the decision shortly before Mr. Mnuchin’s letter was released on Thursday and who, on Friday morning, expressed some concern that the move could have a negative impact on the stock market, according to a person familiar with the matter who was not authorized to speak publicly. Asked if Mr. Trump had instructed Mr. Mnuchin to end the programs, Mr. Mnuchin’s spokeswoman said that it was “solely a Treasury decision based on what the law and congressional intent required.”
Here is a rundown of how these programs work, why Mr. Mnuchin says he is killing them, and why his arguments leave unanswered questions.
The programs are a collaboration.
Mr. Mnuchin is pulling the plug on a set of Fed emergency lending programs, which the central bank can use to keep credit flowing in times of crisis. After the 2008 recession, Congress insisted that the Treasury secretary sign off on such efforts.
The Fed is loath to take credit losses, so Treasury has been providing a layer of money to cover any loans or purchases that go bad. It initially used the Exchange Stabilization Fund, a pot of unused money. But in March, Congress beefed up the Treasury’s capacity.
Mr. Mnuchin and lawmakers earmarked $454 billion to support Fed lending when they cut a deal on a government pandemic response package. The Fed can make money out of thin air, and it only needs a little bit of backing — $1 of insurance can be turned into as much as $10 in bond buying or business loans. The programs offered a big potential bang for the government’s buck.
Mr. Mnuchin ultimately earmarked $195 billion for specific loan programs. Not much of that capacity has been used. Some programs calmed market conditions merely by reassuring investors. The small and medium-sized business loan program had restrictive terms.
When Mr. Mnuchin said Thursday that he would end the five appropriation-backed programs at the end of 2020, he asked the Fed to give back all but $25 billion, which he is leaving to support already-made loans and bond purchases.
The law is not ‘clear,’ as Mr. Mnuchin said.
Mr. Mnuchin has said “it is very clear in the law” that the allocation-backed programs must end Dec. 31. That is not true.
The law states that the Treasury should not hand out money from its $454 billion pot after the end of 2020 — but it allows already-dedicated funds to remain available. Because the Treasury had handed hundreds of billions of dollars in insurance money to the Fed, the central bank theoretically has lots of capacity left to make loans and buy bonds.
The Fed’s lawyers have interpreted the law to mean that they can keep the programs running into 2021, supported by the existing Treasury backstop, as the central bank’s statement on Thursday indicated.
Mr. Mnuchin himself had previously suggested that the programs could be extended past the end of the year, writing in an October letter that the decision would hinge on market conditions.
A Treasury spokeswoman said on Friday that Mr. Mnuchin had always believed Congress meant for the funding to sunset, and had planned to use Exchange Stabilization Fund money — plus the $25 billion that he is leaving with the Fed to cover existing loans — to extend the programs if needed.
That logic is hard to follow given Mr. Mnuchin’s belief that the law prevents new Fed lending backed by Congress’s money after Dec. 31. If that’s the case, it should also prevent new lending against the $25 billion, which comes from the same congressional pot, said Peter Conti-Brown, a lawyer and Fed historian at the University of Pennsylvania.
Congress can’t repurpose the money for free.
Mr. Mnuchin also suggested that taking back the earmarked money would allow Congress to reroute it to other purposes in ways that “won’t cost taxpayers any more money.”
But the Congressional Budget Office, in assessing the budget impact of the money dedicated to Fed programs, found it to be nearly free of cost. The idea was that the loans the money backed would eventually be returned, and fees and interest earnings would cover any expenses. So if the money is clawed back and repurposed for spending — not lending — it would add toward the deficit for accounting purposes.
Market distortions have always been a concern.
Top Republicans have suggested that leaving the programs operational for too long could distort markets, which is a genuine concern with such backstops. In his letter announcing his intent to close the programs, Mr. Mnuchin noted that normal market conditions prevail.
It’s true that corporate bond issuance has been rapid and states and localities are able to fund themselves at low rates. But virus cases are also spiking, suggesting that conditions could worsen and Fed backstops might again be needed.
Over the summer, Mr. Mnuchin agreed to extend the programs until Dec. 31 at a time when coronavirus infections were much lower than they are today, markets were functioning well, and companies were issuing bonds at breakneck speed.
Democrats say the move was political. Republicans applaud it.
Treasury’s move to claw back the funding limits Mr. Biden. The Fed and the next Treasury secretary can use the Exchange Stabilization Fund to back up bond purchases and business lending.
But it contains much less money than the government would have had with the congressional appropriation. That could hamper a goal that had been percolating among Democrats: to restart the programs, make them more generous and use them as a backup option if additional stimulus was tough to get through Congress.
Senator Mitch McConnell of Kentucky, the majority leader, said the request to end the programs and return the money was “fully aligned with the letter of the law and the intent of the Congress.”
Democrats reacted with outrage.
“It is clear that Trump and Mnuchin are willing to spitefully destroy the economy and make it as difficult as possible for the incoming Biden Administration to turn this crisis around and lead the nation to a recovery,” Representative Maxine Waters of California said in a letter.
Jim Tankersley contributed reporting.
Politics Briefing: Liberals acknowledge missed target on clean water for First Nations – The Globe and Mail
During the 2015 election campaign, the Liberals promised to end long-term drinking water advisories on First Nations by March, 2021.
Today, after months of speculation, the government acknowledged that it was not going to meet that deadline.
In fact, there are still 59 advisories in 41 First Nations communities. The longest of which, in Neskantaga in Ontario and Shoal Lake No. 40 in Manitoba, have been in place since the mid-1990s.
Indigenous Services Minister Marc Miller said the government was still racing to provide clean water in those communities by March, but it was unlikely to get all of them in place in the next four months. The government is pledging $1.5-billion in the next fiscal year to that purpose.
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Trade between Canada and China is growing, despite the chilly diplomatic relations.
The Indian government expressed disapproval with Prime Minister Justin Trudeau supporting protests by farmers in India. (Conservative Leader Erin O’Toole and NDP Leader Jagmeet Singh have also voiced support for the farmers.)
More than half of women and men living in the territories have been the victims of physical of sexual assault since the age of 15, Statistics Canada reports.
Canada’s Competition Commissioner says he can’t make nearly the same moves against tech giants that other international watchdogs are making, because he doesn’t have the same powers.
Paul Rochon, the deputy minister of Finance, has resigned.
And the light at the end of the tunnel: Britain is set to begin administering COVID-19 vaccines next week after approving of the drug produced by Pfizer.
John Ibbitson (The Globe and Mail) on the Liberals’ fall economic statement: “The COVID-19 pandemic has savaged this country’s finances. You simply can’t slough off a deficit that will likely surpass $400-billion once we’ve struggled through the dark winter that awaits us. Years of previously unimaginable deficits lie ahead.”
Michael Geist (The Globe and Mail) on why the new broadcasting bill could lead to less Canadian ownership of content: “Yet the obvious trajectory of the new Canadian system is to shift away from the licensing system. Broadcasters in the licensed world will increasingly look at the unlicensed internet world that is free from foreign investment restrictions and conclude that they prefer the unlicensed system.”
The real reason more women should be in politics – TVO
I got a very short, provocative email the other day from a former Ontario finance minister, whose privacy I will protect here, since it was a personal note that he sent. He was responding to a piece I’d just written about what it’ll take to get more women into politics. His note simply said: “Why?”
I inferred from this that he wanted to know why we needed more women in politics. What possible difference could it make? Isn’t it more important to have the “best people” in public life, regardless of gender?
All great questions. Fortunately (and coincidentally), I had just watched a Zoom conversation, organized by Ryerson University’s Democracy Forum, featuring two of the most trailblazing women ever to serve in politics in Canada. So, to that former finance minister who emailed me, here comes your answer.
Kathleen Wynne and Rachel Notley both made history in their respective provinces during the past decade. Wynne became Ontario’s first female premier in 2013 and won a majority government in 2014. She was also the province’s first openly gay premier. In 2015, Notley became the first New Democrat to inhabit the premier’s office in Alberta. She learned her politics from her late father Grant, Alberta’s NDP leader from 1968 to 1984. Notley did her first campaigning as a child of three and a half and has a picture of herself on Tommy Douglas’s knee. (As a young girl, she famously once told federal NDP leader Ed Broadbent, “You have that same fake politician smile as my father.”)
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It seems both women inherited their partisan stripes from their parents’ generation. Wynne came from a Liberal family, and even in Grade 8 at MacKillop Public School in Richmond Hill, her colours were on display. At mock Parliament, there were 30 Conservatives, four Liberals, and one New Democrat. Wynne was one of the Liberals. Even then.
Five years ago, Wynne and Notley were two of six female premiers in Canada. That’s right: for the first time ever, the majority of the country’s premiers were female. They also represented the vast majority of Canada’s population, as they were serving in the biggest provinces (Ontario, Quebec, British Columbia, and Alberta).
And then the wheel turned. Within a few years, there’d be none. Today, there’s one (Caroline Cochrane in the Northwest Territories).
Did having more women in the premier’s offices of the country make a difference?
“It certainly did change the tone,” said Notley. “There’s a different tone when men replace women, especially if they don’t see elevating women as an important part of their approach.”
Notley added that women leaders are more willing to listen to contrary views — for example, around the cabinet table. “They don’t walk in with a pre-set view that they need to defend,” she said.
For her part, Wynne pointed to a Council of the Federation meeting (essentially, all the premiers) in 2013 at Niagara-on-the-Lake as all the proof you need that women in politics do things differently and achieve different outcomes. The issue of the Conservative federal government’s unwillingness to call a public inquiry into missing and murdered Indigenous women had come up for discussion.
“I can tell you categorically, it was the women at the table who structured the discussion so the men had to agree to support it,” Wynne said. “There was some shifting in their chairs, but they had to go along.”
She added: “It’s just very clear that, when there’s a critical mass of women at the table, it means different issues get discussed, and there’s a different commitment to substance.”
Wynne is adamant that most women get into politics to advance a cause, whereas men look to wield authority or exercise power. Her first foray into politics was half a century ago, when she tried to convince her high school in Richmond Hill to repeal a ban on girls wearing pants. Later, after having kids of her own, she became an educational activist, which led her to run for school-board trustee and eventually Queen’s Park. She’s still the MPP for Don Valley West, although she’s announced she will serve out this term, and that’ll be it.
“When you have 50 per cent women at the cabinet table or in caucus, you talk about different issues and solve them in a different way,” Wynne insisted.
“It also sends an important signal,” added Notley. “It says we’re going to make sure that women, who are half the population, are also half the decision makers.”
Both women have also bemoaned the fact that, for much of the public, political leadership still has to look big and strong. Wynne has mentioned in the past how hard it was to project a presence of strong leadership when she campaigned in the 2018 election against Doug Ford, who physically is just much bigger than she is.
“We’ve got to change the criteria of what a good leader looks like,” Notley said. “And, left to their own devices, all political parties will leave women behind. Even my party operates in a very combative, partisan field. It makes it harder for women to participate fully.”
Wynne even fessed up to the fact that, when she was premier, she’d drop a curse word “strategically” every now and then to project a more traditional sense of strength.
“I may not be one of the boys, but I know how to hold my own,” she joked.
“I swear excessively,” added Notley, to bigger laughs.
Notley, meanwhile, is still leader of the opposition in Alberta and hopes to get back into the premier’s office. She still has a chance to break one of the worst curses in Canadian political history: no female first minister has ever been re-elected. Notley’s NDP is currently seven points up on the governing United Conservative Party. “I’d like to break that pattern,” she said.
There’s been considerable debate as to why, so far, no women leaders have been able to do it. Some say the barriers to winning and getting re-elected are bigger for women. Toronto Star columnist Martin Regg Cohn, who moderated the session, suggested that “women only get a chance to be leader at the end of a dynasty. As men run for cover, women step up. They’re braver. They get an opportunity to become leader because often the best men won’t run.”
“That’s why the odds are stacked against us,” added Wynne. “So, Rachel, no pressure, but it’s all on you.”
So, to the former Ontario finance minister who wrote me the shortest email I’ve ever received, I hope this answers your question.
Turkey's Ambitious Greens Aim to Colour Country's Politics – Balkan Insight
“Turkey is an ecocidal country. It struggles with ecological problems across the country,” Urbarli said. [“Ecocide] is a term created by merging the terms “ecology” and “genocide”.]
“The government continuously gives licences to mining companies which destroy nature. The North Marmara Motorway and Kanal Istanbul projects have had tremendous effects on nature. The Marmara Sea is already practically dead and the Black Sea could also die because of these projects,” Urbarli claimed.
The motorway, which will be almost 470km long when complete, is designed to connect European Turkey with the rest of the country, skirting Istanbul and relieving congestion in the city.
Meanwhile some 79 per cent of the Kaz Mountains, on the Aegean coast, which has the country’s cleanest air and is home to many endemic species, is being licenced for mining by the government, despite popular opposition.
According to Northern Forests Defence, NFD, an advocacy organisation set up to protest the forests between the Sea of Marmara and the Black Sea, at least 3.7 million trees have been cut down to make way for the construction of the North Marmara Motorway.
More will be cut down if the Kanal Istanbul project is actualised. The proposed canal is set to be 43 kilometres long and 400 metres wide and will connect the Black Sea to the Sea of Marmara.
Its construction would involve the destruction of a natural lagoon and a reservoir, which is one of Istanbul’s largest water reserves. President Recep Tayyip Erdogan has described the project as his “dream”.
“The government thinks nature can be spent and destroyed … forests are being destroyed, and they think that they can replace them with landscaped designs next to motorways. The ecosystem is not what they presume,” Urbarli said.
Urbarli cited Istanbul’s water problem as an example of the government’s destructive projects. “The government had been warned many times that these forests and the area for the motorway are the water reservoir of Istanbul but all objections were overruled. Now Istanbul faces a great water shortage,” Urbarli continued.
According to the Istanbul Municipality, only 24 per cent of the city’s reservoir dams are full of water and some dams near North Marmara Motorway are empty. “If this situation continues like this, Turkey will have an unprecedented ecological problem,” Urbarli warned.
The only way out from these crises is Green thinking, he says.
Turning to future political alliances, he said: “We are not currently part of any political alliances but we are talking about this with other parties.
“Whether or not we take part in the next elections, we believe Green thinking will shape these elections; a Green discourse has started to appear on other opposition parties’ agendas,” he added.
“Other parties will need Greens because of their knowledge and experience of green politics – and the Green Party needs other parties so it can enter political alliances,” he concluded.
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