Futures Fall as Fed Rebuffs Mnuchin Call for Return of Covid Emergency Funds

Rare open dispute between Fed and administration comes as unemployment claims are rising and uncontrolled pandemic threatens more economic misery.
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Stock futures fell Thursday evening after an open dispute emerged between the Federal Reserve and Treasury Secretary Steven Mnuchin over covid emergency funds aimed at helping municipalities and small businesses.

Mnuchin wrote a letter to Fed Chairman Jerome Powell requesting the return of $445 billion in unused funds that are part of a massive federal bailout bill passed last spring to counter the economic effects of the coronavirus pandemic. In the letter, Mnuchin said the programs had served their purpose.

In an unusual action, the Fed issued a statement in response saying. “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy,” the Washington Post reported.

One of the programs, aimed at supporting municipalities, has only made one loan, the Associated Press reported. Another aimed at helping small and medium-sized businesses has made loans of about $4 billion, according to AP.

The dispute emerged on the same day unemployment claims rose for the first time in five weeks and as the coronavirus spread uncontrolled through most of the nation.

It also comes as Mnuchin’s boss, President Donald Trump, continues to make baseless claims of voter fraud and to file frivolous nuisance lawsuits to keep alive the notion in his base that he won the election.

Powell has urged Congress and the administration to reach agreement on additional stimulus measures to boost the economy. Millions of unemployed Americans are set to lose emergency Federal aid on the day after Christmas. 

Futures contracts for the Dow Industrials and S&P 500 fell 0.7% Thursday evening.  In early trading in Tokyo the Nikkei 225 index fell 0.6%.