Evans says Fed applications are a significant setback, disenchanted in Treasury Division’s try and cease funding
Charles Evans, President of the US Federal Reserve in Chicago, said Friday he was disappointed with the Treasury Department’s decision to end several loan programs run during the coronavirus pandemic.
A day after Treasury Secretary Steven Mnuchin said the programs would not continue beyond the year-end deadline, Evans told CNBC that the facilities had an important role to play.
“I think our 13 (3) facilities have been very helpful. They play an important role when markets are in a more difficult situation,” he told CNBC’s Steve Liesman in an interview with Squawk Box. “I think the backstop role could be important for some time, so it’s disappointing.”
Evans’ comments related to the section of the Federal Reserve Act under which the emergency programs were created.
The facilities in question include two where the Fed has bought corporate bonds, another that focuses on lending to state and local governments, and the Main Street Lending Program, which is aimed at small and medium-sized businesses.
The Treasury Department funded the programs with collateral that allowed the full credit capacity to be used. Most of the facilities were used sparingly, although Fed officials said their existence helped calm markets during the March turmoil and has been a support mechanism ever since.
In a statement that responded to a letter from Mnuchin to Fed chairman Jerome Powell, the central bank said it wanted the programs to continue as they “continue to play an important role in supporting our still strained and fragile economy play”.
Evans said he feared parts of the economy will need more support as the virus continues to spread rapidly across the country.