By MARTIN CRUTSINGER, AP Economic Editor
WASHINGTON (AP) – The Federal Reserve said on Wednesday it would start selling off the holdings of one of its emergency loan programs created last year to stabilize financial markets at the height of the pandemic crisis.
The Fed will begin to liquidate the portfolio of the secondary business credit facility, which held $ 14.2 billion in assets at the end of last year.
Sales of assets from the facility will be “gradual and orderly and will aim to minimize the potential for any negative impact on the functioning of the market,” the Fed said.
The company’s facility was one of many emergency loan vehicles closed on Dec. 31 in a decision by then-Treasury Secretary Steven Mnuchin.
The move drew criticism from Democratic lawmakers who claimed at the time that Mnuchin was trying to curb the Federal Reserve’s efforts to support the economy just as President-elect Joe Biden took office.
The Fed’s announcement came as speculation grew that the central bank could prepare to make a decision as to when it could start cutting its $ 120 billion in monthly government bond purchases. Treasury and Mortgage Backed Securities. These purchases are aimed at boosting the economy by putting downward pressure on long-term interest rates.
The Fed said its announcement about the sale of the small amount of holdings in the business lending facility was unrelated to its handling of monetary policy. Sales of the business loan fund are expected to be finalized by the end of the year.
Emergency loan programs came in response to the near-total freeze in credit markets in March 2020, as the pandemic triggered lockdowns in the United States and resulted in the loss of 22 million jobs last spring.
In his December decision, Mnuchin said in a letter to Fed Chairman Jerome Powell that the programs he allowed to end had “clearly achieved their goals.”
But in a rare disagreement between the Fed and Mnuchin, the central bank said at the time that it would have preferred “the full suite of emergency facilities established during the coronavirus pandemic to continue to play its important role as a net security for our and the vulnerable economy.
However, the economy, which had slowed late last year, has recovered this year, aided by a new $ 1.9 trillion bailout that Biden presented to Congress in March. as well as by the deployment of vaccines against coronaviruses. The Fed’s remaining emergency loan programs that have not been closed have been used only moderately this year.
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