Biden Needs to Fix Mnuchin’s Big Mistake

U.S. Treasury Secretary Steven Mnuchin has just put the country’s financial stability at unnecessary risk, by refusing to extend programs that’ve kept credit flowing to companies and municipalities amid a severe economic crisis. It’s now up to President-elect Joe Biden and the Federal Reserve to correct what could prove to be a costly mistake.

At issue are several emergency lending facilities, set up to address a severe credit freeze that accompanied the onset of the coronavirus pandemic in March and April. With $195 billion in backing from the Treasury, the Federal Reserve made about $2 trillion available to small businesses, corporations, and state and local governments, ensuring that they’d have access to the funds they needed to meet their obligations. The mere presence of such a formidable backstop emboldened lenders, making private credit widely available on excellent terms. As a result, the Fed’s facilities have gone largely unused. For the most part, this is a sign that they’re doing their job, providing the confidence needed for markets to operate on their own.