Thread by @BharatRamamurti

🚨THREAD: In the coming weeks, the Fed and Treasury could choose to deny the Biden Administration more than $1 trillion of potential aid to small businesses and local governments.

We need to push them to do what's best for American workers and not cut off this aid. 1/

Under the CARES Act Congress passed in March, the Treasury and Fed created a small business lending program (the Main Street program) and a state and local lending program (the Municipal Liquidity Facility). Together, they can provide up to $1.1 trillion in credit. 2/

So far, these programs have provided only a few billion dollars in loans. But with changes -- changes a Biden Administration could try to make -- they could do much more to help.

There’s a catch, though: the programs are set to expire at the end of the year. 3/

Some argue that Congress *mandated* the programs expire at the end of the year. That's not true -- and the Treasury and Fed have implicitly acknowledged as much. But bear with me as I walk through the wonky details. 4/

The way these lending programs work is that the Fed sets up a special purpose vehicle, or SPV, that actually extends credit to borrowers. The Treasury, in turn, invests some of its CARES Act money into those SPVs to cushion any losses. 5/

The CARES Act says the Treasury’s authority to make “new loans, loan guarantees, or other investments” ends on December 31. But that refers only to Treasury’s transactions with the SPVs -- not to the SPVs' transactions with businesses or municipalities. 6/

In other words, the tens of billions of dollars Treasury has already invested in the SPVs -- enough to support more than $1 trillion in total lending -- can legally continue to support new loans made after the end of the year. 7/

But despite that, the Treasury and the Fed are *choosing* to terminate these lending programs at the end of the year, withdrawing more than $1 trillion worth of potential support for struggling companies and governments in the face of a Covid surge and a slowing recovery. 8/

The Fed acknowledges it could extend these programs with Treasury's cooperation.

The question now is whether the agencies will end these programs, undermine our economic recovery, and potentially disrupt markets just to deny a Biden Administration a chance to use them. 9/

Thousands of state and local officials want the programs extended. Small businesses still need help too. And investors warn of serious market disruptions if the programs terminate. These programs should be extended through next year so the Biden administration can use them. END