Thread by @GeorgeSelgin

Thread: OK, I'm going to get into (more) hot water saying so, but I think there's a great deal of both exaggeration and more than a little hypocrisy involved in the fuss being made about Mnuchin's decision to not extend the Fed's CARES-Act backstopping.

I should begin by noting that I've held for some time that the whole Fed "backstopping" approach was mistaken, and that Congress "should either have made no use of the Fed, or it should have used it as a mere distributor, and not as a source, of funds" nationalreview.com/2020/09/a-real…

So I'm bound to agree in principle with Mnuchin's suggestion that more can be achieved by having Congress re-appropriate the funding in question--if only Congress can get its act together!

I also think it's unfair and inaccurate to suggest, as many have, that Mnuchin's decision is aimed at "salting the earth" or otherwise harming the Biden administration, much less at deliberately triggering a financial crisis, as Paul Krugman claims!

https://twitter.com/paulkrugman/status/1329765596280532999

For one thing (as I pointed out in another tweet recently), the Treasury made it very clear weeks before the election that it planned to let at least one Fed program--the Municipal Lending Facility--to expire in December.

https://twitter.com/GeorgeSelgin/status/1329942940559536128?s=20

Nor did it give any indication that it planned to extend the other programs.

As Mnuchin has pointed out, and as is evident from the record, many of the expiring programs lent very little, and were unlikely to lend much in the coming months. Their terms simply make them unattractive to most prospective borrowers, and that's not very likely to change.

It's true that, with regard to the Fed's Corporate Debt programs (but not the others to be terminated), their contribution isn't to be gauged by their actual take up: the programs' mere presence has helped to bolster the market for corporate debt.

But as Mnuchin observes in his letter, conditions in the corporate debt market today are dramatically better than when the program was launched. Nor does the bond market think that Mnuchin's decision will change this: reuters.com/article/us-usa… (Ignore the misleading caption.)

There are also plenty of crocodile tears among those being shed by those who say dire consequences will result from withdrawing the Fed's corporate debt support, which many on the left especially had until recently denounced as a Wall Street bailout. wallstreetonparade.com/2020/05/the-fe…

Just 2 months ago, the Select Subcommittee on on the Coronavirus Crisis looked into the Fed's Corporate Bond programs. Report here: coronavirus.house.gov/sites/democrat…

Among other things the Subcommittee accused the Fed of "exacerbating economic inequities and contributing to an economic recovery that benefits wealthy executives and investors but leaves behind American workers."

I'm not saying that there's 0 chance that the Mnuchin's decision will deprive some worthy borrowers of Fed support. That would be a ludicrous position to take.

But I do believe that Congress can put the funds he's taking back to far better use than the Fed can, ultimately getting more aid where it is needed, and that the energy being expended vilifying Mnuchin would be better spent trying to figure out how to get Congress to do it.