By Jon Hill

Law360 (November 30, 2020, 4:57 PM EST) -- The Federal Reserve said Monday four of its coronavirus emergency lending facilities aimed at supporting short-term funding markets will be kept open past the end of the year, an extension that comes as the Trump administration has moved to let the central bank's other related programs expire.

The Fed said the extension will last through March 31, 2021, and will apply to its Commercial Paper Funding Facility, Money Market Mutual Fund Liquidity Facility, Primary Dealer Credit Facility and Paycheck Protection Program Liquidity Facility, which were originally slated to expire on Dec. 31.

"By backstopping critical short-term funding markets, these facilities are supporting market functioning and enhancing the flow of credit to the economy," the Fed said in a statement. "The extension … will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available through the first quarter of 2021 to help the economy recover from the COVID-19 pandemic."

The Fed said the extension also has the approval of the U.S. Treasury Department, which worked with the central bank to establish an array of emergency lending facilities starting this past spring after the onset of the coronavirus pandemic triggered widespread economic turmoil.

Many of those facilities were backstopped with funding allocated to the Treasury under the Coronavirus Aid, Relief and Economic Security Act, and they were created with a broad range of household, business, and state and local government credit needs in mind.

But with their Dec. 31 scheduled expiration approaching, U.S. Treasury Secretary Steven Mnuchin told the Fed in a Nov. 19 letter that he would begin the process of clawing back CARES Act funds supporting nine of these facilities, including those in the Main Street Lending Program.

Although Mnuchin argued the facilities had served their purpose and couldn't legally keep making new loans into 2021 based on his interpretation of the CARES Act, the decision has been criticized as premature by business groups and Democratic lawmakers, some of whom have gone so far as to characterize it as attempted economic sabotage by the outgoing administration.

The decision also drew rare public disagreement from the Fed, which issued a statement saying it "would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy."

By contrast, the Fed's four lending facilities covered by Monday's extension were not established with support from CARES Act funding. The commercial paper and money market facilities each received $10 billion investments from the Treasury's Exchange Stabilization Fund, while the primary dealer and Paycheck Protection Program facilities did not need Treasury funding.

In his Nov. 19 letter to the Fed, Mnuchin said he wanted to see those four facilities kept open another 90 days into 2021 in light of the still-fragile economy. He reiterated that position in a statement on Monday, saying he had called for the extensions out of "an abundance of caution."

"The emergency lending facilities established to provide liquidity to the financial system and stabilize credit markets have been successful. Financial conditions have responded and the use of these facilities has been limited," Mnuchin said.

"I am pleased that the Federal Reserve Board unanimously voted to approve these extensions, and I am proud of the work our teams have done to successfully execute these programs," he added.

--Editing by Janice Carter Brown.

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