WASHINGTON, Dec 30 — The Federal Reserve yesterday extended the deadline for a pandemic business loan programme to deal with a rush of applications in the final days before it was set to expire.

Treasury Secretary Steven Mnuchin last month ordered the central bank to return the funds earmarked for the Main Street Lending Programme by December 31, despite objections from the Fed.

Democratic legislators accused Mnuchin of trying to tie the hands of the central bank just weeks before President-elect Joe Biden was due to take office and as the economic damage from the Covid-19 pandemic worsens.

The facility was relatively underutilised, despite multiple changes to make it more accessible to smaller businesses and nonprofits, with just over US$6 billion (RM2.43 billion) in loans outstanding as of November 30, according to the Fed's latest report to Congress.

However, that volume surged to roughly US$14.6 billion as of December 23, according to Fed data on Monday, although that represents the amount the central bank holds, which is 95 per cent of the total.

"In order to allow more time to process and fund loans that were submitted to the Main Street lender portal on or before December 14, 2020, the Federal Reserve Board yesterday extended the termination date of the Main Street Lending Program facilities to January 8, 2021,” the Fed said in a statement.

The move "was also approved by the Secretary of the Treasury,” the statement said.

It was unclear how many applications were outstanding.

The Fed launched the programme in June to aid companies struggling to survive damage from coronavirus shutdowns but too big to benefit from the Paycheck Protection Programme.

Five months later, Mnuchin instructed the Fed to return US$455 billion in unused funds allocated for the programme as well as other facilities targeting the corporate credit market and municipal borrowers.

That prompted a rare protest from the central bank which said 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.” — AFP