Sunday, August 09, 2020 12:46:41 AM
>>> A glossary of the Federal Reserve's full arsenal of 'bazookas'
Brian Cheung
Yahoo Finance
May 14, 2020
https://finance.yahoo.com/news/glossary-federal-reserves-emergency-measures-coronavirus-bazookas-120337473.html
The novel coronavirus continues to grip businesses on Main Streets across the country, forcing America’s employers to significantly pare back on their operations or shut down entirely.
While Congress has passed more than $3.6 trillion in coronavirus-related spending, the Federal Reserve has committed to using its tools to “support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.”
Since the beginning of March, the Fed has swiftly slashed rates to zero, launched an aggressive quantitative easing program, and unleashed an alphabet soup of liquidity facilities to support the flow of credit in several markets. The central bank hopes its measures will ease credit conditions and keep businesses alive through the virus-induced disruptions.
In total, Fed watchers have referred to the central bank’s measures as “bazookas,” even “going nuclear.”
The Fed is notably getting creative with its tools, dispelling any concern that the central bank was beholden to its 2008 playbook. For the first time, the Fed is tackling financing pressures in the municipal debt market (through the MMLF, CPFF, and MLF) and the corporate debt market (through the PMCCF, SMCCF, CPFF).
Credit: David Foster / Yahoo FinanceView photos
(Credit: David Foster / Yahoo Finance)
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The Fed is providing trillions of dollars of liquidity with the help of money appropriated through the CARES Act. In an effort to provide transparency in its role as a lender of last resort, the Fed says it will publish details (participant names, amounts borrowed, interest rates charged, and costs and fees) on a monthly basis for each facility opened with Congressionally-appropriated funds.
The central bank’s balance sheet, meanwhile, has expanded well past $7 trillion.
Here’s a full breakdown of all the tools (as of June 15) announced by the Fed as it battles the economic impact of the coronavirus:
Near-zero interest rates
Date announced: March 3, March 15
Technical details: Interest rates are the primary tool for monetary policy. The Fed broadly steers rates to support lending when the economy is in need (by lowering rates) and pulls back on lending when the economy may be running too hot (by raising rates).
The Fed began raising rates in 2015 as policymakers feared inflationary pressures; low rates are generally tied to increased inflation — which increases prices for consumers. However, the Fed began cutting interest rates in 2019 amid the trade war. Coronavirus concerns pushed the Fed to cut rates by 50 basis points on March 3 and then slash its interest rate target to between zero and 0.25% on March 15. The Fed has not expressed interest in dipping into negative interest rates, which make it costlier to hold onto money than to lend it out.
How it impacts Main Street: The Fed’s interest rate target concerns overnight bank lending, so interest rates for the average household and business will still be above zero. But for businesses, lower interest rates mean cheaper borrowing costs to invest back into the business and pay workers. For individual households, lower interest rates translate to lower return on bank deposits but generally cheaper rates to finance or refinance auto loans or mortgages.
Quantitative easing (QE)
Date announced: March 15, March 23
Technical details: The Fed said it will purchase at least $500 billion of U.S. Treasuries and $200 billion of agency mortgage-backed securities “over coming months.” On March 23, the Fed announced that it was suspending those limits and would buy assets “in the amounts needed” to support the economy, which would also now include agency commercial mortgage-backed securities. Through QE, the Fed is directly intervening as its own counterparty in the Treasury and agency MBS markets to absorb securities onto its balance sheet.
The Fed began slowing its pace of purchases in April. But in its June 10 Federal Open Market Committee meeting, the central bank said it would increase its asset purchases to a pace of “at least” $80 billion per month for Treasuries and about $40 billion per month for mortgage-backed securities.
How it impacts Main Street: When the Fed last launched QE in the financial crisis, the central bank explicitly bought longer-term Treasuries to depress long-term yields. Since yields on longer-term government debt serve as a benchmark for longer-term interest rates, QE purchases targeting long-dated bonds (as the current program does) should in theory keep interest rates down the curve (i.e. 30-year mortgage rates) from rising too much.
Repurchase agreements (Repo)
Date announced: September 2019
Technical details: As the plumbing of the financial system, the repo market provides financing for banks and broker-dealers at the center of the economy, allowing the levered institutions to cover positions on their balance sheet by lending sums of cash to one another.
Since last September, the New York Fed has offered repurchase agreements to alleviate pressures in the market for interbank short-term loans, but has since increased the scale of the repos available in the wake of the novel coronavirus. Even though the Fed is offering over $5 trillion in total repo agreements (as short as overnight and as long as three months), the uptake has not been anywhere close to that eye-popping figure.
How it impacts Main Street: Stabilizing repo markets also supports money market funds that many Americans are invested in, since the funds often hold some proportion of their assets in daily liquid assets like overnight repos. The NY Fed’s repo operations are also designed to ensure that banks can find short-term financing and therefore feel comfortable continuing to provide credit to customers and businesses.
U.S. dollar swap lines
Date announced: March 15, March 19, March 20
Date launched: March 16
Technical details: Companies around the world disrupted by the novel coronavirus are loading up on U.S. dollars to cover currency hedge positions. As a result, the Fed announced U.S. dollar swap lines with five other major central banks (including the European Central Bank and Bank of Japan) to ensure the availability of the world’s reserve currency.
On March 19, the Fed expanded its U.S. dollar swap lines with nine other central banks and on March 20 the Fed increased the frequency of its previously-announced swaps with the five major central banks.
How it impacts Main Street: The U.S. dollar has strengthened against many global currencies, but with international travel almost all but cut off, most Americans will not see any direct effects of the Fed’s efforts to provide liquidity to foreign exchange markets. But broadly, preventing the world from running out of U.S. dollars ensures that an already exposed U.S. economy isn’t harmed further by dollar shortage-induced financial collapses in other countries.
Tapping into capital and liquidity buffers
Date announced: March 15, March 23
Technical details: After the 2008 financial crisis, Congress passed the Dodd-Frank Act and required banking regulators to increase the amount of capital and liquidity held at U.S. banks in case another crisis struck. To withstand fluctuations, most banks hold capital and liquidity buffers well above their statutory requirements, but the Fed on March 15 encouraged banks to tap into those buffers to lend out into the economy.
The Fed also lowered reserve requirements to zero and on March 23 tweaked a bank capital regulation to more loosely allow banks to lend out retained income. In concert with liquidity facilities concerning money market instruments (MMMLF) and Paycheck Protection Program loans (PPPLF), the Fed has also tweaked the calculation of banks’ liquidity coverage ratios to account for usage of these facilities.
How it impacts Main Street: Bank capital and liquidity regulations are a tightrope; requirements that are too low could lead to fragile balance sheets but requirements that are too high could prevent a bank from lending into an economy in desperate need of more activity.
The Fed hopes that its post-crisis regulations have already beefed up the safety and soundness of the banks, and that it can allow for some slight regulatory easing to encourage them to use their capital to now support businesses and households.
Discount window
Date announced: March 15
Technical details: The Fed can directly offer short-term loans to banks and lowered the interest rate on discount window loans to 0.25% as of March 16. The Fed also joined other major banking regulators in explicitly encouraging banks to take advantage of the loans, which the eight largest U.S. banks did that same day.
How it impacts Main Street: Historically, banks have been reluctant to access the discount window because of the public perception of needing a loan from the Fed, also known as the “lender of last resort.” In the last crisis, banks accessed the discount window but feared that depositors were going to trigger a run on the bank because of the “stigma” associated with the window.
The Fed’s actions, and the fact that the banks have already accessed the discount window, are designed to show depositors and market participants that using the discount window is not necessarily a sign of bank insolvency or severe stress.
Stress Test and Sensitivity Analysis
Date announced: June 25
Technical details: Since the last financial crisis, the Fed has required the largest banks to undergo stress tests that model the impact of hypothetical economic downturns on their balance sheets. The Fed in the middle of its 2020 tests when the coronavirus hit, presenting a real-world scenario that was even worse than the stress test’s “severely adverse” scenario.
The Fed therefore ran a last-minute “sensitivity” analysis modeling the impact to bank capital under V, U, and W-shaped recoveries. Although the central bank did not report the analysis at a firm level, the Fed said that “several” of the 33 largest banks would reach minimum capital requirements under some of the scenarios.
The Fed will require the firms to re-submit their capital plans (detailing dividend and stock buybacks over the coming quarters). And for at least the third quarter of 2020, the Fed will cap dividend payments and restrict any share buybacks.
How it impacts Main Street: Bank capital is a critical measure of a financial institution’s ability to not only lend to borrowers but absorb losses if the economy turns sour. Stress tests are the Fed’s normal check-ups on the health of the banking industry, but the coronavirus presents its own unique challenges.
By restricting dividends and buybacks for the third quarter, the central bank is trying to ensure that the firms are retaining capital as opposed to paying it out to shareholders. But some, such as Fed Governor Lael Brainard, would have preferred the Fed ban dividends entirely instead of merely cap the amount that banks can pay out.
The Fed has unleashed a lot of acronyms. Credit: David Foster / Yahoo FinanceView photos
The Fed has unleashed a lot of acronyms. Credit: David Foster / Yahoo Finance
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Commercial Paper Funding Facility (CPFF)*
Date announced: March 17, March 23, July 23
Date launched: April 14 (effective through March 17, 2021)
Technical details: The Fed announced that it would directly finance eligible commercial paper, a common form of short-term corporate debt. Although the Fed does not have the ability to add commercial paper directly to its balance sheet, the central bank established a special purpose vehicle (SPV) with $10 billion of equity investment from the U.S. Treasury to buy high-rated, three-month commercial paper.
On March 23, the Fed expanded the CPFF to include some short-term municipal bonds as well.
How it impacts Main Street: Businesses forced to shut down or significantly scale back their operations are scrambling to find financing as the U.S. tries to flatten the curve on the novel coronavirus. But with counterparties less willing to buy corporate debt, the Fed is stepping in to directly take on risk by snatching up commercial paper. In theory, the CPFF should allow businesses to keep employees on payroll and ensure that the business is still there for workers to return to once the economy starts up again.
Primary Dealer Credit Facility (PDCF)*
Date announced: March 17
Date launched: March 20 (effective through at least Dec. 31)
Technical details: The PDCF offers short-term (up to 90-day) loans to primary dealers, or firms that serve as intermediaries between the government and the market. To get access to the loans, the dealers can offer up a wide variety of different types of collateral (investment grade corporate debt, commercial paper, municipal debt, mortgage-backed securities, asset-backed securities, and even some stocks). Exchange-traded funds and mutual funds are not eligible collateral under the PDCF.
How it impacts Main Street: The PDCF allows those dealers at the heart of the financial system to temporarily liquidate some assets that they may be unable to sell in the open market. Without assets trapped on the balance sheet, those primary dealers would then have the liquidity to lend to businesses disrupted by the virus.
Money Market Mutual Fund Liquidity Facility (MMLF)*
Date announced: March 18, March 20
Date launched: March 23 (effective through at least Dec. 31)
Technical details: Much like the PDCF, the MMLF offers short-term loans, but to all U.S. banks. Under the program, banks offer up collateral in the form of U.S. Treasuries, asset-backed commercial paper, and some unsecured commercial paper. The MMLF is similar to the crisis-era Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), but the Fed on March 20 announced that it would expand the MMLF to take on short-term (with maturities of a year or less) municipal debt as eligible collateral as well.
The Treasury will provide $10 billion of credit protection.
How it impacts Main Street: The expansion of the MMLF to municipal debt is a new move. With businesses closed, local municipalities and states may be unable to collect tax revenue for a while. As a result, municipal debt markets have been drying up as bond buyers worry about the economic spillover of the virus onto the credit health of American towns, cities, and states. The Fed was able to retrofit the MMLF to the muni debt market in an attempt to maintain the flow of financing for localities and their public utilities.
Primary Market Corporate Credit Facility (PMCCF)*
Date announced: March 23, April 9, June 29
Date launched: June 29 (effective through at least Dec. 31)
Technical details: The PMCCF will purchase investment-grade corporate bonds (with maturities of four years or less) directly from eligible issuers and offer them a loan. Like the CPFF, the facility will have the support of billions of dollars from the U.S. Treasury and will hold the bonds in an SPV. Companies accessing the PMCCF would pay the Fed interest on the loan but would be allowed to hold off on interest payments for up to six months, during which it would not be allowed to pay dividends or buyback shares.
On April 9, the Treasury expanded its support from $10 billion to $50 billion as the Fed expanded the scope of the program to cover “fallen angel” corporate debt with below investment-grade ratings of BB-/Ba3.
The program is new and was not deployed during the 2008 crisis.
How it impacts Main Street: Companies with weaker credit ratings cannot access the CPFF, but strains in the investment-grade and high-yield markets have raised concerns that those with a higher-risk of default may be exposed. The PMCCF hopes to backstop those markets and allow companies to find financing and keep their employees on payroll while the business stoppages continue.
Secondary Market Corporate Credit Facility (SMCCF)*
Date announced: March 23, April 9, June 15
Date launched: May 12 (effective through at least Dec. 31)
Technical details: As the name implies, the SMCCF will provide a backstop in the secondary market for investment-grade and some high-yield corporate debt targeted by the PMCCF. The facility would include a separate SPV with another $10 billion from the U.S. Treasury, which was expanded to $25 billion on April 9. The SMCCF can also take on some U.S.-listed ETFs with “broad exposure” to the market for U.S. investment-grade corporate bonds, in addition to some ETFs with exposure high-yield corporate bonds.
After focusing its initial purchases in ETFs, the facility was expanded on June 15 to include secondary purchases of individual corporate bonds for the purposes of creating a “broad, diversified market index” of bonds that are eligible for the program. Purchases cover bonds with remaining maturities of 5 years or less.
The SMCCF is also a new tool.
How it impacts Main Street: The SMCCF adds extra juice to its efforts to provide liquidity to the investment-grade and some high-yield corporate debt markets by targeting the secondary market. Just as the PMCCF does, the goal is to maintain access to financing for companies hoping to survive the business disruptions from the novel coronavirus, and keep employees paid in the process. In tandem, both facilities are capable of providing up to $750 billion in support to credit markets.
Term Asset-Backed Securities Loan Facility (TALF)*
Date announced: March 23, April 9, May 12, July 23 (effective through at least Dec. 31)
Technical details: The TALF was deployed in the financial crisis and is again being deployed to provide loans to U.S. companies in exchange for collateral in the form of asset-backed securities (with exposure to consumer credit like student loans, car loans, credit card receivables, and small business loans). The facility would offer the loans to U.S. companies via primary dealers, and would be supported through an SPV with $10 billion of equity investment from the U.S. Treasury.
On April 9, the Fed expanded the TALF to also accept collateral with underlying credit exposures to leveraged loans (such as collateralized loan obligations) and commercial mortgages. On May 12, the Fed offered more specifics on the types of CLOs it would accept.
How it impacts Main Street: Asset-backed securities provide liquidity to the underlying availability of consumer credit categories familiar to most Americans. The TALF program is aimed at giving market-makers the confidence to package loans which in theory, should give underwriters the confidence to extend credit to businesses and household through the crisis.
Foreign and International Monetary Authority (FIMA) Repo Facility
Date announced: March 31
Date launched: April 6 (effective through at least the beginning of October)
Technical details: The Fed’s U.S. dollar swap arrangements are only available to 14 central banks, but the repo facility offers U.S. dollars to any of the over 200 foreign and international monetary authorities (FIMA) that have accounts at the New York Fed. Through the FIMA repo facility, other central banks and monetary authorities looking to liquidate their positions in U.S. Treasuries will be able to temporarily swap those securities for U.S. dollars.
How it impacts Main Street: The FIMA repo facility is aimed at supplying U.S. dollars to the world as global investors and companies hunker down in greenbacks. Like the U.S. dollar swap arrangements, the FIMA repo facility is designed to avoid any foreign market strains resulting from a dollar shortage, which could spillover into the U.S. if not properly addressed.
Paycheck Protection Program Liquidity Facility (PPPLF)*
Date announced: April 6, April 30
Date launched: April 16 (effective through at least Dec. 31)
Technical details: The Federal Reserve committed to backstopping the $350 billion Paycheck Protection Program authorized by Congress. On April 6, the Fed released a two-sentence statement committing the central bank to providing financing to PPP lenders. Three days later, the Fed clarified that the facility will offer credit to any PPP lender and take on those PPP loans as collateral at face value.
As of April 30, the Fed expanded participation in the program to allow non-traditional lenders, like community development financial institutions and members of the Farm Credit System, to access liquidity as well.
How it impacts Main Street: The PPP loans were set at a 1% interest rate, but banks say the rate is below “break even” for them to originate and service. By taking on the loans itself, the Fed’s PPP facility hopes to give banks a little more breathing room to originate the PPP loans that Main Street businesses desperately need to weather the coronavirus-induced shut downs.
Main Street New Loan Facility (MSNLF)*
Date announced: March 23, April 9, April 30, June 8
Date launched: June 15 (effective through at least Dec. 31)
Technical details: The MSNLF is one of three facilities within the Fed’s Main Street Lending program and originally sought to offer borrowers new four-year loans of at least $500,000. Pricing for all Main Street loans are set at LIBOR plus 3%.
On April 9, the Fed announced that it would support $600 billion in loans to businesses with fewer than 10,000 employees or up to $2.5 billion in annual revenues. U.S. lenders will underwrite the loans, hold 5% of the loan on its books, and sell the remaining 95% to an SPV backed by $75 billion in equity from the U.S. Treasury.
On April 30, the Fed expanded the scope of the facility to change the employee threshold to 15,000 and the revenue threshold to $5 billion. The updated terms state that the maximum loan size is the lesser of $25 million or four times 2019 adjusted EBITDA.
On June 8, the Fed lowered the minimum to $250,000 and expanded the loan term to five years. The Fed also raised the absolute maximum loan size to $35 million. MSNLF loans, in addition to all other Main Street loans, will allow borrowers to defer principal payments for the first two years.
How it impacts Main Street: The Small Business Administration’s Paycheck Protection Program targets companies with fewer than 500 employees, but businesses larger than that did not have a lifeline. The Main Street Lending Facility will allow businesses to get loans as long as they “make reasonable efforts” to retain employees.
There is no minimum size for eligible companies, and businesses that took a PPP loan remain eligible for any type of Main Street loan.
Main Street Priority Loan Facility (MSPLF)*
Date announced: March 23, April 30, June 8
Date launched: June 15 (effective through at least Dec. 31)
Technical details: The Fed revised the the terms of its Main Street Lending Program on April 30 and created the MSPLF to cover larger, slightly riskier loans. Loans under the MSPLF can be a little larger than those originated under the MSNLF, and can be as large as six times 2019 adjusted EBITDA.
Originally, the Fed sought to require lenders to hold onto a slightly larger slice of the loan (15%) to cover the higher risk.
On June 8, the Fed walked that retention requirement back, and will now only require lenders to hold onto 5% of the loan (like the MSNLF and MSELF). The Fed also raised the absolute ceiling to $50 million.
The same profile of borrowers is applicable for the MSPLF; under 15,000 employees and $5 billion in revenue.
How it impacts Main Street: Like the MSNLF, the MSPLF hopes to keep larger businesses whole through the COVID-19 crisis.
The MSPLF appeals to riskier businesses that, for example, may have low earnings but a need for a large loan. Because the EBITDA requirement would allow for a more highly levered loan relative to the MSNLF, a priority loan will be senior to other debt carried by the borrower (a requirement not part of loans under the MSNLF).
Main Street Expanded Loan Facility (MSELF)*
Date announced: March 23, April 9, April 30, June 8
Date launched: June 15 (effective through at least Dec. 31)
Technical details: The MSELF is the third program in the Main Street Lending Facility. It differs in that it allow banks to upsize the tranche of an existing loan to terms that would allow them to fund the loan from the $600 billion pool.
Borrowers wanting a loan (of a minimum size of $10 million) will face the same eligibility requirements: having fewer than 15,000 employees or up to $5 billion in annual revenues.
Loans under the MSELF can be as large as $200 million, but no company can take out a loan that is larger than six times its EBITDA when adding outstanding and undrawn debt (like the MSPLF). Lenders will be required to hold onto 5% of the loan risk.
On June 8, the Fed expanded the program to raise the maximum loan limit under the MSELF to $300 million.
How it impacts Main Street: Whereas the MSNLF covers brand new loans to borrowers that may not have an outstanding loan, the MSELF will allow borrowers to work with their bank lender to restructure their existing loans. The MSELF will offer large borrowers massive loans of up to $300 million. Like the MSPLF loans, the expanded loans will be senior in debt to all other debt carried by the borrower.
Nonprofit Organization New Loan Facility (NONLF)*
Date announced: June 15, July 17 (effective through at least Dec. 31)
Technical details: On June 15, the Fed proposed a carveout of the Main Street program that would make eligible any 501(c)(3) or 501(c)(19) organization with between 50 and 15,000 employees. Among the requirements: the applicant’s 2019 revenues must be less than $5 billion and the organization must be at least five years old.
On July 17, the Fed finalized the facility and widened the eligibility to allow nonprofits as small as 10 employees. It also broadly loosened standards to cover slightly more indebted nonprofits than in the original proposal.
The terms of the loans are modeled off of the Main Street loans. The minimum loan size for the NONLF is $250,000 and the maximum size is $35 million or the borrower’s average 2019 quarterly revenue. Similarly, the loans will be five years in term and will allow the borrower to defer principal payments for two years, interest payments for one year, and are priced at LIBOR plus 3%.
The “new” loan program would allow lenders to originate a fresh line of credit, 95% of which the lender can shop to the Fed’s facility. The facility will be backed from the same pool of $75 billion of equity from the U.S. Treasury dedicated to the Main Street program.
How it impacts Main Street: As the Fed was designing its Main Street Lending Program, some Fed officials acknowledged that the facility may not meet the needs of nonprofits like universities and charitable organizations facing funding gaps amid the COVID-19 crisis.
Fed Chairman Jerome Powell noted that nonprofits provide essential services like skills development, which is why the central bank felt the need to “help them through this difficult time.”
Nonprofit Organization Expanded Loan Facility (NOELF)*
Date announced: June 15, July 17 (effective through at least Dec. 31)
Technical details: The NOELF will offer loans of larger size than the NONLF, allowing a borrower to take out as much as $300 million (with a minimum loan size of $10 million). The loan would be an upsized tranche of an existing loan and would be senior in repayment priority to other debt.
Although the loan sizes under the NOELF are much larger, the nation’s largest nonprofits and universities may not be eligible. As proposed, the facility would not cover organizations with more than 30% of its revenues coming from donations. In its finalized term sheet, the Fed loosened the donations threshold and will now make eligible nonprofits with up to 40% of its revenues coming from donations.
Any organization with an endowment larger than $3 billion (requirements that also apply to the NONLF) will not be eligible, and borrowers will still face a tailored maximum of their average 2019 quarterly revenue.
Otherwise, loans under the NOELF will have the same terms as all the other Main Street facilities (i.e. five-year term, deferred principal payments for two years, interest payments for one year, pricing at LIBOR plus 3%, and lender retention of 5%).
How it impacts Main Street: Like the MSELF, the NOELF will allow borrowers to work with their bank lender to restructure their existing loans. The NOELF will offer larger borrowers, such as mid-sized universities or recognizable charitable organizations, to bridge about a quarter’s worth of revenue.
However, the country’s largest nonprofits may not be covered due to the endowment and donations-as-a-percentage-of-revenue limits.
Municipal Liquidity Facility (MLF)*
Date announced: April 9, April 27, June 3
Date launched: May 26 (effective through at least Dec. 31)
Technical details: Through an SPV backed by $35 billion of investment from the Treasury, the Fed will buy short-term municipal debt (with maturity of less than two years) directly from state and local governments. U.S. states, cities with more than one million residents, and counties with more than two million residents will be eligible for the program, which will support up to $500 billion in loans.
On April 27, the Fed lowered the bar on qualification to include cities with at least 250,000 residents and counties with at least 500,000 residents. The Fed also expanded the eligible maturity to three years, but municipalities will have to be at least investment-grade to participate. The Fed released pricing details on the facility on May 11.
On June 3, the Fed said it would allow state governors to designate two issuers (such as public transit systems or airports) for access to the facility. The Fed also expanded the facility to allow states without large counties or cities to designate up to two cities or counties for eligibility to get MLF loans.
How it impacts Main Street: Similar to the expanded scope of the MMLF, the municipal liquidity facility hopes to provide a lifeline to local and state governments facing dramatic funding gaps with tax revenue collections essentially frozen. Because local and state governments are the key providers of critical services like unemployment insurance and sanitation, the Fed hopes to prevent municipalities from defaulting by offering to take on their debt if counter-parties are unavailable.
With the expansion, public entities like New York’s Metropolitan Transportation Authority will be able to get loans to help plug their budget shortfalls.
(* denotes facilities opened by the Fed with approval from the U.S. Treasury under Section 13(3) of the Federal Reserve Act)
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Brian Cheung
Yahoo Finance
May 14, 2020
https://finance.yahoo.com/news/glossary-federal-reserves-emergency-measures-coronavirus-bazookas-120337473.html
The novel coronavirus continues to grip businesses on Main Streets across the country, forcing America’s employers to significantly pare back on their operations or shut down entirely.
While Congress has passed more than $3.6 trillion in coronavirus-related spending, the Federal Reserve has committed to using its tools to “support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.”
Since the beginning of March, the Fed has swiftly slashed rates to zero, launched an aggressive quantitative easing program, and unleashed an alphabet soup of liquidity facilities to support the flow of credit in several markets. The central bank hopes its measures will ease credit conditions and keep businesses alive through the virus-induced disruptions.
In total, Fed watchers have referred to the central bank’s measures as “bazookas,” even “going nuclear.”
The Fed is notably getting creative with its tools, dispelling any concern that the central bank was beholden to its 2008 playbook. For the first time, the Fed is tackling financing pressures in the municipal debt market (through the MMLF, CPFF, and MLF) and the corporate debt market (through the PMCCF, SMCCF, CPFF).
Credit: David Foster / Yahoo FinanceView photos
(Credit: David Foster / Yahoo Finance)
More
The Fed is providing trillions of dollars of liquidity with the help of money appropriated through the CARES Act. In an effort to provide transparency in its role as a lender of last resort, the Fed says it will publish details (participant names, amounts borrowed, interest rates charged, and costs and fees) on a monthly basis for each facility opened with Congressionally-appropriated funds.
The central bank’s balance sheet, meanwhile, has expanded well past $7 trillion.
Here’s a full breakdown of all the tools (as of June 15) announced by the Fed as it battles the economic impact of the coronavirus:
Near-zero interest rates
Date announced: March 3, March 15
Technical details: Interest rates are the primary tool for monetary policy. The Fed broadly steers rates to support lending when the economy is in need (by lowering rates) and pulls back on lending when the economy may be running too hot (by raising rates).
The Fed began raising rates in 2015 as policymakers feared inflationary pressures; low rates are generally tied to increased inflation — which increases prices for consumers. However, the Fed began cutting interest rates in 2019 amid the trade war. Coronavirus concerns pushed the Fed to cut rates by 50 basis points on March 3 and then slash its interest rate target to between zero and 0.25% on March 15. The Fed has not expressed interest in dipping into negative interest rates, which make it costlier to hold onto money than to lend it out.
How it impacts Main Street: The Fed’s interest rate target concerns overnight bank lending, so interest rates for the average household and business will still be above zero. But for businesses, lower interest rates mean cheaper borrowing costs to invest back into the business and pay workers. For individual households, lower interest rates translate to lower return on bank deposits but generally cheaper rates to finance or refinance auto loans or mortgages.
Quantitative easing (QE)
Date announced: March 15, March 23
Technical details: The Fed said it will purchase at least $500 billion of U.S. Treasuries and $200 billion of agency mortgage-backed securities “over coming months.” On March 23, the Fed announced that it was suspending those limits and would buy assets “in the amounts needed” to support the economy, which would also now include agency commercial mortgage-backed securities. Through QE, the Fed is directly intervening as its own counterparty in the Treasury and agency MBS markets to absorb securities onto its balance sheet.
The Fed began slowing its pace of purchases in April. But in its June 10 Federal Open Market Committee meeting, the central bank said it would increase its asset purchases to a pace of “at least” $80 billion per month for Treasuries and about $40 billion per month for mortgage-backed securities.
How it impacts Main Street: When the Fed last launched QE in the financial crisis, the central bank explicitly bought longer-term Treasuries to depress long-term yields. Since yields on longer-term government debt serve as a benchmark for longer-term interest rates, QE purchases targeting long-dated bonds (as the current program does) should in theory keep interest rates down the curve (i.e. 30-year mortgage rates) from rising too much.
Repurchase agreements (Repo)
Date announced: September 2019
Technical details: As the plumbing of the financial system, the repo market provides financing for banks and broker-dealers at the center of the economy, allowing the levered institutions to cover positions on their balance sheet by lending sums of cash to one another.
Since last September, the New York Fed has offered repurchase agreements to alleviate pressures in the market for interbank short-term loans, but has since increased the scale of the repos available in the wake of the novel coronavirus. Even though the Fed is offering over $5 trillion in total repo agreements (as short as overnight and as long as three months), the uptake has not been anywhere close to that eye-popping figure.
How it impacts Main Street: Stabilizing repo markets also supports money market funds that many Americans are invested in, since the funds often hold some proportion of their assets in daily liquid assets like overnight repos. The NY Fed’s repo operations are also designed to ensure that banks can find short-term financing and therefore feel comfortable continuing to provide credit to customers and businesses.
U.S. dollar swap lines
Date announced: March 15, March 19, March 20
Date launched: March 16
Technical details: Companies around the world disrupted by the novel coronavirus are loading up on U.S. dollars to cover currency hedge positions. As a result, the Fed announced U.S. dollar swap lines with five other major central banks (including the European Central Bank and Bank of Japan) to ensure the availability of the world’s reserve currency.
On March 19, the Fed expanded its U.S. dollar swap lines with nine other central banks and on March 20 the Fed increased the frequency of its previously-announced swaps with the five major central banks.
How it impacts Main Street: The U.S. dollar has strengthened against many global currencies, but with international travel almost all but cut off, most Americans will not see any direct effects of the Fed’s efforts to provide liquidity to foreign exchange markets. But broadly, preventing the world from running out of U.S. dollars ensures that an already exposed U.S. economy isn’t harmed further by dollar shortage-induced financial collapses in other countries.
Tapping into capital and liquidity buffers
Date announced: March 15, March 23
Technical details: After the 2008 financial crisis, Congress passed the Dodd-Frank Act and required banking regulators to increase the amount of capital and liquidity held at U.S. banks in case another crisis struck. To withstand fluctuations, most banks hold capital and liquidity buffers well above their statutory requirements, but the Fed on March 15 encouraged banks to tap into those buffers to lend out into the economy.
The Fed also lowered reserve requirements to zero and on March 23 tweaked a bank capital regulation to more loosely allow banks to lend out retained income. In concert with liquidity facilities concerning money market instruments (MMMLF) and Paycheck Protection Program loans (PPPLF), the Fed has also tweaked the calculation of banks’ liquidity coverage ratios to account for usage of these facilities.
How it impacts Main Street: Bank capital and liquidity regulations are a tightrope; requirements that are too low could lead to fragile balance sheets but requirements that are too high could prevent a bank from lending into an economy in desperate need of more activity.
The Fed hopes that its post-crisis regulations have already beefed up the safety and soundness of the banks, and that it can allow for some slight regulatory easing to encourage them to use their capital to now support businesses and households.
Discount window
Date announced: March 15
Technical details: The Fed can directly offer short-term loans to banks and lowered the interest rate on discount window loans to 0.25% as of March 16. The Fed also joined other major banking regulators in explicitly encouraging banks to take advantage of the loans, which the eight largest U.S. banks did that same day.
How it impacts Main Street: Historically, banks have been reluctant to access the discount window because of the public perception of needing a loan from the Fed, also known as the “lender of last resort.” In the last crisis, banks accessed the discount window but feared that depositors were going to trigger a run on the bank because of the “stigma” associated with the window.
The Fed’s actions, and the fact that the banks have already accessed the discount window, are designed to show depositors and market participants that using the discount window is not necessarily a sign of bank insolvency or severe stress.
Stress Test and Sensitivity Analysis
Date announced: June 25
Technical details: Since the last financial crisis, the Fed has required the largest banks to undergo stress tests that model the impact of hypothetical economic downturns on their balance sheets. The Fed in the middle of its 2020 tests when the coronavirus hit, presenting a real-world scenario that was even worse than the stress test’s “severely adverse” scenario.
The Fed therefore ran a last-minute “sensitivity” analysis modeling the impact to bank capital under V, U, and W-shaped recoveries. Although the central bank did not report the analysis at a firm level, the Fed said that “several” of the 33 largest banks would reach minimum capital requirements under some of the scenarios.
The Fed will require the firms to re-submit their capital plans (detailing dividend and stock buybacks over the coming quarters). And for at least the third quarter of 2020, the Fed will cap dividend payments and restrict any share buybacks.
How it impacts Main Street: Bank capital is a critical measure of a financial institution’s ability to not only lend to borrowers but absorb losses if the economy turns sour. Stress tests are the Fed’s normal check-ups on the health of the banking industry, but the coronavirus presents its own unique challenges.
By restricting dividends and buybacks for the third quarter, the central bank is trying to ensure that the firms are retaining capital as opposed to paying it out to shareholders. But some, such as Fed Governor Lael Brainard, would have preferred the Fed ban dividends entirely instead of merely cap the amount that banks can pay out.
The Fed has unleashed a lot of acronyms. Credit: David Foster / Yahoo FinanceView photos
The Fed has unleashed a lot of acronyms. Credit: David Foster / Yahoo Finance
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Commercial Paper Funding Facility (CPFF)*
Date announced: March 17, March 23, July 23
Date launched: April 14 (effective through March 17, 2021)
Technical details: The Fed announced that it would directly finance eligible commercial paper, a common form of short-term corporate debt. Although the Fed does not have the ability to add commercial paper directly to its balance sheet, the central bank established a special purpose vehicle (SPV) with $10 billion of equity investment from the U.S. Treasury to buy high-rated, three-month commercial paper.
On March 23, the Fed expanded the CPFF to include some short-term municipal bonds as well.
How it impacts Main Street: Businesses forced to shut down or significantly scale back their operations are scrambling to find financing as the U.S. tries to flatten the curve on the novel coronavirus. But with counterparties less willing to buy corporate debt, the Fed is stepping in to directly take on risk by snatching up commercial paper. In theory, the CPFF should allow businesses to keep employees on payroll and ensure that the business is still there for workers to return to once the economy starts up again.
Primary Dealer Credit Facility (PDCF)*
Date announced: March 17
Date launched: March 20 (effective through at least Dec. 31)
Technical details: The PDCF offers short-term (up to 90-day) loans to primary dealers, or firms that serve as intermediaries between the government and the market. To get access to the loans, the dealers can offer up a wide variety of different types of collateral (investment grade corporate debt, commercial paper, municipal debt, mortgage-backed securities, asset-backed securities, and even some stocks). Exchange-traded funds and mutual funds are not eligible collateral under the PDCF.
How it impacts Main Street: The PDCF allows those dealers at the heart of the financial system to temporarily liquidate some assets that they may be unable to sell in the open market. Without assets trapped on the balance sheet, those primary dealers would then have the liquidity to lend to businesses disrupted by the virus.
Money Market Mutual Fund Liquidity Facility (MMLF)*
Date announced: March 18, March 20
Date launched: March 23 (effective through at least Dec. 31)
Technical details: Much like the PDCF, the MMLF offers short-term loans, but to all U.S. banks. Under the program, banks offer up collateral in the form of U.S. Treasuries, asset-backed commercial paper, and some unsecured commercial paper. The MMLF is similar to the crisis-era Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), but the Fed on March 20 announced that it would expand the MMLF to take on short-term (with maturities of a year or less) municipal debt as eligible collateral as well.
The Treasury will provide $10 billion of credit protection.
How it impacts Main Street: The expansion of the MMLF to municipal debt is a new move. With businesses closed, local municipalities and states may be unable to collect tax revenue for a while. As a result, municipal debt markets have been drying up as bond buyers worry about the economic spillover of the virus onto the credit health of American towns, cities, and states. The Fed was able to retrofit the MMLF to the muni debt market in an attempt to maintain the flow of financing for localities and their public utilities.
Primary Market Corporate Credit Facility (PMCCF)*
Date announced: March 23, April 9, June 29
Date launched: June 29 (effective through at least Dec. 31)
Technical details: The PMCCF will purchase investment-grade corporate bonds (with maturities of four years or less) directly from eligible issuers and offer them a loan. Like the CPFF, the facility will have the support of billions of dollars from the U.S. Treasury and will hold the bonds in an SPV. Companies accessing the PMCCF would pay the Fed interest on the loan but would be allowed to hold off on interest payments for up to six months, during which it would not be allowed to pay dividends or buyback shares.
On April 9, the Treasury expanded its support from $10 billion to $50 billion as the Fed expanded the scope of the program to cover “fallen angel” corporate debt with below investment-grade ratings of BB-/Ba3.
The program is new and was not deployed during the 2008 crisis.
How it impacts Main Street: Companies with weaker credit ratings cannot access the CPFF, but strains in the investment-grade and high-yield markets have raised concerns that those with a higher-risk of default may be exposed. The PMCCF hopes to backstop those markets and allow companies to find financing and keep their employees on payroll while the business stoppages continue.
Secondary Market Corporate Credit Facility (SMCCF)*
Date announced: March 23, April 9, June 15
Date launched: May 12 (effective through at least Dec. 31)
Technical details: As the name implies, the SMCCF will provide a backstop in the secondary market for investment-grade and some high-yield corporate debt targeted by the PMCCF. The facility would include a separate SPV with another $10 billion from the U.S. Treasury, which was expanded to $25 billion on April 9. The SMCCF can also take on some U.S.-listed ETFs with “broad exposure” to the market for U.S. investment-grade corporate bonds, in addition to some ETFs with exposure high-yield corporate bonds.
After focusing its initial purchases in ETFs, the facility was expanded on June 15 to include secondary purchases of individual corporate bonds for the purposes of creating a “broad, diversified market index” of bonds that are eligible for the program. Purchases cover bonds with remaining maturities of 5 years or less.
The SMCCF is also a new tool.
How it impacts Main Street: The SMCCF adds extra juice to its efforts to provide liquidity to the investment-grade and some high-yield corporate debt markets by targeting the secondary market. Just as the PMCCF does, the goal is to maintain access to financing for companies hoping to survive the business disruptions from the novel coronavirus, and keep employees paid in the process. In tandem, both facilities are capable of providing up to $750 billion in support to credit markets.
Term Asset-Backed Securities Loan Facility (TALF)*
Date announced: March 23, April 9, May 12, July 23 (effective through at least Dec. 31)
Technical details: The TALF was deployed in the financial crisis and is again being deployed to provide loans to U.S. companies in exchange for collateral in the form of asset-backed securities (with exposure to consumer credit like student loans, car loans, credit card receivables, and small business loans). The facility would offer the loans to U.S. companies via primary dealers, and would be supported through an SPV with $10 billion of equity investment from the U.S. Treasury.
On April 9, the Fed expanded the TALF to also accept collateral with underlying credit exposures to leveraged loans (such as collateralized loan obligations) and commercial mortgages. On May 12, the Fed offered more specifics on the types of CLOs it would accept.
How it impacts Main Street: Asset-backed securities provide liquidity to the underlying availability of consumer credit categories familiar to most Americans. The TALF program is aimed at giving market-makers the confidence to package loans which in theory, should give underwriters the confidence to extend credit to businesses and household through the crisis.
Foreign and International Monetary Authority (FIMA) Repo Facility
Date announced: March 31
Date launched: April 6 (effective through at least the beginning of October)
Technical details: The Fed’s U.S. dollar swap arrangements are only available to 14 central banks, but the repo facility offers U.S. dollars to any of the over 200 foreign and international monetary authorities (FIMA) that have accounts at the New York Fed. Through the FIMA repo facility, other central banks and monetary authorities looking to liquidate their positions in U.S. Treasuries will be able to temporarily swap those securities for U.S. dollars.
How it impacts Main Street: The FIMA repo facility is aimed at supplying U.S. dollars to the world as global investors and companies hunker down in greenbacks. Like the U.S. dollar swap arrangements, the FIMA repo facility is designed to avoid any foreign market strains resulting from a dollar shortage, which could spillover into the U.S. if not properly addressed.
Paycheck Protection Program Liquidity Facility (PPPLF)*
Date announced: April 6, April 30
Date launched: April 16 (effective through at least Dec. 31)
Technical details: The Federal Reserve committed to backstopping the $350 billion Paycheck Protection Program authorized by Congress. On April 6, the Fed released a two-sentence statement committing the central bank to providing financing to PPP lenders. Three days later, the Fed clarified that the facility will offer credit to any PPP lender and take on those PPP loans as collateral at face value.
As of April 30, the Fed expanded participation in the program to allow non-traditional lenders, like community development financial institutions and members of the Farm Credit System, to access liquidity as well.
How it impacts Main Street: The PPP loans were set at a 1% interest rate, but banks say the rate is below “break even” for them to originate and service. By taking on the loans itself, the Fed’s PPP facility hopes to give banks a little more breathing room to originate the PPP loans that Main Street businesses desperately need to weather the coronavirus-induced shut downs.
Main Street New Loan Facility (MSNLF)*
Date announced: March 23, April 9, April 30, June 8
Date launched: June 15 (effective through at least Dec. 31)
Technical details: The MSNLF is one of three facilities within the Fed’s Main Street Lending program and originally sought to offer borrowers new four-year loans of at least $500,000. Pricing for all Main Street loans are set at LIBOR plus 3%.
On April 9, the Fed announced that it would support $600 billion in loans to businesses with fewer than 10,000 employees or up to $2.5 billion in annual revenues. U.S. lenders will underwrite the loans, hold 5% of the loan on its books, and sell the remaining 95% to an SPV backed by $75 billion in equity from the U.S. Treasury.
On April 30, the Fed expanded the scope of the facility to change the employee threshold to 15,000 and the revenue threshold to $5 billion. The updated terms state that the maximum loan size is the lesser of $25 million or four times 2019 adjusted EBITDA.
On June 8, the Fed lowered the minimum to $250,000 and expanded the loan term to five years. The Fed also raised the absolute maximum loan size to $35 million. MSNLF loans, in addition to all other Main Street loans, will allow borrowers to defer principal payments for the first two years.
How it impacts Main Street: The Small Business Administration’s Paycheck Protection Program targets companies with fewer than 500 employees, but businesses larger than that did not have a lifeline. The Main Street Lending Facility will allow businesses to get loans as long as they “make reasonable efforts” to retain employees.
There is no minimum size for eligible companies, and businesses that took a PPP loan remain eligible for any type of Main Street loan.
Main Street Priority Loan Facility (MSPLF)*
Date announced: March 23, April 30, June 8
Date launched: June 15 (effective through at least Dec. 31)
Technical details: The Fed revised the the terms of its Main Street Lending Program on April 30 and created the MSPLF to cover larger, slightly riskier loans. Loans under the MSPLF can be a little larger than those originated under the MSNLF, and can be as large as six times 2019 adjusted EBITDA.
Originally, the Fed sought to require lenders to hold onto a slightly larger slice of the loan (15%) to cover the higher risk.
On June 8, the Fed walked that retention requirement back, and will now only require lenders to hold onto 5% of the loan (like the MSNLF and MSELF). The Fed also raised the absolute ceiling to $50 million.
The same profile of borrowers is applicable for the MSPLF; under 15,000 employees and $5 billion in revenue.
How it impacts Main Street: Like the MSNLF, the MSPLF hopes to keep larger businesses whole through the COVID-19 crisis.
The MSPLF appeals to riskier businesses that, for example, may have low earnings but a need for a large loan. Because the EBITDA requirement would allow for a more highly levered loan relative to the MSNLF, a priority loan will be senior to other debt carried by the borrower (a requirement not part of loans under the MSNLF).
Main Street Expanded Loan Facility (MSELF)*
Date announced: March 23, April 9, April 30, June 8
Date launched: June 15 (effective through at least Dec. 31)
Technical details: The MSELF is the third program in the Main Street Lending Facility. It differs in that it allow banks to upsize the tranche of an existing loan to terms that would allow them to fund the loan from the $600 billion pool.
Borrowers wanting a loan (of a minimum size of $10 million) will face the same eligibility requirements: having fewer than 15,000 employees or up to $5 billion in annual revenues.
Loans under the MSELF can be as large as $200 million, but no company can take out a loan that is larger than six times its EBITDA when adding outstanding and undrawn debt (like the MSPLF). Lenders will be required to hold onto 5% of the loan risk.
On June 8, the Fed expanded the program to raise the maximum loan limit under the MSELF to $300 million.
How it impacts Main Street: Whereas the MSNLF covers brand new loans to borrowers that may not have an outstanding loan, the MSELF will allow borrowers to work with their bank lender to restructure their existing loans. The MSELF will offer large borrowers massive loans of up to $300 million. Like the MSPLF loans, the expanded loans will be senior in debt to all other debt carried by the borrower.
Nonprofit Organization New Loan Facility (NONLF)*
Date announced: June 15, July 17 (effective through at least Dec. 31)
Technical details: On June 15, the Fed proposed a carveout of the Main Street program that would make eligible any 501(c)(3) or 501(c)(19) organization with between 50 and 15,000 employees. Among the requirements: the applicant’s 2019 revenues must be less than $5 billion and the organization must be at least five years old.
On July 17, the Fed finalized the facility and widened the eligibility to allow nonprofits as small as 10 employees. It also broadly loosened standards to cover slightly more indebted nonprofits than in the original proposal.
The terms of the loans are modeled off of the Main Street loans. The minimum loan size for the NONLF is $250,000 and the maximum size is $35 million or the borrower’s average 2019 quarterly revenue. Similarly, the loans will be five years in term and will allow the borrower to defer principal payments for two years, interest payments for one year, and are priced at LIBOR plus 3%.
The “new” loan program would allow lenders to originate a fresh line of credit, 95% of which the lender can shop to the Fed’s facility. The facility will be backed from the same pool of $75 billion of equity from the U.S. Treasury dedicated to the Main Street program.
How it impacts Main Street: As the Fed was designing its Main Street Lending Program, some Fed officials acknowledged that the facility may not meet the needs of nonprofits like universities and charitable organizations facing funding gaps amid the COVID-19 crisis.
Fed Chairman Jerome Powell noted that nonprofits provide essential services like skills development, which is why the central bank felt the need to “help them through this difficult time.”
Nonprofit Organization Expanded Loan Facility (NOELF)*
Date announced: June 15, July 17 (effective through at least Dec. 31)
Technical details: The NOELF will offer loans of larger size than the NONLF, allowing a borrower to take out as much as $300 million (with a minimum loan size of $10 million). The loan would be an upsized tranche of an existing loan and would be senior in repayment priority to other debt.
Although the loan sizes under the NOELF are much larger, the nation’s largest nonprofits and universities may not be eligible. As proposed, the facility would not cover organizations with more than 30% of its revenues coming from donations. In its finalized term sheet, the Fed loosened the donations threshold and will now make eligible nonprofits with up to 40% of its revenues coming from donations.
Any organization with an endowment larger than $3 billion (requirements that also apply to the NONLF) will not be eligible, and borrowers will still face a tailored maximum of their average 2019 quarterly revenue.
Otherwise, loans under the NOELF will have the same terms as all the other Main Street facilities (i.e. five-year term, deferred principal payments for two years, interest payments for one year, pricing at LIBOR plus 3%, and lender retention of 5%).
How it impacts Main Street: Like the MSELF, the NOELF will allow borrowers to work with their bank lender to restructure their existing loans. The NOELF will offer larger borrowers, such as mid-sized universities or recognizable charitable organizations, to bridge about a quarter’s worth of revenue.
However, the country’s largest nonprofits may not be covered due to the endowment and donations-as-a-percentage-of-revenue limits.
Municipal Liquidity Facility (MLF)*
Date announced: April 9, April 27, June 3
Date launched: May 26 (effective through at least Dec. 31)
Technical details: Through an SPV backed by $35 billion of investment from the Treasury, the Fed will buy short-term municipal debt (with maturity of less than two years) directly from state and local governments. U.S. states, cities with more than one million residents, and counties with more than two million residents will be eligible for the program, which will support up to $500 billion in loans.
On April 27, the Fed lowered the bar on qualification to include cities with at least 250,000 residents and counties with at least 500,000 residents. The Fed also expanded the eligible maturity to three years, but municipalities will have to be at least investment-grade to participate. The Fed released pricing details on the facility on May 11.
On June 3, the Fed said it would allow state governors to designate two issuers (such as public transit systems or airports) for access to the facility. The Fed also expanded the facility to allow states without large counties or cities to designate up to two cities or counties for eligibility to get MLF loans.
How it impacts Main Street: Similar to the expanded scope of the MMLF, the municipal liquidity facility hopes to provide a lifeline to local and state governments facing dramatic funding gaps with tax revenue collections essentially frozen. Because local and state governments are the key providers of critical services like unemployment insurance and sanitation, the Fed hopes to prevent municipalities from defaulting by offering to take on their debt if counter-parties are unavailable.
With the expansion, public entities like New York’s Metropolitan Transportation Authority will be able to get loans to help plug their budget shortfalls.
(* denotes facilities opened by the Fed with approval from the U.S. Treasury under Section 13(3) of the Federal Reserve Act)
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