On Thursday, April 9, the Federal Reserve announced additional actions to support the economy through the coronavirus pandemic. This commitment of an additional $2.3 trillion in loans will support American households and employers contributing to both state and local economics. These additional measures will ensure that local governments will be able to continue to provide critical services through the pandemic.
To properly prioritize the current public health crisis, the Federal Reserve’s role is to provide relief and stability during this time of constrained economic activity. Mandated by Congress, the Federal Reserve’s actions will safeguard an economic recovery allowing state and local governments to prioritize healthcare efforts and limiting the spread of the virus.
The Federal Reserve is exercising its full range of authority, mandated by the United States Congress, to give support for the flow of credit for employers of all sizes. These supports will continue to promote the stability of the financial system and includes focused pandemic actions such as:
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Ensure the effective delivery of the Small Business Administration’s Paycheck Protection Program (PPP) by providing term financing to small businesses to ensure financial liquidity. These loans allow small businesses to keep employees on their payroll under the Paycheck Protection Program Liquidity Facility (PPPLF).
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Allow credit flow to medium-sized and small businesses with up to $600 billion in loans through the Main Street Lending Program. The Treasury Department will provide $75 million in equity using funding from the Coronavirus Aid, Relief and Economic Security Act (CARES Act)
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Expanding the scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) increases the flow of the credit to households and businesses through the use of capital markets. The PMCCF, SMCCF, and the Term Asset-Backed Securities Loan Facility (TALF), will support $850 billion in credit backed support.
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Bolster local and state governments’ ability to reduce cash flow stress caused by economic limitations due to pandemic measures. This cash flow will be established through the Municipal Liquidity Facility that will offer municipalities and states up to $500 billion in lending.
This financial aid, along with the Main Street Lending Program, will provide additional support to small and mid-sized businesses by offering 4-year loans to companies employing more than 10,000 employees or with revenues of less than $2.5 billion. Under the measures, principal and interest payments can be deferred for up to one year to alleviate financial strain through this time of pandemic measures.
To recognize the wide variety of financial support needs, the Federal Reserve and Treasury are seeking input from lenders, borrowers, and other stakeholders until April 16.
Several eligibility criteria have been broadened to further credit flow to households and businesses, helping state and local authorities to manage cash flow pressures better and continue the flow of goods and services to their communities. In addition to the above-listed actions, the Federal Reserve will continue to monitor the COVID-19 situation and primary and secondary markets. Additional