The Federal Reserve will expand a $500 billion lending program designed to help state and local governments better manage cash flow stresses caused by the COVID-19 pandemic.
Until now, the Municipal Liquidity Facility (MLF) — which will purchase up to $500 billion of short term notes — was open to states, as well as counties with at least 500,000 residents and cities with at least 250,000. Although eligible state-level issuers may use the proceeds to support additional counties and cities, some states did not have any local governments that reached those population thresholds.
Under the new terms, all U.S. states will be able to designate at least two cities or counties eligible to directly issue notes to the MLF, regardless of population. Governors of each state will also be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility.
According to the Federal Reserve:
In addition to the actions described above, the Federal Reserve will continue to closely monitor conditions in the primary and secondary markets for municipal securities and will evaluate whether additional measures are needed to support the flow of credit and liquidity to state and local governments.