Fed Extends Several Emergency Lending Programs By Three Months

Federal_ReserveThe Federal Reserve Board today extended most of its emergency lending programs by three months, through the remainder of 2020, to support an economy still grappling with the COVID-19 pandemic.

“The three-month extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the COVID-19 pandemic,” the Federal Reserve Board said in a statement Tuesday.

Since March, the Federal Reserve has initiated nine emergency programs directed at injecting liquidity into short-term credit markets and extending credit to businesses and local governments facing increased expenditures and massive declines in revenues as a result of the public health emergency.

According to the Federal Reserve Board:

The Board’s lending facilities have provided a critical backstop, stabilizing and substantially improving market functioning and enhancing the flow of credit to households, businesses, and state and local governments. Each facility was created under section 13(3) of the Federal Reserve Act with the approval of the Treasury Secretary.

The extensions apply to the Primary Dealer Credit Facility, the Money Market Mutual Fund Liquidity Facility, the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Securities Loan Facility, the Paycheck Protection Program Liquidity Facility, and the Main Street Lending Program. The Municipal Liquidity Facility is already set to expire on December 31, with the Commercial Paper Funding Facility set to expire on March 17, 2021.

Further details on each can be found here.

As previously reported on Conduit Street, in June the Federal Reserve expanded a $500 billion lending program designed to help state and local governments better manage cash flow stresses caused by the COVID-19 pandemic.

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.

Stay tuned to Conduit Street for more information.

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