The Federal Reserve System will be providing up to $2.3 trillion in loans to support the nation’s economy in response to the ongoing COVID-19 pandemic. These funds will impact a range of institutions and are designed to assist individuals and businesses, as well as support state/local governments.
Funding released by the Federal Reserve will go to support the Small Business Administration (SBA)’s Paycheck Protection Program (PPP), the Main Street Lending Program, the Primary and Secondary Market Corporate Credit Facilities, and establish a Municipal Liquidity Facility.
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” Federal Reserve Board Chair Jerome H. Powell said in a statement. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
The Federal Reserve will support the PPP be providing liquidity to financial institutions offering the small business loans. The Paycheck Protection Program Liquidity Facility will offer credit to financial institutions that are originating the loans, with the loans being taken as face-value collateral.
In addition, the Reserve will purchase up to $600 billion in loans through the Main Street Lending Program to assist small and mid-sized businesses. Using Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Department of Treasury will release $75 billion to support the program. The Main Street Lending Program is designed to assist businesses that were in good financial standing prior to the pandemic by providing four-year loans for companies employing up to 10,000 employees or with revenues under $2.5 billion.
Banks will in some instances be able to originate Main Street loans or use them to increase the size of existing business loans.
Primary and Secondary Market Corporate Credit Facilities, as well as the Term Asset-Backed Securities Loan Facility, will now support up to $850 billion in credit. This will be backed by $85 billion in Treasury Department credit protection.
The Federal Reserve will also establish a Municipal Liquidity Facility that will offer up to $500 billion in lending for state and local governments. This will be backed by $35 billion in Treasury credit protection. The Municipal Liquidity Facility is designed to assist governments manage cash flow during the COVID-19 pandemic.
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