New financing mechanisms aimed to deliver much-needed credit and lending to stimulate economy
To provide direct support for employers and households, the Federal Reserve recently announced up to $2.3 trillion in loans to be delivered across multiple mechanisms and platforms. The following are several of the financing initiatives rolled out by the Federal Reserve on April 9th:
Paycheck Protection Program Liquidity Facility (PPPLF)
Through PPPLF, the Federal Reserve will extend credit to eligible financial institutions that originate Paycheck Protection Program (PPP) loans, allowing the loans as collateral at face value.
Main Street Lending Program
To ensure credit flows to small and mid-sized businesses, the Federal Reserve is set to purchase up to $600 billion in loans through the Main Street Lending Program. The Department of Treasury will provide $75 billion in equity to the facility, which is funding allocated from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Primary & Secondary Market Corporate Credit Facilities (PMCCF / SMCCF) & Term Asset-Backed Securities Loan Facility (TALF)
Aiming to increase the flow of credit to businesses and households via capital markets, the Federal Reserve will be expanding the size and scope of PMCCF, SMCCF, and TALF to support up to $850 billion credit. The financing will be supported by $85 billion in credit protection from the Treasury Department. Asset ranges for TALF have also been expanded under the new initiative.
Municipal Liquidity Facility
Leveraging funds appropriated by the CARES Act, the Federal Reserve will provide up to $500 billion in lending to states and municipalities through a Municipal Liquidity Facility. The short term notes will be purchased directly from U.S. states and Washington, DC, counties with at least two million residents, and cities with more than one million residents.
Additional guidance on these new financing mechanisms from the Federal Reserve can be found on their official website.