The Federal Reserve announced Thursday that it would take additional actions to provide $2.3 trillion in loans to support the businesses of all sizes, local governments and more affected by the economic impact of COVID-19.
The funding will assist businesses in providing paycheck protection, four-year loans to mid-sized and small businesses and support cash flow for local and city governments suffering in the midst of the coronavirus pandemic, according to a news release from The Federal Reserve.
Late last month, the White House and Senate leaders announced an agreement on an unprecedented $2 trillion emergency bill to rush widespread aid to businesses, workers and a health care system slammed by the coronavirus pandemic. The programs announced Thursday will be backed by $165 billion of funds in the economic relief package passed last month by Congress as well as $30 billion that had previously been committed by the Treasury Department, Politico reported Thursday.
The additional funds announced Thursday will “promote maximum employment, stable prices and “stability of the financial system.”
"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."
Federal Reserve is taking action to support employers of all sizes and communities by:
- Bolstering the effectiveness of the Small Business Administration's Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. The PPP provides loans to small businesses so that they can keep their workers on the payroll. The Paycheck Protection Program Liquidity Facility (PPPLF) will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value;
- Ensuring credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. The Department of the Treasury, using funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will provide $75 billion in equity to the facility;
- Increasing the flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF). These three programs will now support up to $850 billion in credit backed by $85 billion in credit protection provided by the Treasury; and
- Helping state and local governments manage cash flow stresses caused by the coronavirus pandemic by establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities. The Treasury will provide $35 billion of credit protection to the Federal Reserve for the Municipal Liquidity Facility using funds appropriated by the CARES Act.
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The Fed’s plan activated a loan program which provides loans to businesses with fewer than 500 employees. The Main Street lending program “will make a significant difference for the 40,000 medium-sized business that employ 35 million Americans,” Treasury Secretary Steven Mnuchin said.
The government's pay protection plan for small businesses is off to a rocky start. They have had difficulty getting banks to provide the loans. The banks have said that the government has not made clear how they should process such loans, even what forms are required.
The Fed announced the new infusion of cash on the same day the U.S. reported applications for unemployment benefits last week reached a staggering 6.6 million. That means more than one in 10 workers have lost their jobs in just the past three weeks as a result of the coronavirus outbreak.
The Associated Press contributed to this report.
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