Federal Reserve announces $2.3 trillion in additional funding to support the economy

In a press release this morning the Federal Reserve (Fed) announced additional actions to provide up to $2.3 trillion in loans to support the economy. The loans will go towards assisting households and businesses of all sizes as well as state and local governments.

The Fed announced two new lending programs including a municipal liquidity facility, and its previously announced main street lending program. The facilities will provide up to $500 billion and $600 billion in loans, respectively, backstopped by the Treasury per the CARES Act. The Fed will also bolster the Small Business Administration's Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions.

In addition to its new lending programs the Fed also expanded existing facilities. It’s Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF) will now support up to $850 billion in credit, backstopped by the Treasury. The PMCCF and SMCCF will now be able to purchase high yield bonds if they were downgraded after March 22, and high yield ETFs. The TALF will now accept triple-A rated tranches of both outstanding commercial mortgage-backed securities and newly issued collateralized loan obligations as collateral.

Why it matters:

• The Fed announced another kitchen sink of lending facilities to support the economy. In the month since it first began taking action, the Federal Reserve has been the most aggressive it’s ever been.
• With the addition of high yield and municipal bonds the Fed is now supporting virtually every financial market. The moves are unprecedented.
  

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