Federal Reserve announces new measure to combat economic losses News
Pexels / Pixabay
Federal Reserve announces new measure to combat economic losses

The Federal Reserve announced on Monday it is taking several steps to enhance access to credit and liquidity for consumers, municipalities, and small and large businesses.

In its statement, the Federal Reserve said, “While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive measures must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery one the disruptions abate.”

Some of these measures include:

  • Purchasing $500 billion in Treasury securities and at least $200 billion of mortgage-backed securities, as well as agency mortgage-backed securities, in order to support the market to continue functioning.
  • Providing up to $300 billion in new financing to support the flow of credit to employers, consumers and businesses.
  • Establishing two facilities to support credit to large employers that will provide liquidity for outstanding corporate bonds.
  • Establishing another facility to support credit to consumers and businesses by enabling the issuance of asset-backed securities backed by student loans, auto loans, credit card loans and loans guaranteed by the Small Business Administration.
  • Facilitating credit to municipalities through a Money Market Mutual Fund Liquidity Facility.
  • Facilitating credit to municipalities by expanding the Commercial Paper Funding Facility.

These programs are individually tailored to meet the needs of the various stakeholders, but in the aggregate, seek to prop up the economy as a whole and position it for a swift recovery.

In its statement, the Federal Reserve said it will soon establish a Main Street Business Lending Program for small- to medium-sized businesses. Additionally, the Federal Reserve is modifying one of its facilities, the Primary Market Corporate Credit Facility (PMCCF) for large employers that will provide bridge financing for four years with the option to defer payments for the first six months.

In order to establish these measures, the Department of Treasury is making an equity investment into these facilities through a special purpose vehicle. This provides the additional capital necessary for the programs while providing a repayment method back to the Dept. of Treasury.

The Federal Reserve sees these measures as supporting many actors in the economy. “Taken together, these actions will provide support to a wide range of markets and institutions, thereby supporting the flow of credit in the economy.”

This announcement came less than a day after the Senate was unable to pass the Coronavirus Aid, Relief, and Economic Security Act on Sunday. All government actors are seeking ways to combat the economic issues that are affecting nearly all facets of the economy as it came to an abrupt halt in the past week.

For more on COVID-19, see our special coverage.

THIS DAY @ LAW

District of Columbia named seat of US government

On July 16, 1790, the District of Columbia was established as the permanent seat of the United States government by the Residence Act. Originally the district contained land on both sides of the Potomac, grants from Maryland and Virginia, but in the mid-19th century, when it was obvious that the major government buildings were being built on the Maryland side, Virginia asked for its land back and received it. Learn more about the District of Columbia.

Saddam Hussein becomes President of Iraq

On July 16, 1979, Hasan al-Bakr resigned as President of Iraq. He was replaced by Saddam Hussein, who held power until he was deposed by American forces in 2003. In 2006, Hussein was tried and convicted of crimes against humanity. He was executed by hanging later that year. Learn more about relations between the United States and Saddam Hussein from George Washington University.