Loans

Federal Reserve Facilitates $2.3T In Loans To Boost Economy

Federal Reserve Facilitates $2.3T In SMB Loans

In an effort to deliver more relief to the nation’s struggling small businesses and boost the economy amid the global coronavirus pandemic, the Federal Reserve announced it has taken actions to facilitate $2.3 trillion in loans.

“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,” said Federal Reserve Board Chair Jerome H. Powell in a statement on Thursday (April 9).

The Fed’s latest round of funding is expected to assist the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) by supplying cash to lenders through financing backed by PPP loans to small businesses.

Last week, the $349 billion PPP was launched to help small businesses keep their workers on the payroll in the wake of the worldwide COVID-19. The daily demand for loans has been more than the SBA typically processes in a year.

As part of the Fed’s newly announced actions, the Paycheck Protection Program Liquidity Facility (PPPLF) will extend credit to lenders that originate PPP loans, taking the loans as collateral at face value.

Under the initiative, the Fed said it will provide credit to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. In addition, the U.S. Treasury will provide $75 billion in equity from the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Fed will also offer up to $500 billion in lending to assist cash-strapped states and municipalities through a  newly formed Municipal Liquidity Facility. The Treasury will offer credit protection totaling $35 billion under the plan.

Additionally, the Fed vowed to monitor the financial markets to determine whether more help is needed to support the flow of cash and credit to state and local governments.

“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,” Powell said.

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