While Congress continues to debate a $2 trillion stimulus package to maintain the U.S. economy, the Federal Reserve continues to do the heavy lifting.
After re-instituting its quantitative easing program, expanding swap arrangements for global central banks, cutting short-term interest rates to near zero and announcing backstops for the commercial paper and money markets, the Fed announced additional programs Monday morning to maintain liquidity in financial markets.
The Fed said there would be no limits on its revived Treasury and mortgage-backed securities purchases, aka “quantitative easing,” and that it would be purchasing “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. (Last week it announced $700 billion in Treasury and MBS purchases.)
Also on Monday morning the Fed established for the first time programs to support the corporate bond market: a Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and a Secondary Market Corporate Credit Facility (SMCCF).
In addition, the Fed re-established the Term Asset-Backed Securities Loan Facility (TALF), program used during the financial crisis, to help enable issuance of asset-backed securities backed by student loans, auto loans, credit card loans and more, and expanded programs it announced just last week supporting money market funds and commercial paper market.
The Money Market Mutual Fund Liquidity Facility (MMLF) will now cover municipal variable rate demand notes (VRDNs) and bank CDs, and the Commercial Paper Funding Facility will allow more issuers to participate since the Fed lowered the minimum pricing for the overnight indexed swap rate.
The Fed also said it would establish a Main Street Business Lending Program to support lending to eligible small- and medium-size businesses, complementing efforts by the Small Business Administration.