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FRB Chair Powell and Treasury Secretary Mnuchin Detail CARES Act Efforts

In testimony before the Senate Banking, Housing, and Urban Affairs Committee, Federal Reserve Board ("FRB") Chair Jerome H. Powell and Secretary of the Treasury Steven T. Mnuchin reviewed government actions taken pursuant to the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

In his statement, Mr. Powell outlined the actions taken by the FRB, including:

  • reducing the federal funds rate to "near zero," until confidence is restored in the economy;

  • purchasing Treasury securities and agency mortgage-backed securities through the Federal Open Market Committee in amounts necessary to support "smooth market functioning";

  • lengthening the term and lowering the rate on discount window loans in an effort to stabilize short-term funding markets;

  • establishing the Primary Dealer Credit Facility ("PDCF"), the Commercial Paper Funding Facility ("CPFF") and the Money Market Mutual Fund Liquidity Facility ("MMLF") in conjunction with Treasury through emergency lending authorities outlined in Section 13(3) of the Federal Reserve Act;

  • expanding and enhancing dollar liquidity swap lines in conjunction with other central banks;

  • providing liquidity to lenders backed by its Paycheck Protection Program ("PPP") loans to small businesses;

  • preparing to launch the Main Street Lending Program, which will lend money to certain small- and medium-sized businesses that were in "good financial standing" prior to the pandemic; and

  • disclosing under the PDCF, CPFF and MMLF programs the (i) names and details of participants in each facility, (ii) amounts borrowed, (iii) interest rates charged, and (iv) total fees, costs and revenues of each facility.

In his statement, Mr. Mnuchin highlighted the efforts of the Treasury, including:

  • processing over 4.2 million loans worth more than $530 billion (in conjunction with the Small Business Administration);

  • issuing over 140 million "Economic Impact Payments," totaling over $240 billion, as direct relief to Americans;

  • distributing over $150 billion for essential services to states, in addition to local and tribal governments, through the Coronavirus Relief Fund;

  • approving approximately $25 billion in payroll support to the airline industry; and

  • approving under the Exchange Stabilization Fund:

    • the PDCF,

    • The MMLF,

    • the Term Asset-Backed Securities Loan Facility,

    • the Primary Market Corporate Credit Facility,

    • the Second Market Corporate Credit Facility,

    • the Main Street Business Lending Program,

    • the Municipal Liquidity Facility, and

    • the PPP Lending Facility.

The Treasury Secretary stated that of the $454 billion allotted by the CARES Act in support of Federal Reserve facilities, $259 billion remains and can be used to expand existing programs or create new programs, as the need further arises.

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