Fed Unveils Emergency Lending Program

The Federal Reserve Board announced today that it will establish a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses. The Treasury will provide $10 billion of credit protection to the Federal Reserve in connection with the CPFF from the Treasury's Exchange Stabilization Fund (ESF). The Federal Reserve will then provide financing to the SPV under the CPFF. Its loans will be secured by all of the assets of the SPV.

According to The New York Times, putting it into action required the signoff of Treasury Secretary Steven Mnuchin and Treasury will provide $10 billion of credit protection to the Fed, using Treasury’s Exchange Stabilization Fund.

“Commercial paper markets directly finance a wide range of economic activity,” the Fed said in a statement, noting that it supplies “credit and funding for auto loans and mortgages as well as liquidity to meet the operational needs of a range of companies.”

Additionally, the White House will ask Congress for a stimulus package worth at least $850 billion to address the economic fallout of the coronavirus outbreak as members of both parties express a heightened urgency to prop up the economy in response to the crisis.

The Fed announced that over the coming months that it will increase its holdings of Treasury securities by at least $500 billion and its holdings and agency mortgage-backed securities by at least $200 billion.