The U.S. Federal Reserve on Thursday unveiled emergency programs that could dole out more than $2 trillion in loans to businesses of all sizes, as well as to struggling state and city governments, in a bid to keep the economy afloat as it is ravaged by the coronavirus pandemic.
The programs will be backed by $165 billion of funds in the economic relief package passed last month by Congress as well as $30 billion that had previously been committed by the Treasury Department.
The scope and scale of the programs underscore how serious a threat the virus poses to an economy where millions of jobs have been shed in recent weeks as businesses have shuttered across the U.S.
“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,” Fed Chair Jerome Powell said in a statement. “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.”
The Fed is committing to buy up to $600 billion in loans from medium-sized businesses that had up to 10,000 employees or $2.5 billion in revenue in 2019, in what it is calling its “Main Street” lending facility.
Under that program, the central bank will buy 95 percent of a loan originated by a bank, which will keep the other 5 percent. The Fed will also bolster the $350 billion in the relief package set aside for government-backed loans to small businesses by lending to banks that put up those loans as collateral.
Under an emergency facility designed to support municipalities, $500 billion will be available to buy debt from states, cities with a population over one million, and counties over a population of 2 million.
The Fed is also scaling up its programs designed to buy bonds from corporations whose debt have been deemed safe by credit ratings agencies, as well as a program to boost student loans, auto loans and credit card debt from banks, which together will now provide $850 billion in funding.
Under the latter program, the Fed will offer loans to banks collateralized by loans to companies that are already highly indebted, which will help riskier businesses that don’t have direct access to the central bank’s lending programs to borrow from the private sector.
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