A new array of programs unveiled today by the Federal Reserve is expected to make up to $2.3 trillion in loans available in the coronavirus-battered U.S. economy.
In a statement, the central bank announced the highly anticipated details of its Main Street business lending program and several other initiatives aimed at boosting small and mid-size firms as well as cities and states struggling amid the pandemic.
“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 Fed chairman Jerome Powell. “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.”
As part of the Main Street Lending Program, the Fed is offering four-year loans to companies with up to 10,000 employees and revenues of less than $2.5 billion. It will initially fund up to $600 billion in loans.
Watch on FN
Under the provisions, principal and interest payments will be deferred for a year, and the funds will be subject to restrictions on stock buybacks, dividends and executive compensation. Only companies that “commit to make reasonable efforts to maintain payroll and retain workers” can take advantage of the program.
The funding is offered in addition to the protection plan of the recently enacted stimulus package (aka the CARES Act), which provides forgivable loans to cover payroll and other operating expenses to businesses with 500 workers or fewer.
In addition, the central bank pledged to purchase up to $500 billion in short-term debt directly from states and the District of Columbia, as well as counties with at least 2 million residents and cities with at least 1 million residents. Eligible state-level issuers can use the funds to support additional counties and cities. This Municipal Liquidity Facility is aimed at helping state and local governments manage cash flow pressures.
In late March, President Donald Trump signed the $2 trillion emergency relief CARES Act intended to aid businesses, individuals and state governments while the pandemic rages on. The deal includes $250 billion in checks to individuals and families, $250 billion in jobless insurance benefits, $350 billion in small business loans and $500 billion in loans for distressed companies.
Lost Your Job Amid Coronavirus? You Could Get Federal Aid as Soon as This Week
The $2 Trillion Coronavirus Stimulus Package Hits Trump’s Desk — Here’s What’s Next
Fed Slashes Interest Rates to Almost Zero as Coronavirus Concerns Escalate