INSUBCONTINENT EXCLUSIVE:
By Jeanna Smialek and Peter EavisThe Federal Reserve said it could pump $2.3 trillion into the economy through new and expanded programs it
announced on Thursday, ramping up its efforts to help companies and state and local governments suffering financial damage from the
coronavirus.
The central bank rolled out its relief package just as the government announced that 6.6 million more Americans were newly
jobless, laying bare the severe damage to the economy as quarantines keep workers at home and grind entire sectors to a standstill
About 16 million people have filed for unemployment in the past three weeks.
The Fed announced that it would use Treasury Department funds
recently authorized by Congress to buy municipal bonds and expand corporate bond-buying programs to include some riskier debt
The Fed also rolled out a highly anticipated lending program that targets midsize companies, including those not eligible under a Small
Business Administration loan program.
The measures push the Fed far beyond anything it attempted in the 2008 financial crisis, and expand
its already significant efforts to cushion the economy and calm markets, which have included money market interventions and an unlimited
The Fed had previously rolled out about $500 billion worth of emergency lending programs, so this could more than quadruple the size of its
Powell, the Fed chairman, said in a speech after the announcement Thursday
economy as coronavirus shutters businesses, tanks consumer confidence and leaves millions of workers without a paycheck.
While some of their
newly-announced programs urge or incentivize companies to hang onto employees, they are just getting up and running, coming too late for
The most recent economic rescue bill signed into law by President Donald Trump included a new cushion for laid-off workers, in the form of
The emergency programs are intended to get credit flowing to companies and governments that might struggle to access funding as uncertainty
roils markets, helping them to make it through
Officials had avoided buying municipal debt and lower-rated company debt, out of concern about credit risk and to avoid picking winners and
But amid market disruptions, calls for Fed action in both areas have been building.
And the Fed provided details on another previously
employers left out of other government initiatives
companies have between 500 and 10,000 employees, and they employ 30.3 million workers, Census Bureau data show
Many of those are too big to get small business loans, but too small to tap corporate debt markets.
Companies with up to 10,000 workers, or
up to $2.5 billion in revenues, will be able to gain access to four-year loans through the program
that means or how it will be enforced.
Though the borrowers must follow restrictions on compensation, stock repurchase and dividend
restrictions set out in the recently passed congressional package, the Fed stopped short of applying limits on offshoring suggested in the
law.
Principal and interest on those loans can be deferred for one year, but the borrowing is not forgivable, unlike the small business
loans Congress authorized
The program design is still open to comment
The Fed gave no guidance on when it, or other new programs announced, would be up and running.
Help for state and city governmentsFed relief
for states and cities had also been highly anticipated because Congress provided only limited aid to those governments in its recent
The markets that local governments use to issue bonds and finance themselves have been in turmoil, which threatened to make it difficult for
officials to fund operations just as revenues dried up and the need for cash skyrocketed.
The new program will buy up to $500 billion of
states, counties with at least 2 million residents, and cities with a population of at least 1 million residents, according to the Fed
that there may be more to come
below investment grade after March 22, for instance, will now be eligible for Fed help
So will some high-yield exchange-traded funds, which are built on bonds but trade like stock.
Companies that benefit from the programs will
not be forced to restrict share buybacks or dividends
the corporate bond-buying as falling under that umbrella.
The TALF program, which everyone from lawmakers to private equity firms have been
urging the Fed to expand, will now accept bundles of debt built on both commercial mortgages and leveraged loans, which are given to
companies already deeply in debt
Big investors have been pushing the Fed to expand the program down the ratings ladder.
The central bank has not slammed the door on the
Barrack Jr., chief executive of a company that invests in commercial real estate, and a prominent supporter of Trump, said Thursday that he
In a blog post last month he called for federal action to support the commercial real estate market.
Limited support for risky
debt
Officials are trying to make sure that a broad swath of companies can continue obtaining credit, allowing them to stay in business and
gotten no direct help, and had seen relatively little improvement.
Borrowing has become comparatively expensive for companies with risky
That lowers the chances that such businesses, wobbly in the best of times, will survive the sharp downturn.
The new expansions may help to
soften the sharp cutoff between investment grade and junk status, but only to a limited extent
Under one program, American Airlines and United Airlines would not be able to sell their bonds or loans to the Fed because their ratings
Southwest Airlines would qualify, because it is still rated investment grade
