The Federal Reserve System (the “Fed”) is the central bank of the United States and primarily interacts with banks and financial institutions to conduct monetary policy and promote the stability of the U.S. financial system.
The U.S. Department of the Treasury (the “Treasury”) is the executive agency of the federal government responsible for, among other things, managing federal government revenue, managing U.S. debt, licensing and supervising banks and thrift institutions, and advising the legislative and executive branches of the federal government on matters of fiscal policy.
The Fed and the Treasury have taken a variety of actions to help minimize the adverse effects of the COVID-19 pandemic. Set forth below are highlights of many, but not all, of the Fed’s and the Treasury’s COVID-19 related actions. A complete listing of all of the Fed’s COVID-19 related actions can be found here: Fed COVID-19 Announcements. A complete listing of all of the Treasury’s COVID-19 related actions can be found here: Treasury Press Releases.
June 15, 2020
The Fed announced updates to the term sheet and FAQs related to the SMCCF. The goal of the SMCCF is to support market liquidity by purchasing, in the secondary market, individual corporate bonds of eligible issuers and exchange-traded funds (“EFTs”). The combined size of the SMCCF and the PMCCF may be up to $750 billion, with Treasury making an equity investment of $25 billion into the SMCCF (and $50 billion into the PMCCF). Bonds purchased under the SMCCF must meet certain maturity, rating and U.S. business-related requirements. The SMCCF began purchasing eligible EFTs on May 12 and corporate bonds on June 16. It is expected that the PMCCF will be operational in the near future. The new SMCCF term sheet and frequently asked questions can be found here: June 15, 2020.
June 3, 2020
The Fed announced that the terms of the Municipal Liquidity Facility have been expanded. Some State Governors may now designate up to two city or county issuers, such that all states will have at least two cities or counties eligible to participate. Governors designating one issuer may select either the most populous city or the most populous county not meeting the population thresholds and Governors designating two issuers may select either their first and second most populous cities, their first and second most populous counties, or their most populous city and county. In addition, each state Governor may select up to two revenue bond issuers (and the Mayor of the District of Columbia may select one revenue bond issuer) to participate. The new term sheet and frequently asked questions can be found here: June 3, 2020.
May 28, 2020
The Federal Reserve Bank of New York published a schedule of the fees that will be charged by BLX LLC, as administrative agent for the Municipal Liquidity Facility. Fees can be found within the Administrative Agent Services Agreement posted here: May 28, 2020.
May 27, 2020
The Federal Reserve Bank of New York published sample purchase rates for the purchase of short terms notes under the Municipal Liquidity Facility. The rates will be published weekly. Actual rates will be priced on a case-by-case basis. The May 27th sample rates can be found here: May 27, 2020.
May 11, 2020
The Fed announced the pricing methodology for the purchase of short term notes under the Municipal Liquidity Facility. The notes will bear a fixed interest rate that is based on the overnight indexed swap rate for a comparable maturity plus a fixed spread that corresponds with the rating of the notes and their tax status. The Fed also made an allowance for issuers that had been rated by only one rating agency (previously an issuer needed two ratings), so long as other conditions are met. The revised term sheet and frequently asked questions can be found here: May 11, 2020.
April 30, 2020
The Fed announced that it would expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) to additional lenders and expanded the collateral that can be pledged. As a result of the changes, all Paycheck Protection Program lenders approved by the Small Business Administration are now eligible to participate in the PPPLF. The announcement and a link to a PPPLF term sheet may be found here April 30, 2020.
The Fed announced that it is expanding the scope and eligibility for its Main Street Lending Program. Among the changes include a third loan option with increased risk sharing by lenders for borrowers with greater leverage, lowering the minimum loan size for certain loans to $500,000, and expanding the pool of businesses eligible to borrow. The announcement, details regarding the changes, and links to term sheets related to the new and previously announced loan facilities and frequently asked questions may be found here: April 30, 2020.
April 27, 2020
The Fed announced an expansion in scope and duration of the Municipal Liquidity Facility. Population thresholds for Eligible Issuers have been lowered and certain multistate entities may now participate, but new investment grade rating thresholds must be met. In addition, the short-term notes that the Municipal Liquidity Facility will purchase may now have a maximum maturity of 36 months (instead of 24). The termination date of the Municipal Liquidity Facility has been extended to December 31, 2020 (instead of September 30th). The new term sheet, frequently asked questions and list of Eligible Issuers can be found here: April 27, 2020.
April 17, 2020
The Fed announced a rule change that will temporarily allow bank directors and shareholders to apply for PPP loans for their small businesses. The press release can be found here April 17, 2020 and the Federal Register notice can be found here April 17, 2020 Federal Register Notice.
April 16, 2020
As a follow up to its announcement on April 9, 2020, the Fed announced that its PPP Liquidity Facility is fully operational and available to provide liquidity to eligible financial institutions. More information on the Fed’s PPP liquidity facility, which will be managed by the Federal Reserve Bank of Minneapolis, can be found here: April 16, 2020.
April 15, 2020
The Fed is accepting comments relating to the Municipal Liquidity Facility. Comments are due by April 16th and can be submitted here: Municipal Liquidity Facility Comments.
April 14, 2020
The Fed, FDIC, and the Comptroller announced an interim final rule deferring, for up to 120 days post-closing, the requirement of appraisals and evaluations under the agencies’ appraisal regulations. The deferrals apply to certain residential and commercial real estate-related financial transactions, but not to transactions for the acquisition, development and construction of real estate. See the announcement here: April 14, 2020. See the interim final rule here: Interim Final Rule.
The Fed, FDIC, the Comptroller, the Consumer Financial Protection Bureau and the National Credit Union Administration issued an Interagency Statement on Appraisals and Evaluations for Real Estate Affected by the Coronavirus (the “Interagency Statement”). The Interagency Statement highlights existing flexibilities in industry appraisal standards and in the appraisal regulations of the agencies as they relate to physical property inspections, instances when “desktop appraisals” or “exterior-only appraisals” are acceptable, and exceptions and waivers to obtaining appraisals. See the Interagency Statement here: April 14, 2020.
April 13, 2020
The Treasury announced which state, local, territories and tribal governments are eligible to receive funds from the Coronavirus Relief Fund as well as how those entities can apply for funds. The deadline to apply is 11:59 p.m. EDT on April 17th. The CARES Act established the $150 billion Coronavirus Relief Fund to assist governmental entities. See the announcement, list of eligible entities and application requirements here: Coronavirus Relief Fund.
April 9, 2020
The Fed, FDIC, and the Comptroller announce relaxed capital rules to encourage lending to small businesses through the PPP. See the announcement here: April 9, 2020.
The Fed and the Treasury announce significant actions, including (1) supplying liquidity to financial institutions participating in the Small Business Administration’s Paycheck Protection Program (the “PPP”); (2) purchase up to $600 billion in loans through a newly established Main Street Lending Program (Treasury will provide $75 billion in equity to the facility under the CARES Act); (3) increase the size and scope of the PMCCF and the SMCCF; and (4) establishing a new Municipal Liquidity Facility that will offer up to $500 billion in lending to states, counties, and municipalities (the Treasury will provide $35 billion of credit protection to the Fed for the program using funds from the CARES Act). See the announcement here (please note term sheets for the programs are embedded in the Fed’s announcement): April 9, 2020.
April 8, 2020
The Fed announces that it will temporarily modify the growth restriction applicable to Wells Fargo under a 2018 Consent Order between the Fed and Wells Fargo to encourage Wells Fargo to makes loans under the Small Business Administration’s Paycheck Protection Program and Fed’s Main Street Lending program. See the announcement here: April 8, 2020.
See the amended consent order here: Amended Consent Order.
April 7, 2020
Multiple agencies, including the Fed, issue a revised joint statement encouraging financial institutions to work with borrowers affected by COVID-19 to modify loans in a manner that is consistent with Section 4013 of the CARES Act. See the announcement here: April 7, 2020.
April 6, 2020
The Fed provides guidance financial institutions regarding small business relief options under the CARES Act and encourages financial institutions to participate in such programs. See the announcement here April 6, 2020 and links to further guidance here:
- SBA Guidance – Coronavirus (COVID-19): Small Business Guidance & Loan Resources available at: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
- Treasury’s information on Assistance for Small Businesses available at: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
- Federal Reserve information on COVID-19 Supervisory and Regulatory actions available at: https://www.federalreserve.gov/supervisory-regulatory-action-response-covid-19.htm
The Fed, the Federal Deposit Insurance Corporation (“FDIC”), and the Office of the Comptroller of the Currency (the “Comptroller”) implement CARES Act requirements to lower the certain community bank leverage ratio to 8 percent until at least January 1, 2022. See the announcement here: April 6, 2020.
April 3, 2020
Multiple agencies, including the Fed, issue a joint statement regarding increased flexibility provided to mortgage servicers assisting consumers with mortgage forbearance relief under the CARES Act. See the announcement here: April 3, 2020.
April 1, 2020
The Federal Reserve Board announces temporary change to its supplementary leverage ratio rule to ease strains in the Treasury market resulting from the coronavirus and increase banking organizations’ ability to provide credit to households and businesses – see term sheet here: April 1, 2020.
MArch 30, 2020
The Treasury announces that it published guidelines and application procedures for eligible businesses applying for payroll support loans under the CARES Act. See the announcement here: March 30, 2020.
See the Guidelines and Application Procedures for payroll Support to Air Carriers and Contractors under Division A, Title IV, Subtitle B of the CARES Act here: March 30, 2020.
See the Procedures and Minimum Requirements for Loans to Air Carriers and Eligible Businesses and National Security Businesses under Division A, Title IV, Subtitle A of the CARES Act here: March 30, 2020.
March 27, 2020
Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and made available not more than the sum of $454,000,000,000 plus any amounts available under paragraphs 4003 (b)(1), (2), and (3) that are not used as provided under those paragraphs to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, states, or municipalities by—
(A) purchasing obligations or other interests directly from issuers of such obligations or other interests;
(B) purchasing obligations or other interests in secondary markets or otherwise; or
(C) making loans, including loans or other advances secured by collateral.
March 23, 2020
The Fed announced a variety of new actions including:
- Continued purchase of Treasury securities and mortgage backed securities and the addition of purchasing agency commercial mortgage-backed securities.
- Establishment of the Primary Market Corporate Credit Facility (the “PMCCF”) for new bond and loan issuance for investment grade companies – see term sheet here: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323b1.pdf.
- Establishment of the Secondary Market Corporate Credit Facility (the “SMCCF”) for secondary market corporate bond purchases issued by investment grade companies and U.S. listed exchanged traded funds – see term sheet here: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323b2.pdf.
- Establishment of the Term Asset-Backed Securities Loan Facility (the “TALF”) for loans to be made by the Fed to holders of certain AAA-rated asset backed securities backed by newly and recently originated consumer and small business loans. See term sheet here: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323b3.pdf.
- Indication that the Fed “expects” to announce the establishment of a new Main Street Business Lending Program to “support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.” The CARES Act (discussed below) also references the establishment by the Board of Governors of the Federal Reserve System of a “Main Street Lending Program or other similar program that supports lending to small and mid-sized businesses.”
March 19, 2020
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint statement encouraging financial institutions to work with affected customers and communities, particularly those that are low- and moderate-income, specifically identifying actions such as waving certain fees such as ATM fees, overdraft fees, and late fees, and activities that help to revitalize or stabilize low- or moderate-income geographies as well as distressed or underserved nonmetropolitan middle-income geographies, and that support community services targeted to low- or moderate-income individuals such as certain types of loans and investments. For more on this joint statement click here: https://www.federalreserve.gov/supervisionreg/caletters/CA%2020-4%20Attachment.pdf
March 18, 2020
The Fed announced that it would establish a Money Market Mutual Fund Liquidity Facility, or MMLF, that will assist money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy. The MMLF program is structured similarly to the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, or AMLF, that operated from late 2008 to early 2010. For more on this announcement click here: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200318a.htm
March 17, 2020
The Fed announced the establishment of a Commercial Paper Funding Facility (CPFF). Commercial paper markets finance a wide range of activities such as funding for auto loans and mortgages as well as liquidity to meet the operational needs of a range of companies. The CPFF was created to provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper rated A1/P1 (as of March 17, 2020) directly from eligible companies. The Fed noted that “[t]he commercial paper market has been under considerable strain in recent days as businesses and households face greater uncertainty in light of the coronavirus outbreak. By eliminating much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper obligations, this facility should encourage investors to once again engage in term lending in the commercial paper market. An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak.” https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm.
March 15, 2020
The Fed announced a Coordinated Central Bank Action among The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements by lowering the pricing on the standing U.S. dollar liquidity swap arrangements by 25 basis points. For more on this announcement click here: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315c.htm.
The Fed announced a variety of actions to support the flow of credit to households and businesses, including (1) lowering its primary credit rate (the rate that depository institutions pay the Fed on certain borrowed funds) by 150 basis points (1.50%) to 0.25%, (2) permitting depository institutions to borrow from the Fed for short-term periods as long as 90 days, (3) encouraging depository institutions to utilize intraday credit extensions from Reserve Banks and to use their capital and liquidity buffers to lend, and (4) effective March 26, 2020, reducing depository institutions’ reserve requirements to support lending to households and business. For more on this announcement click here: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm.
March 3, 2020
In one of its earliest announcements directly addressing “the coronavirus” (as it was still referred to on March 3, 2020), the Fed issued a statement advising that the coronavirus posed “evolving risks” to U.S. economic activity, and in light of such risks, the Federal Open Market Committee (the “FOMC”) lowered the target range for the federal funds rate by 0.5%, to 1.25%. For more on this announcement, click here: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm.