The Fed announced additional $2.3 trillion loans to support coronavirus-stricken-economy
The Federal Reserve launched an additional $2.3 trillion in lending program for small and mid-size US businesses as well as local governments, to support the economy amid COVID-19 pandemic.
On Thursday, the US central bank announced that it will pump upto $600 billion into small and mid-size companies, as part of its Main Street lending facility. It will work with banks, with latter required to keep 5% stake in the loans they originate or increase for the businesses under this program; banks can sell the remaining loans – roughly upto $600 billion – to the Fed. Loans will be directed towards businesses with upto 10,000 employees or less than $2.5 billion in revenue.
The Fed will also directly inject up to $500 billion into local governments, by directly buying municipal bonds with up to two year’s duration. This is for the states, the District of Columbia, counties with more than 2 million residents, and cities of more than 1 million.
The programs announced on Thursday will be backed by $195 billion in capital provided by the U.S. Treasury. That is only a portion of the $454 billion that Treasury was provided under the CARES act for new Fed programs
