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CARES Act Alert – New Fed Measures

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CLIENT UPDATE: Federal Reserve announces up to an additional $2.3 trillion in new lending programs to bolster the U.S. economy

Yesterday, the Federal Reserve took steps to add up to $2.3 trillion in new lending programs to pump additional money into the U.S. economy, which has been ravaged by the coronavirus public health crisis. This influx of financial support aims to assist households, employers of all sizes, and state and local governments as they battle the coronavirus pandemic. The Federal Reserve seeks to inject this money through a variety of programs, including:

  • Providing additional liquidity to the Paycheck Protection Program through the Paycheck Protection Program Liquidity Facility (PPPLF), which will extend credit to eligible financial institutions that originate PPP loans.
  • Purchasing up to $600 billion in loans through the Main Street Lending Program to ensure credit flows to small and mid-sized businesses (businesses with fewer than 10,000 employees or revenues less than $2.5 billion). This Program offers these businesses favorable 4-year loans with principal and interest payments deferred for one year. Main Street loans will be available to companies that have already taken PPP loans. Companies that receive these loans will have to abide by the same restrictions as larger companies that obtain direct financing from Treasury under the CARES Act, in terms of compensation, stock repurchase, and dividends.
  • Increasing credit to households and businesses by expanding the Primary and Secondary Market Corporate Credit Facilities and the Term Asset-Backed Securities Loan Facility, thereby supporting up to $850 billion in credit backed by $85 billion in credit protection provided by Treasury.  
  • Establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities to help state and local governments provide services during the pandemic.
  • For more information and term sheets for each of these programs, please see the Federal Reserve’s website, including the recent press release available at: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm

Wadleigh’s COVID-19 Response Team will continue to monitor announcements from the Federal Reserve as details of these lending programs are released.