Midsize-business loan vehicle is among Fed's $2.3T rollout of initiatives

Dive Brief:

The Federal Reserve rolled out several initiatives Thursday to provide up to $2.3 trillion in loans to businesses and state and local governments during the coronavirus pandemic, it said in a press release.
The central bank will buy up to $600 billion in loans through the Main Street Lending Program (MSLP) under the $2 trillion stimulus package Congress passed last month. Companies with up to 10,000 workers or less than $2.5 billion in revenue can get four-year loans, with principal and interest payments deferred for a year. Banks that originate loans through the program can hold a 5% share; the rest will be sold to the facility.
The Fed will also create a Paycheck Protection Program Liquidity Facility to supply credit to banks that make PPP loans through the Small Business Administration’s platform. The central bank will take the loans as collateral at face value, it said in a release.

Dive Insight:

The moves come less than a week after the Small Business Administration launched the Paycheck Protection Program, aimed at giving small businesses relief from the coronavirus pandemic. The Fed has announced a spate of facilities over the past month to curb the economic effects of the outbreak.

“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,” Federal Reserve Chairman Jerome Powell said in a statement. “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 with the Small Business Administration’s Paycheck Protection Program, companies looking to take advantage of the MSLP “must commit to make reasonable efforts to maintain payroll and retain workers.” MSLP participants must also comply with the stimulus package’s restrictions on stock buybacks.

The Treasury Department will also provide $75 billion in equity to the program.

Lenders, borrowers and others can submit feedback on the program through April 16.

The Fed is also creating a third facility to support state and local governments with up to $500 billion in lending. The Treasury Department is backing $35 billion for the new Municipal Liquidity Facility using funds appropriated by the stimulus package.

The central bank is also expanding its already-announced Primary and Secondary Market Corporate Credit Facilities, which will now each support up to $850 billion in credit. Treasury is offering $85 billion in credit protection for those facilities.