In testimony before the Senate Banking Committee today (May 19), Treasury Secretary Mnuchin and FRB Chair Powell stated that the Main Street Lending Program and other FRB liquidity facilities will be operational around the end of May. Secretary Mnuchin further stated that Treasury expects to fully allocate all of the CARES Act appropriations but is waiting to see where more funding might be needed or whether new facilities should be established.
Congressional oversight commission report
On May 18, 2020, the Congressional Oversight Commission (Oversight Commission) published its first report on the actions of the Treasury and the FRB to apply the $500 billion provided by the CARES Act for lending to businesses and state and local governments. The report finds that $185 billion of the $454 billion appropriated to the FRB’s liquidity programs and facilities has been pledged, but only $37.5 billion has been disbursed. (Note: The balance of $46 billion, which was provided specifically for the airline industry and businesses critical to national security, has also not been disbursed.)
Six separate credit facilities are highlighted in the report:
- Main Street Lending Program: targeted to small and medium-sized businesses and consisting of three separate lending facilities (the Main Street New Loan Facility, the Main Street Expanded Loan Facility, and the Main Street Priority Loan Facility). Treasury intends to invest $75 billion in total into these three facilities. A start date has not been announced.
- Municipal Liquidity Facility: targeted to state and local governments. Treasury intends to invest $35 billion in this facility. A start date has not been announced.
- Primary Market Corporate Credit Facility: targeted to large businesses as a funding backstop for corporate debt. The Treasury intends to invest $50 billion in this facility. A start date has not been announced.
- Secondary Market Corporate Credit Facility: targeted to large businesses with outstanding corporate bonds. Treasury intended to invest $25 billion in this facility but actually invested $37.5 billion on May 11, 2020. The facility became operational May 12, 2020, making purchases of ETFs.
The report contains dozens of questions from the Oversight Commission regarding the initial actions of Treasury and FRB, ranging from expected start dates to the reasoning behind specific term modifications.
The Oversight Commission was established by section 4020 of the CARES Act to report regularly to Congress on the implementation of Title IV, Subtitle A (the Coronavirus Economic Stabilization Act of 2020).
This first report does not cover other facilities established by the Treasury and the FRB including the Term Asset-Backed Securities Loan Facility (TALF), the Commercial Paper Funding Facility (CPFF), the Money Market Mutual Fund Liquidity Facility (MMLF), and the Primary Dealer Credit Facility (PDCF). The Oversight Commission states these facilities are outside of its current jurisdiction.
The report also does not cover the FRB’s Paycheck Protection Program Liquidity Facility (PPPLF). On May 15, 2020, the FRB published its report to Congress on outstanding lending facilities, indicating that the PPPLF had more than $29 billion in outstanding advances