INSUBCONTINENT EXCLUSIVE:
By Christopher Condon, Rich Miller and Craig TorresAs fresh evidence of the economic toll from the coronavirus pandemic flood in, the
Federal Reserve unleashed another round of emergency measures, including a pledge to provide support to risky corners of financial markets
that have been some of the hardest hit.
The Fed said Thursday it will invest up to $2.3 trillion in loans to aid small and mid-sized
businesses and state and local governments as well as fund the purchases of some types of high-yield bonds, collateralized loan obligations
and commercial mortgage-backed securities.
The money comes on top of the massive stimulus that the Fed had already announced and it thrusts
the institution into the sort of speculative lending activities it had shunned in the past -- underscoring the risks that Chairman Jerome
the measures were announced.
Just as the Fed unveiled the measures, a new report from the Labor Department highlighted the economic pain:
6.6 million Americans filed for unemployment benefits in the week ended April 4, bringing the number to 16.8 million in the past three
details of the new actions
and stocks after the announcement
High-yield debt was among the biggest gainers, with some of the largest ETFs tracking those bonds surging the most in a decade.
But the
economist at Barclays Capital in New York.
That said, the direct purchase of municipal debt could put the Fed in an uncomfortable political
businesses shuttered to stem the spread of the virus
unchartered territory to support American businesses, states and local governments.
In its latest announcement, the Fed laid out details of
the heavily anticipated Main Street Lending Facility, which will deliver funding to companies much bigger than those yet eligible for help
Eligible borrowers can have up to 10,000 employees or up to $2.5 billion in annual revenue
Loan sizes will range from $1 million to $150 million.
Borrowers will be subject to restrictions imposed by the $2.2 trillion stimulus
package that Congress passed in the CARES Act including on employee retention, distribution of dividends and other factors
The program will be backstopped by $75 billion from the Treasury to absorb losses
Banks that handle the loans will be required to retain a 5% interest in each loan, with the facility purchasing the remainder.
Fallen
AngelsIn a move that surprised some investors, the central bank will also expand its bond-buying program to include debt that was
investment-grade rated as of March 22 but was later downgraded to no lower than BB-, or three levels into high yield
primary and secondary markets for municipal securities and will evaluate whether additional measures are needed to support the flow of
credit and liquidity to state and local governments.
What Bloomberg Economists SayThe Federal Reserve continues to defy the skeptics who
questioned whether there was further scope for monetary policy action
The constraints of the zero lower-bound for interest rates may have changed the configuration of additional policy accommodation, but it has
clearly not limited the heft of Fed action -- Yelena Shulyatyeva and Carl Riccadonna
Other HighlightsThe Municipal Liquidity Facility will
and the Term Asset-Backed Securities Loan Facility will support as much as $850 billion in credit.The Fed will starting the Paycheck
