Fed unveils new emergency measures to prop up faltering economy

Darnell Taylor
March 23, 2020

"Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate", the official statement elaborated.

The Federal Reserve on Monday announced an all-out effort to support a US economy stressed by the coronavirus pandemic by permitting unlimited buying of Treasury bonds and mortgage-backed securities.

In addition to all of these market support mechanisms, the Fed "expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small and medium-sized businesses, complementing efforts by the Small Business Administration".

After cutting interest rates to near zero recently, the Fed will now lend against student loans and credit card loans, as well as back the purchase of corporate bonds and make direct loans to companies.

The Fed also expanded its buying to include government-backed commercial real estate debt.

The Fed estimates the impact of its measures to provide about $300 billion in new financing available to businesses.

Both programs will last until September 30, 2020.

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The U.S. Federal Reserve on Monday mounted an extraordinary new array of programs to offset the "severe disruptions" to the economy caused by the coronarvirus outbreak, backstopping an unprecedented range of credit for households, small businesses and major employers. They are also expanding the Commerical Paper Funding Facility.

In the wake of the coronavirus, the Fed had already slashed interest rates to zero, announced over $1 trillion of liquidity support to money markets, and coordinated with central banks around the world to address a USA dollar shortage.

Dow futures briefly hit their "limit down" overnight, but stocks ripped higher on Monday morning after the Federal Reserve lifted restrictions on its quantitative easing asset purchases and launched multiple new stimulus programs aimed at lending to small businesses and maintaining liquidity in the credit markets. The latter will be supported via the government lending them money by buying companies' bonds.

Underneath the brand new packages, the Fed will lend towards pupil loans, bank card loans, and US authorities backed-loans to small companies, and purchase bonds of bigger employers and make loans to them in what quantities to 4 years of bridge financing.

Practically a 3rd of the US inhabitants has been urged to keep indoors and authorities have mandated the shutdown of enormous components of the service sector to maintain individuals secure.

The Fed's decision was unanimous among the voting members of the Federal Open Market Committee.

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