Treasury Department expands existing facilities, establishes three more facilities

Federal Issues Covid-19 Department of Treasury

On March 23, the Department of Treasury authorized the expansion of the Money Market Mutual Fund Liquidity Facility (MMLF) and the Commercial Paper Funding Facility (CPFF), and established three new facilities under section 13(3) of the Federal Reserve Act to provide liquidity to the financial system.

• The MMLF was expanded to include a wider range of securities, including municipal variable rate demand notes and bank certificates of deposit.
• The CPFF was expanded to included high-quality, tax-exempt commercial paper and its pricing was reduced.
• The following three new facilities were created: (i) the Term Asset-Backed Securities Loan Facility (TALF), under which the Federal Reserve Bank of New York will provide loans to U.S. companies that are secured by certain eligible consumer and small business asset-backed securities, such as student loans, auto and credit card loans, loans guaranteed by the Small Business Administration, and certain other assets; (ii) the Primary Market Corporate Credit Facility (PMCCF), under which the Federal Reserve Bank of New York will provide liquidity to U.S. financial and nonfinancial businesses by providing loan and bond financing to U.S. companies with investment grade debt ratings; and (iii) the Secondary Market Corporate Credit Facility (SMCCF), under which the Federal Reserve Bank of New York will purchase in the secondary market bonds issued by U.S. companies with investment-grade debt ratings. According to the Treasury, the three new programs comprise up to $300 billion in new financing.