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Financial Services Law Insights and Observations

Fed revises Municipal Lending Facility to include more cities and counties; extends expiration date

Federal Issues Agency Rule-Making & Guidance Federal Reserve Liquidity Department of Treasury CARES Act Covid-19

Federal Issues

On April 27, the Federal Reserve (Fed) announced it will expand the Municipal Liquidity Facility (MLF) in important ways. As previously covered by InfoBytes, the MLF was established to provide liquidity to state and local governments so they could continue to provide services for their citizens. As when it was established on April 9, the facility will provide up to $500 billion through the purchase of state and county-issued short-term notes, with $35 billion in credit protection provided by the Treasury pursuant to the CARES Act. Revisions to the MLF include lower population thresholds for the facility. Specifically, the facility will purchase notes from counties with at least 500,000 residents, down from the original two million resident threshold, and U.S. cities with a minimum of 250,000 residents, down from the original one million residents threshold. Further, to be eligible for the revised facility, notes must mature within 36 months of issuance—an increase from the previous 24-month maximum maturity term. Issuers must also have had at least two nationally recognized statistical rating firms provide investment grade ratings, as of April 8, 2020. In addition, the Fed extended the termination date for the MLF from September 30 to December 31, 2020.

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