covid-19: policy response overvie · home/cdc guidance. (march 29) fed establishes fima repo...
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COVID-19: Policy Response OverviewAs of April 27, 2020
All information is subject to change as our understanding evolves or as policy details are released.
Source: Various congressional bills, Federal Reserve, Moody’s Analytics (costs of bills)
TimelineLots of action, a lot of which is “behind the scenes”
Fed lowers fed funds by 50 bps
(March 3)
Coronavirus Preparedness and
Response Supplemental
Appropriations Act(March 6, $8.3B)
WHO declares COVID-19 a pandemic(March 11)
Fed lowers fed funds by 100 bps to the zero lower bound in another inter-meeting cut.
It also expands QE by $500B, MBS purchases by
$200B and its overnight/repo operations. Five swap lines initiated with foreign central
banks.(March 15)
President Trump issues national CDC guidance on COVID-
19. Fed lowers discount/primary credit rate by 150
bps to 0.25%.(March 16)
Families First Coronavirus
Response Act(March 18, ~$172B)
Fed, FDIC and OCC provide guidance to banks to enhance
liquidity. Fed establishes of CPFF and PDCF. Trump
invokes DPA.(March 17)
Fed establishes MMLF. Treasury and IRS provide
guidance on moving the April 15 tax
deadline.(March 18)
Fed establishes temporary U.S. dollar liquidity
arrangements with nine central banks.
Fed, FDIC, and OCC issue CRA guidance
to banks.(March 19)
Fed enhances dollar liquidity with other central banks
and expands MMLF. Treasury
and IRS finalize tax deferral to July 15.
(March 20)
All financial regulators issue joint
statement encouraging banks to modify or restructure
loans of impacted borrowers.(March 22)
Fed launches unlimited QE and new credit facilities (TALF, PMCCF, SMCCF). It expands the CPFF
and MMLF.(March 23)
Fed announces reduction in
examination activities and will focus on
monitoring/outreach at banks.
(March 24)
Five financial regulators encourage small dollar loans to impacted borrowers.
(March 26)
Coronavirus Aid, Relief, and Economic
Security Act(March 27,
$2.3T)
President Trump extends stay at
home/CDC guidance.(March 29)
Fed establishes FIMA repo facility to provide liquidity
to international financial and
Treasury markets.(March 31)
Fed changes supplemental
leverage ratio to ease bank liquidity.(April 1)
SBA PPP Loan processing begins. Federal and state
financial regulators issue guidance on mortgage servicer
flexibility (consistent with CARES Act).
(April 3)
Fed, FDIC, and OCC change community bank leverage ratio. Fed begins CPFF processing and
announces SBA PPP lending facility.
(April 6)
Fed announces expansion of
existing facilities and the
parameters of the two new Main Street Lending
Facilities, totaling $2.3T in liquidity.
(April 9)
Fed increases intra-day
credit/liquidity.(April 23)
Congress approves more funding for SBA PPP
program as well as aid for healthcare and S&L
governments.(April 4, $484B)
Key:CongressFed/RegulatoryOther
Source: Center on Budget and Policy Priorities, Oxford Economics/Moody’s Analytics, Cushman & Wakefield Research. 2007 nominal GDP used for GFC, 2019 nominal GDP used for present.https://www.cbpp.org/research/economy/the-financial-crisis-lessons-for-the-next-one
The First Thing You Need To Know…It’s BIGComparing Stimulus Programs: GFC vs. Covid-19 Crisis
$1.5 $2.4
$12.3
$9.7
10.10%11%
85.3%
45%
13.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
$0
$2
$4
$6
$8
$10
$12
$14
2008-10 Congress March 2020 Congress 2008-10 (including Fed &Regulators)
March 2020 (including Fed)
With 4th billFirst 3 bills
Source: Oxford Economics, Moody’s Analytics, JCT, CARES Act*Note: estimates vary by source
CARES Act: composition of spendingSize = $2.2T to $2.4T*
Source: Cushman & Wakefield Research, various Senate sites
PPP and Health Care Enhancement ActSize = $484B
$310
$60
$75
$25
SBA PPP Loans EIDL Loan Program Hospitals COVID-19 Testing
$10B in $10,000 EIDL grants$50B in EIDL loans
($350-$400B in EIDL loans when levered)
$322B appropriated($12B to cover fees)
Source: ETA, BLS
Economic fallout underwayLook no farther than the labor market
Job losses mounting Cumulative Initial Claims, % of February Emp.
0%
5%
10%
15%
20%
25%
30%
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3/7/2020 3/14/2020 3/21/2020 3/28/2020 4/4/2020 4/11/2020 4/18/2020
Week ending 4/4
Week ending 3/28
Week ending 4/11
8.7M
3.3M(3/21)
24.8M
39.5M
4.4M(4/18)
6.6M(4/4)
5.2M(4/11)
6.9M(3/28) 26.4M
Jobs created since Great Recession trough
(2/1/2010 – 2/1/2020)
Initial jobless claims since 3/21
Great Recession total job losses (peak to trough)
Initial jobless claims filed during Great Recession (12/1/2007 – 6/30/2009)
Source: U.S. Bureau of Labor Statistics, U.S. Employment & Training Administration
Aid for HouseholdsIndirect cash flow aid for multifamily
Employment Expansion of claims programs thru 7/31/2020
40
60
80
100
120
140
160
1971
1975
1979
1983
1987
1991
1995
1999
2003
2007
2011
2015
2019
Mill
ions
Covered Employment Total Employment
$0
$200
$400
$600
$800
$1,000
$1,200
Average StateBenefit
Average State+ Federal
COVID Benefit
Avg Weekly Claim AmountState State+Federal
0
5
10
15
20
25
30
35
40
Mode StateDuration
State +FederalCOVID
Duration
Avg # of WeeksState State+Federal
Expansion of eligibility to
close this gap
Source: Joint Committee on TaxationExcludes the direct cash payments (rebates).
Estimated value of tax policy changes
-$300
-$200
-$100
$0
$100
$200
$300
$400
$500
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Bill
ions
Employee Retention Tax Credit Payroll Tax Deferral NOL Carryback Chg in Loss Limit for non-Corporates Other
$668B in liquidity in 2020-2021
Source: SBA
Composition of PPP LendingApprovals through 4/16/2020, based on $342B of approvals
NAICS Sector Approved Loans Approved Dollars ($) % of
Amount
Construction 177,905 44,906,538 13.1%
Professional, Scientific, and Technical Services 208,360 43,294,714 12.7%
Manufacturing 108,863 40,922,240 12.0%
Health Care and Social Assistance 183,542 39,892,493 11.7%
Accommodation and Food Services (6) 161,876 30,500,418 8.9%
Retail Trade 186,429 29,418,369 8.6%
Wholesale Trade 65,078 19,489,410 5.7%
Other Services (except Public Administration) 155,319 17,707,077 5.2%
Administrative and Support and Waste Management and Remediation Services 72,439 15,285,814 4.5%
Real Estate and Rental and Leasing 79,784 10,743,430 3.1%
Transportation and Warehousing 44,415 10,598,076 3.1%
Finance and Insurance 60,134 8,177,042 2.4%
Educational Services 25,198 8,062,652 2.4%
Information 22,825 6,675,630 2.0%
Arts, Entertainment, and Recreation 39,670 4,939,280 1.4%
Agriculture, Forestry, Fishing and Hunting 46,334 4,374,344 1.3%
Mining, Quarrying, and Oil and Gas Extraction 11,168 3,894,793 1.1%
Industries not classified 5,570 1,197,354 0.4%
Management of Companies and Enterprises 3,211 1,170,748 0.3%
Utilities 3,247 1,027,575 0.3%
% of Count(inner)
% of Amount(outer)
< $150K > $150K - $350K> $350K - $1M > $1M - $2M> $2M - $5M > $5M
Source: Federal Reserve
Fed Balance SheetAs of April 22, 2020
0
1
2
3
4
5
6
7
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$Tril
lions
Treasury Agency MBS Repos LF/CF Float CB Swaps Other
The Details
Source: CARES Act
Support for Small BusinessesPPP Loans via 7(a)
Provision Size Details Pros / Cons
Paycheck Protection Program
$349B(CARES Act)
$310B(PPP and Health Care Enhancement Act)
Businesses with 500 or fewer employees per physical location, including sole proprietors, independent contractors and self-employed (NAICS 72, size limit by physical location)
Had to have been in business before 2/15/20.
Does not require approval of SBA. Removes credit check and collateral requirements.
SBA guarantees loans originated by its thousands of partner lending institutions. Secondary market cap at $100B.
Lesser of $10M or 2.5x average monthly payroll
Loans have 1.0% interest rate, 2-year term. Payments on portion not eligible for forgiveness can be deferred for 6-months.
Amounts spent to support payroll, insurance premiums, rent, mortgage in the 8 weeks following origination can be forgiven, provided 75% of portion eligible for forgiveness spent on payroll specifically
Forgiveness amount reduced proportional to decrease in headcount or wages relative to a year ago period.
Uses existing infrastructure to distribute funds
Terms of forgiveness incentivize worker retention and essential payments
Low interest rate
Wide eligibility with few/any restrictions
Banks may have limited administrative capacity
Only covers 8-10 weeks of expenses
Expansion requires additional act of Congress
Borrowers cannot use employee retention tax credit or payroll tax deferment until 2021
*Estimates vary by analyst/firm
Support for Small BusinessesEIDL Loans
Provision Size* Details Pros / ConsEconomic Injury Disaster Loans
(EIDL Program)
$10B in grants (CARES Act)
Plus $1.1B already in the financing account
$10B in grants$50B in loans(PPP and Health Care Enhancement Act)
(This can be levered up to 7-8x, bringing estimated liquidity value to $350-$400B.)
Businesses with 500 or fewer employees per physical location, including sole proprietors, independent contractors and self-employed
Had to have been in business before 1/31/20.
Direct loans from SBA
No forgiveness, although $10,000 emergency grant can be applied for as bridge funding. This is forgiven whether or not the applicant is approved for the EIDL loan.
Up to $2 million, 30-year term, 3.75% interest rate for small businesses, 2.75% for not-for-profits, up to 12-month deferral. Terms are on a case-by-case basis.
Can be used for: Sick leave for employees, payroll, meeting increased costs due to COVID-19 disruptions to supply chain, rent/mortgage payments, utilities, repaying other obligations that cannot be met due to revenue loss
For loans greater than $200,000, a personal guarantee is required. SBA will not require real estate as collateral and any person with an interest in the company worth 20% or more must be a guarantor.
No loan fees, guarantee fees or prepayment fees.
Uses existing infrastructure to distribute funds
Terms incentivize worker retention and essential payments
Low interest rate
Wide eligibility with few/any restrictions
Due to heightened volumes, SBA may be more delayed than usual in processing applications and distributing funds
Expansion requires additional act of congress
Source: Federal Reserve Term Sheet
Support for Small BusinessesFed SBA PPP Purchases
Provision Size Details Pros / ConsTreasury/Fed
PPP Lending Facility
$0B/$100B or $659B (TBD)
All depository institutions that originate PPP Loans are eligible to borrow under the Facility. The Board is working to expand eligibility to other lenders that originate PPP Loans in the near future. Purchases to last through 9/30/2020.
Only collateral are SBA PPP loans.
The maturity date of an extension of credit under the Facility will equal the maturity date of the PPP Loan pledged to secure the extension of credit. The maturity date of the Facility’s extension of credit will be accelerated if the underlying PPP Loan goes into default and the eligible borrower sells the PPP Loan to the SBA to realize the SBA guarantee or if borrower receives loan forgiveness reimbursement.
Extensions of credit under the Facility will be made at a rate of 35 basis points.
No fees associated with loans.
Provides additional bank liquidity to make PPP or other loans.
Does not penalize banks under risk-based capital rules or leverage capital ratios.
Not clear if Fed is treated as “secondary market buyer”, hence the uncertainty as to the purchasing power.
Source: Federal Reserve Term Sheet*Excludes mandatory principal payments, details TBD.
Support for Medium BusinessesMain Street Lending Program
Provision Size Details Pros / Cons
Treasury/Fed:
Main Street NewLoan Facility
(MSNLF)
$75B/$600B
(between both MSELF and MSNLF)
(of $454B in Treasury funding)
Treasury investing this money to backstop Fed lending facilities. Some portion of these funds will be placed into Main Street New/Expanded Lending Program with an initial target of $600B in liquidity. Purchases to be made thru 9/30/2020.
Targets U.S. companies with employment up to10,000 or $2.5B in revenue. SBA PPP borrowers are eligible.
Not available to non-US companies or those currently in bankruptcy
Term is four years. Deferral of P&I for up to one year. Interest rate SOFR +250-400 bps. No prepayment fee. Minimum amount is $1M, Maximum loan size that is the lesser of (i) $25 million or (ii) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”).
Proceeds should be used with reasonable effort to maintain borrower’s payroll and to retain its employees during the term. Cannot be used to repay existing debt*, credit lines, etc. Must follow restrictions outlined in CARES Act (e.g., dividend, executive compensation, etc.).
Ability to use leverage means that the program could potentially be enormous and capital efficient
Interest rates well below market rate capital
Creates incentives to retain workers and wages
No provisions for loan forgiveness. Could leave companies over-levered post-crisis.
Reduces companies’ ability to reduce costs
Restrictions could reduce uptake
Source: Federal Reserve Term Sheet*Excludes mandatory principal payments, details TBD.
Support for Medium BusinessesMain Street Lending Program
Provision Size Details Pros / Cons
Treasury/Fed:
Main Street Expanded Loan Facility
(MSELF)
$75B/$600B
(between both MSELF and MSNLF)
(of $454B in Treasury funding)
Treasury investing this money to backstop Fed lending facilities. Some portion of these funds will be placed into Main Street New/Expanded Lending Program with an initial target of $600B in liquidity. Purchases to be made thru 9/30/2020.
Targets U.S. companies with employment up to10,000 or $2.5B in revenue. SBA PPP borrowers are eligible.
Not available to non-US companies or those currently in bankruptcy
Term is four years. Deferral of P&I for up to one year. Interest rate SOFR +250-400 bps. No prepayment fee. Minimum amount is $1M, maximum is the lesser of (i) $150 million, (ii) 30% of the eligible borrower’s existing outstanding and committed but undrawn bank debt, or (iii) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”).
Proceeds should be used with reasonable effort to maintain borrower’s payroll and to retain its employees during the term. Cannot be used to repay existing debt*, credit lines, etc. Must follow restrictions outlined in CARES Act (e.g., dividend, executive compensation, etc.).
Ability to use leverage means that the program could potentially be enormous and capital efficient
Interest rates well below market rate capital
Creates incentives to retain workers and wages
No provisions for loan forgiveness. Could leave companies over-levered post-crisis.
Reduces companies’ ability to reduce costs
Restrictions could reduce uptake
Implementation timeline as yet unclear
Source: Federal Reserve Term Sheet
Support for Large BusinessesCorporate Bond Markets
Provision Size Details Pros / Cons
Treasury/Fed:
Primary Market Corporate Credit Facility (PMCCF)
$50B/$500B
(between both PMCCF and SMCCF)
(of $454B in Treasury funding)
Purchase portions of syndicated loans or bonds at issuance until 9/30/2020. U.S. companies only.
$75B total credit protection, $50B directed at primary market, $25B directed at secondary market.
Limited to IG securities. Eligible bonds/securities are those made by eligible issuer and a maturity of 4 years or less. Issuers cannot have received other federal support from CARES Act or subsequent legislation.
Issuer must have been rated IG (BBB- or higher) as of March 22,2020. Downgraded BBB- to BB- are eligible provided two rating agencies confirm the rating status. Any eligible issuer is capped at 1.5 percent of the combined potential size of PMCCF and the SMCCF.
PMCCF will leverage the Treasury equity at 10 to 1 when acquiring corporate bonds or syndicated loans from issuers that are IG at the time of purchase. PMCCF will leverage its equity at 7 to 1 when acquiring any other type of eligible asset.
Corporate bond pricing will be issuer-specific, informed by market conditions, plus a 100 bps facility fee. PMCCF will receive the same pricing as other syndicate members, plus a 100 bps facility fee on the Facility’s share of the syndication.
Massive potential support – billions of dollars to restore function to bond markets
Could become active very quickly
No relief to high yield issuers
Treasury/Fed:
Secondary Market Corporate Credit Facility (SMCCF)
$25B/$250B
(between both PMCCF and SMCCF)
(of $454B in Treasury funding)
Source: Federal Reserve Term Sheet
Support for Large BusinessesCorporate Bond Markets
Provision Size Details Pros / Cons
Treasury/Fed:
Primary Market Corporate Credit Facility (PMCCF)
$50B/$500B
(between both PMCCF and SMCCF)
(of $454B in Treasury funding)
Purchase bonds at issuance or exchange-traded funds aimed at corporate bonds until 9/30/2020. U.S. companies only.
$75B total credit protection, $50B directed at primary market, $25B directed at secondary market.
Limited to investment grade securities. Eligible bonds/securities are those made by eligible issuer and a maturity of 5 years or less. Issuers cannot have received other federal support from CARES Act or subsequent legislation.
Issuer must have been rated IG (BBB- or higher) as of March 22,2020. Downgraded BBB- to BB- are eligible provided two rating agencies confirm the rating status. Any eligible issuer is capped at 1.5 percent of the combined potential size of PMCCF and the SMCCF.
SMCCF will leverage the Treasury equity at 10 to 1 when acquiring corporate bonds or syndicated loans from issuers that are IG at the time of purchase. SMCCF will leverage its equity at 7 to 1 when acquiring asset from below-IG issuer at the time of purchase and in a range between 3 to 1 and 7 to 1, depending on risk, when acquiring any other type of eligible asset.
Pricing will be market fair value. No ETF purchases when they trade at prices that materially exceed the estimated net asset value of the underlying portfolio.
Massive potential support – billions of dollars to restore function to bond markets
Could become active very quickly
No relief to high yield issuers
Treasury/Fed:
Secondary Market Corporate Credit Facility (SMCCF)
$25B/$250B
(between both PMCCF and SMCCF)
(of $454B in Treasury funding)
Source: Federal Reserve Term Sheet
Support for All BusinessesAsset-backed Bond Markets, including non-agency CMBS
Provision Size* Details Pros / Cons
Treasury/Fed
Term Asset-Backed Securities Loan Facility (TALF)
$10B/$100B Purchase and facilitate issuance of (not-synthetic) ABS. U.S. companies only with primary dealer relationship. Loans issued in this facility have 3-year term. Will not allow substitution of collateral.
ABS include loans backed by: auto loans and leases, student loans, corporate and consumer credit card receivables, equipment loans and leases, floorplan loans, insurance premium finance loans, some SBA-guaranteed loans, leveraged loans and commercial mortgage loans.
Must have highest short/long-term credit rating depending on collateral.
CMBS issued on or after March 23, 2020 will not be eligible. For CMBS, the underlying credit exposures must be to real property located in the United States or one of its territories.
The detailed CMBS terms and conditions will further define the eligible underlying credit exposures for purposes of the TALF. The definitions are expected to be broadly consistent with the defined terms used for purposes of the TALF established in 2008.
Restriction on single-asset single-borrower (“SASB”) CMBS and commercial real estate collateralized loan obligations (“CRE CLOs”): SASB CMBS and CRE CLOs will not be eligible collateral. Restrictions on CLO loan substitution: Only static CLOs will be eligible collateral.
Collateral Valuation: Haircut schedule is in the table to the right. The haircut schedule is consistent with the haircut scheduled used for the TALF established in 2008. Haircuts appear to be about 17%.
For CLOs, the interest rate will be 150 basis points over the 30-day average secured overnightfinancing rate (“SOFR”).
*For legacy CMBS with average lives beyond five years, base dollar haircuts will increase by one percentage point of par for each additional year (or portion thereof) of average life beyond five years. No securitization may have an average life beyond ten years.
Provides liquidity to high-grade ABS, including private CMBS/CLO
Does not address market outside of AAA-rated private CMBS/CLOs
Restrictions on collateral, haircuts reduce attractiveness
Average ABS Life CMBS Haircut
0-1 15%
1-2 15%
2-3 15%
3-4 15%
4-5 15%
5-6 16%
6-7 17%*
*Estimates vary by analyst/firm. Figures for tax provisions are from JCT estimates.
Support for All Businesses (cont’d)Tax Provisions
Provision Size* Details Pros / Cons
Employee Retention Credit
$55B Refundable payroll tax credit for 50% of wages incurred between 3/12/20 and end of year, up to $10K per employee per quarter
Less than 100 employees, applies to all wages. More than 100, then to employees not able to provide services
Businesses that are fully or partially suspended or have revenues decline over 50% eligible
Paycheck Protection Program borrowers ineligible. Most benefit accrues in 2020-21.
Incentivizes employers to retain workers and wages
Particularly favorable for small firms
Not generous enough compared to European programs
Could be difficult to administer
Payroll Tax Deferment
$12B Employers and self-employed can defer payroll taxes for 2020 with half coming due by YE 2021 and the remainder by YE 2022
Paycheck Protection Program borrowers ineligible.
Provides ~$350B in near-term liquidity based on JCT estimates (but only costs $12B over the 10-year budget horizon). Payroll taxes due in 2022-23 offset near-term benefit.
Enhances liquidity and reduces labor costs during the acute stress period
Wide range of firms eligible
Firms have to somehow come up with the money later which could cause distress
*Estimates vary by analyst/firm. Figures for tax provisions are from JCT estimates.
Support for All Businesses (cont’d)Tax Provisions
Provision Size* Details Pros / Cons
Total ~$275B Loosen caps imposed under Tax Cuts and Jobs Act on interest deductibility and operating losses
Changes to Net Operating Losses
$25.5B NOL’s from 2018-2020 can be carried back for five years and can be applied to 100% of taxable income.
Nearly $90B in near-term benefit (2020-21).
Additional source of cash for firms that have paid taxes in recent years
Must incur losses first in order to obtain tax rebate
Interest Rate Deductibility
$13B Can deduct 50% of business interest rather than 30% Reduces taxes
Limitation on business losses for non-corporates
$170B TCJA limited business loss deductions to $250K single / $500K married. This limit has been removed.
Most benefit accrues in 2020-21.
Enables pass-through businesses to deduct all of their losses, reducing taxes
Permanent change. Not sure how cost effective this will be. Potentially regressive.
Qualified Improvement Property
N/A Changes depreciation schedule on QIP from 40 years to 20 years Fixes mistake in TCJA. Good for real estate.
Source: CARES Act
Support for Specific IndustriesTargeted aid
Provision Size* Details Pros / Cons
Direct support to harmed industries
$78B
(of $454B in Treasury funding)
$25B loans / $25B grants for passenger air carriers$4B loans / $4B grants for cargo air carriers$3B grants airline-related contractors$17B loans for critical national security businesses
Combination of grants, loans and loan guarantees
Possible that grants will be in exchange for non-voting equity
Similar restrictions on business actions during and after loan repayment
Addresses some of the needs for critically harmed industries
Grant portions reduce problem of leverage post-crisis
No support for hospitality sector
Significant loan portion pushes problems down the road
Source: Federal Reserve, CARES Act, Oxford Economics, various sources
Monetary policyCurrent standing of actions
Policy Tool/Action Note
Fed Funds Rate ZIRP Lowered 150 bps via two intermeeting cuts
Open-ended QE Treasuries, gov’t-backed MBS and CMBS, unlimited
Repo intervention Unlimited money market support
Forward guidance Lower for longer
Discount window Lowered borrowing rate
Dollar swap lines Price lowered, adding new swap lines, term increased to 90 days
Intraday credit Extended via Federal Reserve Banks
Reserve requirement ratio Cut to zero
Commercial Paper Funding Facility (CPFF) Backed by $10B at Treasury
Money Market Mutual Fund Liquidity Facility Backed by $10B at Treasury
Primary Dealer Credit Facility (PDCF) Terms up to 90 days, facility running for 6 months +
Primary Market Corporate Credit Facility (PMCCF) Support new corporate bond issuance, backed by $50B at Treasury
Secondary Market Corporate Credit Facility (SMCCF) Purchase investment grade corporate bonds < 5yr maturity, backed by $25B at Treasury
Term Asset-Backed Securities Loan Facility (TALF) Support issuance of ABS collateralized by loans, backed by $10B at Treasury, includes CMBS
Temporary FIMA Repo Facility Interest rate set at 25 basis points over the rate on IOER
Temporary change to the supplementary leverage ratio rule Treasuries and deposits temporarily exempt from ratio calculation
Main Street Business Lending Program Provide $600B liquidity to mid-sized companies via $75B of Treasury backstop funding
SBA PPP Loan Facility Can purchase up to $100B of SBA PPP loans (TBD)
Municipal Liquidity Facility Can purchase up to $500B of eligible notes
*Estimates vary by analyst/firm*Includes FHA, NHA-insured HECMs, HUD-insured, VA, RHS, USDA, Fannie Mae or Freddie Mac loans or insured loans.
Other Actions
Provision/Entity Size* Details
Tax Credits for Paid Sick/Family Medical Leave
(2nd Bill)
$105B • Payroll tax credits for qualified sick leave wages and family leave paid by an employer will be allowed in the amount of benefits paid over the permitted duration; and an individual tax credit for qualified sick leave and family leave for self-employed individuals in the amount of $200 a day or 67% of average daily pay for self-employed individuals over the permitted duration
FHFA/HUD Action N/A • 60-day moratorium on evictions, foreclosures (FHA, Fannie, Freddie)• 90-day forbearance on GSE-backed loans (90-day forbearance on rent) – consistent with CARES Act requirement
CARES Act N/A • 120-day consumer credit protection (to defer 1 or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted); no credit score impact
• 180-day forbearance for federally-backed single-family mortgages**, no additional fees, interest or penalties allowed, option toextend another 180 days if borrower requests during covered period
• 30-day forbearance for federally-backed multifamily loans (if loan was current on 2/1/2020), option to extend to a total of 90-days; cannot evict or charge late fees to tenants if this request is made. Covered period is thru 12/31/2020.
• 120-day moratorium on evictions in properties backed by federal or federally-insured mortgages, including multifamily• 60-day moratorium on foreclosures of properties backed by federal or federally-insured mortgages, including multifamily
FDIC/OCC (CARES Act)
N/A • Allowing banks to modify, refinance and restructure loans that were current prior to COVID-19 without compliance penalties (particularly for deferrals, ‘TDR’s)
• SBA-backed loans held by banks can be modified, extended, suspended and/or payments can be deferred
Source: Federal Reserve (Term Sheets), CARES Act, various sources*Based on the announcement’s implication of a 10-to-1 leverage ratio.
Other Fed Facility DetailsForeign banks, domestic financial firms and state/local government liquidity
Provision Size Details
Temporary FIMA Repo Facility N/A
• Allow foreign central banks to temporarily raise dollars by selling U.S. Treasuries to the Federal Reserve's System Open Market Account and agreeing to buy them back at the maturity of the repurchase agreement. The term of the agreement will be overnight, but can be rolled over as needed. The transaction would be conducted at an interest rate of 25 basis points over the rate on IOER Eligible borrowers are central banks and other foreign monetary authorities with accounts at the Federal Reserve Bank of New York
Money Market Mutual Fund Liquidity Facility $10B / $100B*
• Maturity of 12 months or that of the pledged collateral; advances are non-recourse• Fund must identify itself as a Prime, Single State, or Other Tax Exempt money market fund• Securities must be Treasuries; full-guaranteed Agencies; GSE-backed securities, asset-backed/unsecured commercial paper or certificate of
deposit rate A1, F1, P1; high-grade municipal short-term debt; variable rate demand notes; certain repurchase agreements• Interest, collateral valuation at amortized cost applied to non-Treasury, non-GSE or Agency backed collateral• Through 9/30/2020. No regulatory capital penalty applied to this debt.
Commercial Paper Funding Facility (CPFF) $10B / $100B*
• Purchase three-month U.S. dollar-denominated commercial paper that is rated at least A1/P1/F1• Eligible issuers are U.S. issuers of commercial paper, including municipal issuers and U.S. issuers with a foreign parent company• The maximum amount of a single issuer’s commercial paper the SPV may own at any time will be the greatest amount of U.S. dollar-
denominated commercial paper the issuer had outstanding on any day between March 16, 2019 and March 16, 2020• Program goes through March 17, 2021
Primary Dealer Credit Facility (PDCF) N/A
• Terms up to 90 days, facility running for 6 months +• Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including
commercial paper and municipal bonds, and a broad range of equity securities. • Interest rate charged will be the primary credit rate, or discount rate
Municipal Liquidity Facility $35B / $500B
• Used funds from 2nd bill in Exchange Stabilization Fund• Short-term (24 months) notes only, available thru 9/30/2020• U.S. states (and DC), cities with a population of one million or counties with a population of two million eligible• Up to an aggregate amount of 20% of the general revenue from own sources and utility revenue of the applicable State, City, or County
government for fiscal year 2017
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