Key Highlights

  • Fed unveils two-pronged approach
  • One prong is directed to shoring up financial markets by buying up bonds and mortgage-backed securities in open-ended fashion
  • One prong is directed to small and medium sized businesses to protect them from bankruptcy and more extensive joblessness once virus is contained

The Federal Reserve has moved to an “open-ended” or “no ceiling” purchasing package to buy bonds and mortgage-backed securities “in the amounts needed” to help the financial markets begin functioning as “normal” (my quote) again.

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This “no ceiling” approach augments the Fed’s Open Market Committee’s efforts announced last week of buying “at least” $500B in Treasury securities and “at least” $200 B in mortgage-backed securities. This week’s “open-ended” approach has no upper limit figure even mentioned.

According to the Fed’s chair Jerome Powell, “While great uncertainty remains, it has become clear that our economy will face severe disruption. 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 disruptions abate.”

The second prong in the Fed’s approach is designed to help individual households and small and medium sized businesses. The proposed name of this program is the Main Street Business Lending Program that was originally created during the financial crisis in 2008 to pump money lending into outfits having no access to Wall Street debt markets.

Though no specifics have yet been announced, this Market Street Business Lending Program would complement those already announced last week by the Small Business Administration via its SBA Economic Injury Disaster Loan Program.

As highlighted in Part One of Tim and Julie’s Agent’s Crisis Plan, this SBA Economic Injury Disaster Loan Program is making available up to $2M in capital loans for small/medium-sized businesses to help mitigate temporary lost income due to the coronavirus pandemic.

New information came out March 23 about this SBA lending program…businesses requesting over $25,000 are being asked to put up collateral for such a loan, preferably real estate.

More to come on the Federal Reserve’s Main Street Business Lending Program.

 

Thanks to the New York Times, Bill Chappell for source material.

Also read: Key Aspects About Unemployment Benefits