Yale School of Management

Program on Financial Stability

Improving our understanding and management of systemic risk.

Use of Federal Reserve Programs - 06/11/2020

June 11, 2020
: By: Pascal Ungersboeck

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Below we report on operational Fed programs, based on the Fed’s weekly H.4.1 release. Since last week, the ECB and BoE significantly decreased their use of the swap lines established with the Fed in March.

Note on Federal Reserve Swap lines

Since last week, the European Central Bank (ECB) significantly decreased its use of the USD swap line established with the Fed in March. The decrease is due to the expiration of a $75 billion 84-day swap the ECB entered on March 18, shortly after the swap lines were established. As the contract reached maturity on June 11, the outstanding amount for the ECB decreased from $144 billion to $69 billion. The Bank of England’s position decreased from $20 billion to $13 billion, as a 84-day swap agreement entered on March 18 matured. 

The Bank of Japan (BoJ) also entered a $30 billion swap that expired on June 11. However, its overall position did not decrease, as the BoJ entered a new 84-day contract for $15 billion on June 9. The BoJ has the highest outstanding amount at $213 billion.

Note on Treasury contributions to Fed facilities

The Treasury announced on April 9 that it intended to use funds available under the CARES Act to purchase equity in special purpose vehicles established under Fed lending programs. As of June 4, the Treasury invested a total of $104 billion in five facilities. Per the facility agreements, 85% of the equity contributions to the CCF, CPFF, MLF and MSF have been invested in nonmarketable Treasury securities; $31.9 billion for the CCF, $8.5 billion for the CPFF, $14.9 billion for the MLF and $31.9 billion for the MSF.

For the MSF and MLF, the current balance largely reflects the purchase of treasuries, rather than facility-specific assets. For the MLF treasuries purchased with equity constitute $14.9 billion out of $16 billion total. The facility began purchasing municipal notes on June 2. The current balance for the MSF is exclusively constituted by the 85 percent of equity invested in treasuries.

Liquidity Swap Lines

The USD swap lines are bilateral agreements between the Fed and foreign central banks. They allow foreign central banks to exchange domestic currency for US dollars. The Fed currently maintains swap line agreements with 14 central banks.

Money Market Mutual Fund Liquidity Facility

The MMLF allows the Fed to fund the purchase of money market mutual fund assets. The program is established under section 13(3) of the Federal Reserve Act. The Fed reported that the U.S. Treasury, to date, has provided credit protection of $1.5 billion to the Money Market Mutual Fund Liquidity Facility.      

Discount Window

The DW is a standing facility that allows the Fed to provide collateralized loans to depository institutions.

Primary Dealer Credit Facility

The PDCF allows the Fed to extend collateralized loans to primary dealers. The facility was established under section 13(3). 

Paycheck Protection Program Liquidity Facility

The PPPLF allows the Fed to provide financial institutions with liquidity backed by loans to small and medium businesses extended under the federal government’s Paycheck Protection Program and guaranteed by the Small Business Administration. The Program was established under section 13(3).

Commercial Paper Funding Facility 

The CPFF provides a liquidity backstop to issuers of commercial paper and was also established under section 13(3). It is operated by the FRBNY through a special purpose vehicle, the Commercial Paper Funding Facility II LLC (CPFF LLC). The Treasury has made an equity investment of $10 billion in CPFF LLC.

Primary and Secondary Market Corporate Credit Facilities

The PMCCF and SMCCF were set up under section 13(3) to support credit to employers through purchases of newly issued bonds and support market liquidity for outstanding corporate bonds. These facilities operate through a special purpose vehicle, the Corporate Credit Facilities LLC (CCF LLC). The Treasury has made an equity investment of $37.5 billion in CCF LLC.

Municipal Liquidity Facility

The MLF provides liquidity to states, counties and cities. The facility was set up to purchase up to $500 billion of short-term notes and was established under section 13(3). The Treasury has made an equity investment of $17.5 billion in MLF LLC.

Main Street Lending Programs

The MSF is established under section 13(3) to provide loans to SMEs. The program operates through three facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). The loans are extended through a special purpose vehicle, the Main Street Facilities LLC (MSF LLC), established by the Federal Reserve Bank of Boston.