Yale School of Management

Program on Financial Stability

Improving our understanding and management of systemic risk.

Use of Federal Reserve Programs - 07/09/2020

July 9, 2020
: By: Pascal Ungersboeck

Contact the Author

Below we report on operational Fed programs, based on the Fed’s weekly H.4.1 release. Since last week, the total amount outstanding across all 10 lending facilities has fallen for the first time since the beginning of the crisis. Central banks have continued to reduce their use of the swap agreements with the Federal Reserve.

Note on Treasury contributions to Federal Reserve Programs

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. On June 16, the Federal Reserve Bank of New York received the most recent contribution of $10 billion to TALF. In total, the Treasury has invested a total of $114 billion in six facilities. Per the facility agreements, 85% of the equity contributions to the CCF, CPFF, MLF, MSF and TALF 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, $31.9 billion for the MSF, and $8.5 billion for TALF.

As of July 2, there is $211 billion outstanding across 10 facilities (Figure 1); $109 billion out of the total has been used to purchase targeted assets. The total amount outstanding is slightly down from last week, when it stood at $215 billion - $114 billion excluding Treasury contributions. It is the first time the total has declined since the launch of the first programs in March. Figure 1a below reports the outstanding amount of each facility, not including Treasury contributions that are invested in securities, from June 18 onwards.

Note on Federal Reserve Swap lines

Over the last month, central banks significantly reduced their use of the USD swap lines established with the Fed in March. The reduction is due to the expiration of 84-day swaps entered during the early weeks of the crisis. Auctions for these swaps were conducted weekly. As these contracts are reaching maturity, the total outstanding amount declined by almost $300 billion since its peak on May 27. As of July 9, the total amount still outstanding is $153 billion, down from $183 billion last week. The BoJ and ECB are now the only counterparties with an outstanding amount above $10 billion. At $112 billion outstanding, the BoJ’s share represents 73 percent of the total. The ECB stands at $17 billion; together the two largest counterparties hold 84 percent.

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-sized 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. The Treasury has made an equity investment of $37.5 billion in MSF LLC.

Term Asset-Backed Securities Loan Facility

The TALF is established under section 13(3) to provide liquidity guaranteed by asset-backed securities (ABS). Under the facility, the Federal Reserve lends to holders of certain AAA-rated ABS. The facility operates through a special purpose vehicle to extend its loans, the Term Asset-Backed Securities Loan Facility II LLC (TALF II LLC). The Treasury has made an equity investment of $10 billion in TALF II LLC.