Yale School of Management

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Federal Reserve Introduces Paycheck Protection Program Liquidity Facility

April 10, 2020

On April 9, the Federal Reserve released the details of its new Paycheck Protection Program Liquidity Facility (PPPLF), through which financial institutions can use eligible loans made to small businesses as collateral when borrowing from the Fed. The purpose of the program, authorized under Section 13(3) of the Federal Reserve Act, is to facilitate such lending to small businesses. 

Continue reading “Federal Reserve Introduces Paycheck Protection Program Liquidity Facility”

Federal Reserve Announces New Municipal Liquidity Facility

April 10, 2020

On April 9, the Federal Reserve announced the Municipal Liquidity Facility (MLF) as part of a new series of facilities providing up to $2.3 trillion in loans to support the economy. The facility aims to ease cash flow pressures on state and local governments as they adjust to a decline in municipal and state revenues and face greater than expected public health costs due to the  COVID-19 pandemic .

Continue reading “Federal Reserve Announces New Municipal Liquidity Facility”

Countering COVID-19 with Countercyclical Bankruptcy Policy

April 9, 2020

Governments are temporarily tilting their bankruptcy laws in favor of debtors to help businesses survive the crisis. Some have taken advantage of the crisis to propose permanent pro-debtor bankruptcy reforms. 

Many countries have found that their current bankruptcy laws do not offer enough relief to debtors in these difficult times. This even applies to countries with pro-debtor systems, like Chapter 11 in the United States, that aim to avoid liquidations and restructure all companies that are viable as going concerns. Due to COVID-19, many otherwise viable businesses see themselves without a strategy for recovery until social-distancing measures end. Policymakers fear that this will force countless businesses to liquidate, leaving even more workers unemployed. So many bankruptcies could overwhelm bankruptcy courts, drawing out an already painful process. 

Continue reading “Countering COVID-19 with Countercyclical Bankruptcy Policy”

Large-Scale Assistance Programs for Small Businesses

April 8, 2020

With the economic effects of the coronavirus pandemic likely to be particularly devastating for small and medium-sized enterprises (SMEs), countries around the globe are faced with the task of determining how best to support such businesses.  A number of potential intervention types exist and are already being deployed, many of which have also been used in response to earlier financial crises. This post begins by describing the fundamental challenge: to provide SME assistance quickly and on a large scale.  It next examines each of the primary tools governments can use to extend assistance to SMEs on such a scale. In so doing, it provides examples of the use of these tools drawn from the current situation and previous crises. The post then presents a detailed analysis of the framework for SME assistance established in the United States by the recently adopted CARES Act as one example of how interventions can be combined to support SMEs.  It concludes by offering some takeaways about why certain SME assistance interventions may be preferable to others in given contexts.

Continue reading “Large-Scale Assistance Programs for Small Businesses”

Asian Development Bank Increases Funds for Producers of Critical Medical Supplies

April 8, 2020

On March 12, the Asian Development Bank (ADB) said it would make $200 million available to companies that make and distribute medicines and medical supplies to fight the coronavirus.

The ADB will disburse this aid through its Supply Chain Finance Program, which was originally developed in 2012 to “unlock financial resources caught in the supply chain.” Suppliers were sometimes waiting for up to six months to receive payment from buyers, and the SCFP provides short-term funding so they don’t have to wait (see here, pp. 3).

Continue reading “Asian Development Bank Increases Funds for Producers of Critical Medical Supplies”

Programs Support Individuals through Direct Payments and Tax Cuts

April 8, 2020

During this COVID-19 crisis, many countries have provided cash directly to individuals and households through direct payments and tax cuts. Though programs differ across countries, some key considerations for these temporary income support programs include:

  1. Channel: What is the channel for providing the benefits? 
  2. Size: What is the monetary value of the benefits provided?
  3. Eligibility: Who is eligible to receive the benefits?  
  4. Length: What is the timeframe for the benefits? 
  5. Administration: How does the individual receive the benefits?
Continue reading “Programs Support Individuals through Direct Payments and Tax Cuts”

Federal Reserve Introduces Paycheck Protection Program Liquidity Facility

April 10, 2020

On April 9, the Federal Reserve released the details of its new Paycheck Protection Program Liquidity Facility (PPPLF), through which financial institutions can use eligible loans made to small businesses as collateral when borrowing from the Fed. The purpose of the program, authorized under Section 13(3) of the Federal Reserve Act, is to facilitate such lending to small businesses. 

Continue reading “Federal Reserve Introduces Paycheck Protection Program Liquidity Facility”

Federal Reserve Announces New Municipal Liquidity Facility

April 10, 2020

On April 9, the Federal Reserve announced the Municipal Liquidity Facility (MLF) as part of a new series of facilities providing up to $2.3 trillion in loans to support the economy. The facility aims to ease cash flow pressures on state and local governments as they adjust to a decline in municipal and state revenues and face greater than expected public health costs due to the  COVID-19 pandemic .

Continue reading “Federal Reserve Announces New Municipal Liquidity Facility”

Countering COVID-19 with Countercyclical Bankruptcy Policy

April 9, 2020

Governments are temporarily tilting their bankruptcy laws in favor of debtors to help businesses survive the crisis. Some have taken advantage of the crisis to propose permanent pro-debtor bankruptcy reforms. 

Many countries have found that their current bankruptcy laws do not offer enough relief to debtors in these difficult times. This even applies to countries with pro-debtor systems, like Chapter 11 in the United States, that aim to avoid liquidations and restructure all companies that are viable as going concerns. Due to COVID-19, many otherwise viable businesses see themselves without a strategy for recovery until social-distancing measures end. Policymakers fear that this will force countless businesses to liquidate, leaving even more workers unemployed. So many bankruptcies could overwhelm bankruptcy courts, drawing out an already painful process. 

Continue reading “Countering COVID-19 with Countercyclical Bankruptcy Policy”

Large-Scale Assistance Programs for Small Businesses

April 8, 2020

With the economic effects of the coronavirus pandemic likely to be particularly devastating for small and medium-sized enterprises (SMEs), countries around the globe are faced with the task of determining how best to support such businesses.  A number of potential intervention types exist and are already being deployed, many of which have also been used in response to earlier financial crises. This post begins by describing the fundamental challenge: to provide SME assistance quickly and on a large scale.  It next examines each of the primary tools governments can use to extend assistance to SMEs on such a scale. In so doing, it provides examples of the use of these tools drawn from the current situation and previous crises. The post then presents a detailed analysis of the framework for SME assistance established in the United States by the recently adopted CARES Act as one example of how interventions can be combined to support SMEs.  It concludes by offering some takeaways about why certain SME assistance interventions may be preferable to others in given contexts.

Continue reading “Large-Scale Assistance Programs for Small Businesses”

Asian Development Bank Increases Funds for Producers of Critical Medical Supplies

April 8, 2020

On March 12, the Asian Development Bank (ADB) said it would make $200 million available to companies that make and distribute medicines and medical supplies to fight the coronavirus.

The ADB will disburse this aid through its Supply Chain Finance Program, which was originally developed in 2012 to “unlock financial resources caught in the supply chain.” Suppliers were sometimes waiting for up to six months to receive payment from buyers, and the SCFP provides short-term funding so they don’t have to wait (see here, pp. 3).

Continue reading “Asian Development Bank Increases Funds for Producers of Critical Medical Supplies”

Programs Support Individuals through Direct Payments and Tax Cuts

April 8, 2020

During this COVID-19 crisis, many countries have provided cash directly to individuals and households through direct payments and tax cuts. Though programs differ across countries, some key considerations for these temporary income support programs include:

  1. Channel: What is the channel for providing the benefits? 
  2. Size: What is the monetary value of the benefits provided?
  3. Eligibility: Who is eligible to receive the benefits?  
  4. Length: What is the timeframe for the benefits? 
  5. Administration: How does the individual receive the benefits?
Continue reading “Programs Support Individuals through Direct Payments and Tax Cuts”