Daily Management Review

Fed pours in $ 2.3T more into US economy


The US Federal Reserve System (Fed) announced a massive expansion of support for the US economy in the amount of $ 2.3 trillion. The new pack of measures is primarily aimed at maintaining a previously stable small and medium-sized business, the loans of which the regulator promises to buy back from banks in exchange for the preservation of jobs by companies. In addition, state authorities will receive support in the form of soft loans.

Head of the watchdog, Jerome Powell, promised to continue to “proactively and aggressively” use the available support tools. According to experts, the implementation of the announced measures will lead to an increase in the Fed balance to $ 10 trillion in the coming months.

The Fed announced expansion of support for the US economy through soft loans by $ 2.3 trillion. This amount is approximately 10% of the country's GDP. Support will be given to both households and all categories of employers, regardless of company size, as well as state authorities.

In particular, the regulator will provide liquidity to banks issuing loans to small and medium-sized businesses, loans in their nominal amount will become the guarantee of such financing. The volume of this program is $ 350 billion. In addition, as part of the program for lending to small and medium-sized businesses, the Fed will buy its loans up to $ 600 billion. Banks will have 5% of these loans, and they will be able to sell to the regulator the remaining 95%.

The program will enroll companies with good pre-crisis financial performance, with up to 10 thousand employees and an annual turnover of up to $ 2.5 billion.

They will receive loans for four years with an annual deferral of payments. In return, companies will have to commit to maintaining employment.

Another $ 850 billion will be allocated to three previously announced programs. Within the first two, companies with an investment rating (BBB and higher) will be able to count on loans with a deferred payment for six months. In addition, the regulator will redeem the bonds of such companies. Under the third program, loans will be provided to holders of securities secured by new consumer loans and loans for small businesses, its size has been saved in the amount of $ 100 billion. Finally, state and municipal authorities will be able to get another $ 500 billion in loans. The regulator will also buy short-term bonds issued by the states. Until April 16, the Fed will be accepting wishes of the business regarding additional support tools.

source: bloomberg.com