Fed takes emergency action to stave off a depression

Coronavirus

WASHINGTON, DC – MARCH 03: Federal Reserve Chair Jerome H. Powell announces a half percentage point interest rate cut during a speech on March 3, 2020 in Washington, DC. (Photo by Mark Makela/Getty Images)

(CNN) — The Federal Reserve massively accelerated its coronavirus rescue plans Monday by announcing unlimited bond-buying, three new credit facilities and an upcoming Main Street lending program.

Taken together, the US central bank said the new programs will provide up to $300 billion in new financing to an economy getting crushed by the crippling health restrictions aimed at fighting the pandemic. The Fed is going all out to prevent the health crisis from turning into a full-blown financial crisis.

US stock futures spiked on the new emergency actions from the Fed, which has already slashed interest rates to zero.

The Fed vowed to support American households and businesses, but it acknowledged “our economy will face severe disruptions.”

“The coronavirus pandemic is causing tremendous hardship across the United States and around the world,” the Fed said in a statement.

Major steps announced include:

  • Open-ended quantitative easing (QE). Just over a week ago, the Fed had set a limit of $700 billion on these bond-buying programs
  • Fed will start buying commercial mortgage backed securities (CMBS)
  • Two lending facilities to large companies: Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance, and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for existing corporate bonds
  • Bringing back crisis-era Term Asset-Backed Securities Loan Facility (TALF) to support the flow of credit to consumers and businesses
  • Expanding money market mutual fund liquidity facility to include wider range of municipal bonds
  • Expanding commercial paper credit facility

And the Fed said it expects soon to launch a Main Street Business Lending Program to support small- and medium-sized businesses.

All of this is part of the Fed’s efforts to prevent a major credit crisis.

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