Fed extends municipal lending to more cities

By Aysu Bicer

ANKARA ( AA) - The US Fed announced on late Monday an expansion of the scope and duration of the municipal liquidity facility, offering up to $500 billion in lending to states and municipalities to help manage cash flow stresses caused by the coronavirus pandemic.

The program was launched as part of the bank's initiative to provide up to $2.3 trillion in loans to support US households, businesses, and communities, the bank said in a statement.

When announced on April 9, the lending program put the county threshold at two million residents and the city threshold at one million residents.

It will now allow counties with a population of at least 500,000 residents and cities with a population of at least 250,000 to be eligible for selling their short-term debt directly to a special purpose vehicle (SPV) established by the Fed and the US Treasury. An SPV is a subsidiary of a company which is protected from the parent company's financial risk.

"The new population thresholds allow substantially more entities to borrow directly from the municipal lending than the initial plan announced on April 9," it said.

The Treasury will also enable $35 billion of credit protection to the Fed for the facility using funds appropriated by the Coronavirus Aid, Relief, and Economic Security Act.