United States + COVID-19

The Federal Reserve System’s (FRS) response to the COVID-19 crisis was four-pronged.  (1) The monetary impulse to cut interest rates came first.  The FRS cut interest rates in-between its regular policy meetings.   By March 2020, the US IRs were near zero, a stimulus that was expected to avert drastic declines in asset prices and to support private demand. (2) The FRS additionally purchased vast quantities of Treasuries and Mortgage Backed Securities (MBS) lending extensively to banks and, thereby, fulfilling its role as the lender of last resort. (3) The FRS, using its emergency powers, under article 13(3) of the Federal Reserve Act,[1] and with the assistance of the Treasury, found innovative ways to lend to: Money Market Funds (MMFs), issuers of corporate debt, municipal governments and even to main street businesses.   This effort transformed the FRS from a lender of last resort to the banking system into a lender of last resort to the whole US economy; a transformation that elucidated that, no matter their revered independence, central banks (CBs) are willing to become subservient to the fiscal authorities (FAs) during crises. The US Congress, which curtailed the powers of the FRS, during the 2008 crisis, by amending article 13(3) of the Federal Reserve Act,[2] bowed to the bank’s technocratic competence that was sorely needed for addressing the economic chaos caused by the pandemic.  The FRS independence and lack of political partisanship rendered it the prefect institution to disburse the loans expected to jump-start the US economy. (4) The Treasury made additionally one-time lump sum payments to individuals, families, companies, states and municipalities that were mostly affected by the pandemic and beefed up unemployment benefits.   

The total amount of fiscal infusions, whose purpose was to provide some relief of misery and hardship,[3]  were calculated to be more than $3.6 trillion.[4]  This increase in spending was expected to generate a budget deficit of $3.7 trillion in 2020.[5]  As of May 7, 2020, 33 million unemployment claims were filed in the United States as businesses faced with the emergency lockdown ceased operations and laid off employees.   In fact, the rate of unemployment was expected to jump from 3.2% in February 2020 to 16% in May 2020,[6] with 42%  pandemic-related job losses expected to be permanent.[7]  (4)  At the global level, the FRS reassumed its role as global lender of last resort[8]  by activating its swap lines with foreign CBs and facilitated the quick conversion of Treasuries into dollars, which was the highly-sought-after currency during the pandemic.

 19.1.1 Immediate Response

The FRS cut its benchmark interest rate, the Federal Funds Rate (FFR) in two unscheduled meetings.  The FRS lowered the FFR range by 0.50%, to 1 to 1.25%,  at its March 3, 2020 meeting,[9] and to 0 to 0.25%,  at its March 15, 2020 meeting.  [10] It also announced that it would purchase at least $500 billion of Treasury securities[11] and at least $200 billion of MBS,[12] a kind of policy reminiscent of the 2008 Quantitative Easing (QE).   Eventually, given the dire circumstances in the financial markets, it directed the Federal Reserve Bank of New York (FRBNY) to buy Treasuries and MBS[13] in the amounts needed to maintain the FFR in the target range of 0 to 0.25%.[14]   As a result, its asset portfolio ballooned from $4.2 trillion in February 2020 to more than $6.6 trillion in April 2020[15] and was expected to reach $8-11 trillion before the taming of the pandemic.  Between March 16 and April 16, the FRS bought Treasuries and MBS at the pace of $79 billion per day.   To put this in context, the FRS bought $85 billion per month between 2012 and 2014 in the aftermath of the 2008 financial crisis. The FRS made it clear that its intention was to keep on easing monetary condition as needed to support the economy.

The chairman of the FRS stated: ‘Businesses have shuttered, workers are staying home, and we have suspended many basic social interactions. People have been asked to put their lives and livelihoods on hold, at significant economic and personal cost. We are moving with alarming speed from 50-year lows in unemployment[16] to what will likely be very high…levels.’ [17]   The FRS was willing to engage in ‘aggressive efforts’ to limit the losses to jobs and incomes and to promote a swift recovery[18] and was prepared to use its ‘full range of tools’ to support the flow of credit to households and businesses.[19]

19.1.2 Support for Financial Institutions and Corporations

Given the fact that the FRS is the lender of last resort to the banking system,[20] its priority was to ensure the smooth functioning of that system.    In addition, the Coronavirus Aid, Relief, and Economic Security (CARES) Act adopted on March 27, 2020[21] mandated the Treasury to use the Exchange Stabilization Fund (ESF),[22] up to $454 billion, to backstop losses that the FRS could incur by providing credit to various companies that were on the brink of bankruptcy during the pandemic.   These FRS credit facilities were established under article 13(3)[23]   of the Federal Reserve Act, which grants the FRS powers to address financial emergencies. The Treasury Secretary declared that this $454 billion could be leveraged 10 times to provide up $4.2 trillion credit to financial institutions and US companies.[24]

The Primary Dealer Credit Facility (PDCF) provided credit to the primary dealers[25] as long as they could provide as collateral investment grade corporate bonds, commercial paper, municipal bonds, MBS, ABS,[26]  ETFs[27] and a number of other securities.[28]   The Commercial Paper Funding Facility (CPFF) provided loans to issuers of commercial paper, an important source of short-term financing for small business and municipalities.  In 2020, the commercial paper market was estimated to be a more than $1-trillion market.   The FRS established a Special Purpose Vehicle (SPV)[29] that purchased high-grade commercial paper directly from the issuers of such paper. The Treasury provided $10 billion of credit protection to the FRS in connection with the CPFF.[30]  Through the Money Market Mutual Fund Liquidity Facility (MMLF) the FRS provided loans to financial institutions that were secured by high-quality assets from MMFs.  The purpose of the MMLF was to assist MMFs in meeting demands for redemptions by individuals and other investors and, thus, avoiding the ‘forced liquidation’ of commercial paper and municipal bonds into ‘already strained financial markets.’[31]  Those entitled to borrow under the MMLF included not only US banks but also US branches and agencies of foreign banks. The Treasury provided $10 billion of credit protection to the FRS in connection with the MMLF.[32]

Business big enough to tap the bond market could make use of  two facilities established by the FRS  to support credit to large companies: (1) the Primary Market Corporate Credit Facility (PMCCF) that supported new bond and loan issuance by big companies; and (2) the Secondary Market Corporate Credit Facility (SMCCF) that provided liquidity for outstanding corporate bonds. 

The purpose of PMCCF was to facilitate the provision of new credit to companies to ensure that they had ample financing to maintain their operations during the pandemic.  The FRS provided credit to an SPV that was in charge of making these loans. The Treasury, through the ESF, made an equity investment in the SPV of $10 billion.[33]  Carnival, a cruise company, was considering loans offers at a 15% annual rate by various hedge funds[34] when the PMCCF was adopted. The PMCCF made it possible for Carnival to tap the broader bond market at more favorable rates than those offered by the hedge funds, which were eager to take over a piece of the company expected to soon face bankruptcy.[35] Ford, a car manufacturer, was also able to issue $8 billion of new debt.  The PMCCF was largely successful in defibrillating the corporate bond market for the issuance of new corporate debt dimming the hopes of hedge funds expecting make extraordinary profits by acquiring companies at bargain prices due to the pandemic.

The SMCCF purchased already issued debt by US companies and related ETFs.   The Treasury, using the ESF, made an equity investment of $10 billion in the SPV, established by the FRS, for the operation of this facility.  Companies eligible for support under the SMCCF included the so-called ‘fallen angels.’[36] These were companies whose debt, before mid-March 2020, was considered investment grade, but had since been downgraded to junk.  Such companies included airlines and various oil companies, some of which were facing bankruptcies due the slump in oil demand triggered by the pandemic.  Ford, for example, had $36 billion in outstanding bonds broadly rated investment-grade before the pandemic that had, since then, fallen into the junk debt category.[37]

The Term Asset-Backed Securities Loan Facility (TALF) was initially put together during the 2008 financial crisis.[38]  In 2020 it was revived and amended to accept much riskier assets as collateral for the provision of credit, including securities backed by student loans, auto loans, credit card loans and loans guaranteed by the Small Business Administration (SBA).[39]  Asset managers, using the FRS’ loans provided through TALF, could buy securities sold off at bargain basement prices due to the pandemic.   Once the market recovered, they could resell them making a hefty profit.[40]  The Treasury, using the ESF, made a $10 billion investment in this facility to shield the FRS from potential losses.[41]

The Treasury used $75 billion from the ESF to back the FRS’ Main Street Lending Program,[42] which could provide up to $600 billion (at 8 times leverage) to mid-size companies.  These companies are too large to qualify as small business but also too small to access the corporate debt market. Initially such companies were defined as companies with up to 10 000 employees or up to $2.5 billion in annual revenue.   Medium-sized companies are the backbone of the US economy and are typically much less leveraged than big corporations.  The Main Street Lending Program was eventually comprised of three facilities:  the Main Street New Loan Facility (MSNLF) which provided new loans[43] and the Main Street Expanded Loan Facility (MSELF) that made it possible for business to upsize their pre-pandemic loans.[44]   On April 30, 2020, the FRS broadened the Main Street Lending Program by creating the Main Street Priority Loan Facility (MSPLF). [45] This facility addressed the needs of companies with up to 15 000 employees or up to $5 billion in revenue, such as regional car dealerships and local grocery chains.  More than 19 000 mid-size firms employed 30 to 40 million people in the United States.[46]  The loans provided by all these three facilitieswere were expected to help such firms. Unfortunately, these loans came with many strings attached to limit potential government losses.

Banks that facilitated the Main Street Lending Program had to keep 5% of the loans they made on their books (for the MSELF and the MSNLF) and 15% (for the MSPLF).  They could sell the rest (95% or 85%) to the FRS, leaving them with much less debt on their books and giving them more freedom to provide loans to other borrowers.  Still having to keep a percentage of the loans they provided on their books made banks much more conservative in lending during the COVID-19 pandemic.  Many banks refused to give loans to companies that were not part of their regular clientele.[47]  Businesses using the Main Street program, furthermore, had to shallow some strict conditionality.  They had to maintain almost all their workforce and to restrict their dividends and share buybacks.[48]  The FRS that was in charge of managing the Main Street Program had to balance two risks.   The CB did not want to be saddled with a high number of bad loans by encouraging reckless lending by the banks.  At the same time, the terms of loans  could not be so burdensome that firms did not participate in the Main Street Program, missing on financing they much needed to keep operating during the pandemic.

19.1.3 Relief for Small Business, Local Governments and Families Small Business

The SBA’s Paycheck Protection Program (PPP) was established by the CARES Act to provide loans to small businesses.  These were businesses with fewer than 500 employees, including self-employed individuals. The initial amount dedicated to this program was $349 billion.[49]  By April 16, 2020, the SBA announced that it had approved more than $1.4 million loans valued at $335 billion and that the PPP was running out of money.[50]  Some criticized the program for not doing enough to support small business.   Loans granted under the program could be used for payroll, health insurance, utilities, and mortgage interest or rent.[51]    Small businesses, though, occur many more expenses including payments to suppliers, maintenance and have to pay mortgage principal.[52]    Furthermore, the SBA stipulated that, in order for the loan to be forgiven, only 25% of the loan could be used for non-payroll expenses.[53]    The rest 75% had to be used for the salaries of employees.  This 25/75 conditionality failed to take into account the needs of businesses located in big cities, like New York, where a big chunk of expenses goes to rent.[54]    In fact, the goal of the program was to prevent business from prioritizing paying landlords over paying workers.  As the economy slowly opened up, however, it became abundantly clear that small business, like hair salons and restaurants, would have difficulty recovering their prior levels of clientele.  Therefore, they could not afford to re-hire or maintain 75% of their workforce, making the 25/75 conditionality look needlessly debilitating and impervious to the needs of small entrepreneurs.   

On April 24, 2020, the PPP program was replenished with an additional $310 billion[55] — part of a larger package of $484 billion that included assistance to hospitals and money dedicated to coronavirus testing. Out of this $310 billion about $110 billion was earmarked for loans made by small lenders.  This $110 set-aside was to address concerns by small, community banks that big banks were able to benefit from the previous PPP outlay of $349 billion. Big banks seemed to be swifter than community banks at assisting their clients in applying for the PPP loans.[56]

In coordination with the Treasury, the FRS established the Paycheck Protection Lending Facility to provide credit to banks that were offering PPP loans.  The loans provided under the facility were fully guaranteed by the SBA — the US government.[57]   Furthermore, the FRS encouraged financial institutions to consider participating in other programs administered by the SBA and the Treasury: the Economic Injury Disaster Loan program,[58] which provided funds to cover economic losses resulting from the pandemic, and the Small Business Debt Relief Program.  The FRS stipulated that banks could exclude loans granted to small business from their capital ratios, freeing them to make more loans.  Overall, FRS loosened the capital requirements for banks to encourage them to lend to struggling business and individuals.[59]  The CB further encouraged banks to use its discount window as needed.

Meanwhile, in the markets, private equity firms[60] and various hedge funds, with billions of dollars in cash, raised from pension funds and Sovereign Wealth Funds (SWFS),[61] were eager to exploit the opportunities offered by the pandemic.   These firms were slavering over the prospect of buying commercial real estate and related MBS at bargain prices.   Due to the pandemic, restaurants and hotels were increasingly unable to pay their rent.  Landlords, in turn, were unable to pay their mortgage bills.  As a result, investors with lots of cash were ready to jump into buying out the many distressed properties and securities sold off, during the pandemic, with the aim of reselling them when the market normalized.  Banks frequently prefer to sell off the real assets they hold as collateral, at severely discounted prices, to firms with expertise in distressed debt.  This way banks avoid the administrative costs of foreclosure, including potential lawsuits by disgruntled owners.  As the pandemic was ravaging the economy, bankruptcy auctions were expected to become common place.   One broker stated blithely: ‘Our thoughts and prayers are with all our fellow Americans and nobody wants to capitalize on anybody’s misfortune…But I will tell you real estate investors…have been waiting for this for a decade.’[62] States and Local Governments

States, cities and municipalities issue debt that they backup with the taxes and fees they impose on local businesses and residents.  Other municipal borrowers, such as health-care facilities, charter schools, highway tolls and nursing homes, are risker borrowers than local governments because they are supported by more unpredictable revenue streams.  In 2020,  these riskier borrowers comprised $1 trillion of the $4 trillion US municipal bond market.[63]

The CARES act established a $150 billion Coronavirus Relief Fund through which the Treasury made direct payments to states and local governments.[64]  The FRS established additionally the Municipal Liquidity Facility.  The facility was used to provide credit to states, cities and county governments to help them manage the pandemic.  The Treasury made $35 billion investment in this facility so as to mitigate FRS’ potential losses.  This amount leveraged 10 times could provide $350 billion credit to states and local governments. The FRS committed to buying $500 billion of short-term notes directly from states and counties with a population of at least 500 000 residents, and cities with a population of at least 250 000 residents.[65]   This was a much more generous program than the program it had initially envisioned.[66]  The FRS decided to expand the program to cover smaller cities and counties when members of the US Congress pointed out that it was important to include in it 35 cities densely populated by African Americans and less densely populated rural communities.[67]

We must underline here that all the FRS’ programs and those that it sponsored in coordination with the Treasury were lending programs.  The FRS is first and foremost the lender of last resort to the banking system.   Even in the role it acquired during the pandemic, as lender of the last resort to the whole economy, the FRS remained a lender.   It was willing to provide credit to illiquid companies until they solved their liquidity problems.   The FRS could not lend to insolvent companies.  It could not make grants.[68]   It could not provide payments to the unemployed.  The central bank fulfilled its role as lender of last resort by stepping in the Treasury and MBS markets when yields in those markets rose more than expected.  It did the same for the corporate bond market through the PMCCF and SMCCF.  The FRS even granted loans to the Main Street[69] when the Treasury declared its commitment to absorb the bulk of the losses.  The FRS’ willingness to intervene to soar up lackluster companies and securities built up confidence in the markets.  The FRS offered companies unable to finance themselves, due to the panic brought by the pandemic, the much-needed breathing space.  With regard to saving insolvent companies and providing relief to the new unemployed, though, the CB passed the baton to the Treasury.  It urged the Treasury to use ‘the great fiscal power of the United States’ to nurse the economy through the shock caused by the pandemic.  The FRS could not freely distribute dollars to those in need without grossly violating its mandate.[70] Individuals and Families

The Treasury provided an one-time payment of $1 200 to those earning less $75 000 per year.  Married couples making less than $150 000 received a cash infusion of $2 400 plus $500 for each child. [71]  The estimated cost of the program was expected to be $292.4 billion.[72]  Further assistance was provided to the unemployed including $600 payment per week on top of the already existing unemployment benefits.  Additionally $32 billion was put aside to provide relief for aviation workers.[73]  Furthermore, the FRS, the FDIC and the Controller of the Treasury stipulated that persons having a mortgage loan, who were experiencing financial hardship due to COVID-19, could ask for forbearance by submitting a request to their mortgage provider.[74]  Mortgage providers had to, in turn, grant such forbearance by deferring mortgage payments for up to 180 days and possibly longer.[75] Other Programs

Other programs were put in place to support of education, hospitals, the Public Health and Social Services Fund, and coronavirus testing.   All in all, the relief provided by the US government, under the CARES Act alone, exceeded $2 trillion.

19.1.4 The FRS as Global Lender of Last Resort

In March 2020, the FRS  utilized the already established swap lines,[76] the standing swap arrangements with the CBs of Canada, England, Switzerland, Japan and the European Central Bank (ECB), in order to increase the availability of dollars in the global financial markets.[77] On March 19, 2020, it initiated temporary swap arrangements with the CBs of Australia, Brazil, Denmark, South Korea, Mexico, New Zealand, Norway, Singapore and Sweden. These were the countries with which the FRS had established swap lines during the 2008 financial crisis.[78] Furthermore, on March 31, 2020, the FRS established a temporary repurchase agreement Facility for Foreign and International Monetary Authorities (FIMA Repo Facility).[79] The FIMA Repo Facility made it possible for foreign CBs to use the US government bonds, they held in their FX reserves,  as collateral for short-term dollar borrowing.[80]  Through this newly established repo  facility, countries with reserves in the form of Treasuries could readily convert those Treasuries into dollars.  Then they could channel these dollars to their dollar-starved domestic banks.   Even the Peoples Bank of China (PBOC) was theoretically eligible to use this new facility, if approved by the FRS, an important milestone given that the FRS did not maintain, at the time, any swap lines with that CB.  The development of the FIMA Repo Facility bolstered the role of the FRS as global lender of last resort and, as a result, further promoted the use of dollar as the prime global reserve currency.

19.1.5 Conclusion

The FRS’ massive stimulus and the Treasury’s fiscal largess signaled to the markets that the US government was ready to do whatever needed to support the economy.  As a trader triumphantly declared: ‘They [US government] took away the depression.’ The stock market rose from its end-of-March lows by 30%.  At the same time, some feared that slathering money around in the economy would not stave off a prolonged recession.   The government’s actions, no matter how bold, could not stop an economic depression on its tracks because they could not alter peoples’ behavior.  As long as the threat of high levels of contagion by the virus was omnipresent, the government could not force people to leave their homes, eat at restaurants, shop at malls and go to movies.[81]

[1] 12 USC §343(3).

[2] Elli Louka, The Global Economic Order: The International Law and Politics of the Financial and Monetary System 104 (2020), https://books.google.com/books?id=Di7eDwAAQBAJ.

[3] Dan Weil, The Fed Can’t Do It All, Says Alan Blinder, WSJ, May 1, 2020.

[4] Committee for a Responsible Federal Budget, COVID Money Tracker: Policies Enacted to Date, Apr. 20, 2020,  http://www.crfb.org/blogs/covid-money-tracker-policies-enacted-to-date.

[5] Phill Swagel, Congressional Budget Office’s Current Projections of Output, Employment, and Interest Rates and a Preliminary Look at Federal Deficits for 2020 and 2021, Apr. 24, 2020, https://www.cbo.gov/publication/56335.

[6] Id.

[7] Jose Maria Barrero et al., COVID-19 is also  a Reallocation Shock, NBER Working Paper 27137, May, 2020, https://www.nber.org/papers/w27137.pdf.

[8] For the role of the FRS as global lender of last resort during the 2008 financial crisis, see Louka, supra note 2, at 109-114 .

[9] Federal Reserve issues FOMC statement, Press Release, Mar. 3, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm.

[10] Federal Reserve issues FOMC statement, Press Release, Mar. 15, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.

[11] Chair Powell’s Press Conference Call, at 3, Mar. 15, 2020, https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20200315.pdf.

[12] Id.

[13] Federal Reserve announces extensive new measures to support the economy, Press Release, Mar. 23, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm.

[14] Federal Reserve issues FOMC statement, Press Release, Mar. 23, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323a.htm.

[15] https://fred.stlouisfed.org/series/WALCL.

[16] The unemployment rate in February 2020 was 3.5%.  See US Bureau of Labor Statistics,  Unemployment Situation – March 2020, Press Release, Apr. 2020, https://www.bls.gov/news.release/pdf/empsit.pdf.

[17]  Jerome H. Powell, COVID-19 and the Economy, Hutchins Center on Fiscal and Monetary Policy, Brookings Institution, Apr. 9, 2020, https://www.federalreserve.gov/newsevents/speech/powell20200409a.htm.

[18] Federal Reserve announces extensive new measures to support the economy, Press Release, Mar. 23, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm.

[19] Federal Reserve issues FOMC statement,  Press Release, Mar. 15, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.

[20] Louka, supra note 2, at 11.

[21] The CARES Act was preceded by the Coronavirus Preparedness and Response Supplemental Appropriations Act which authorized $8.3 billion in emergency funding to help mitigate the coronavirus outbreak; and the Families First Coronavirus Response Act which introduced a tax credit for coronavirus-related sick leave and approved more funding for agencies dealing COVID-19.

[22] For an analysis of the ESF, see Louka supra note 2, at 87-91.

[23] 12 USC §343(3).

[24] Jeanna Smialek, How the Fed’s Magic Money Machine Will Turn $454 Billion into $4 Trillion, NY Times, Mar. 26, 2020.

[25] Primary dealers are usually big banks, see Louka, supra note 2, at 14.

[26] Asset-Backed Securities (ABS). For the definition of ABS, see Louka, supra 2 note, at 97.

[27] Exchange Traded Funds (ETFs).  For the definition of ETFs, see Louka, supra note 2, at145.

[28] Federal Reserve Board announces establishment of a Primary Dealer Credit Facility (PDCF) to support the credit needs of households and businesses, Press Release, Mar. 17, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317b.htm.

[29] A SPV is usually a Limited Liability Company (LLC), see Louka, supra note 2, at 97.

[30] Federal Reserve Board announces establishment of a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses, Press Release, Mar. 17, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm.

[31] FRS, Report to Congress  Pursuant to Section 13(3) of the Federal Reserve Act: Money Market Mutual Fund Liquidity Facility, Mar. 25, 2020, https://www.federalreserve.gov/publications/files/money-market-mutual-fund-liquidity-facility-3-25-20.pdf.

[32] Id.

[33] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Primary Market Corporate Credit Facility, Mar. 25, 2020, https://www.federalreserve.gov/files/primary-market-corporate-credit-facility-3-29-20.pdf.

[34] On hedge funds, see Louka, supra note 2, at 273-76.

[35] Matt Wirz, How Fed Intervention Saved Carnival, WSJ, Apr. 26, 2020.

[36] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Secondary Market Corporate Credit Facility, Mar. 30, 2020, https://www.federalreserve.gov/publications/files/secondary-market-corporate-credit-facility3-29-20.pdf.

[37] Sebastian Pellejero and Sam Goldfarb, Fed Moves Spark Corporate Bond Rally, WSJ, Apr. 10, 2020.

[38] For an analysis of the programs put together during the 2008 crisis, see Louka, supra note 2, at 103-09.

[39] The Small Business Administration (SBA) is a US government agency founded in 1953 that provides support to entrepreneurs and small businesses.

[40] Dave Michaels, Investors Eye Fed Emergency Lending Program That Brought Rich Returns in 2009, WSJ, Apr. 25, 2020.

[41] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Term Asset-Backed Securities Loan Facility, Mar. 30, 2020, https://www.federalreserve.gov/publications/files/term-asset-backed-securities-loan-facility-3-29-20.pdf.

[42] FRS, Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy, Press Release, Apr. 9, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm.

[43] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Main Street New Loan Facility, Apr. 16, 2020, https://www.federalreserve.gov/publications/files/main-street-new-loan-facility-4-16-20.pdf.

[44] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Main Street Expanded Loan Facility, Apr. 16, 2020, https://www.federalreserve.gov/publications/files/main-street-expanded-loan-facility-4-16-20.pdf.

[45] Main Street Priority Loan Facility Press Release, Apr. 30, 2020, https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200430a2.pdf

[46] Medium-sized firms defined as firms having between 500 and 15 000 employees based on the 2017 Census Bureau Data.

[47] Anna Maria Andriotis and Peter Rudegeair, People Need Loans as Coronavirus Spreads. Lenders Are Making Them Tougher to Get, WSJ, Mar. 28, 2020.

[48] Sec. 4003(c)(3)(A)(ii), CARES Act.

[49] Sec. 1107(1) of CARES Act.

[50] Kristina Peterson, Small-Business Aid Program Set to Run Out of Money, WSJ, Apr. 15, 2020.

[51] Sec. 1102(a)(2)(F),CARES Act.

[52] Glenn Hubbard and Hal Scott, Main Street Needs More Fed Help, WSJ, Apr. 16, 2020.

[53] SBA, Paycheck Protection Program – Requirements – Loan Forgiveness,  Interim Rule, 13 CFR 120, https://home.treasury.gov/system/files/136/PPP-IFR-Loan-Forgiveness.pdf.

[54] Yuka Hayashi, For Small Businesses With High Rents, Coronavirus Aid Falls Short, WSJ, May 1, 2020.

[55] Sec. 1102(b)(1), CARES Act as amended on April 24, 2020 by the Paycheck Protection Program and Health Care Enhancement Act.

[56] Ruth Simon and Peter Rudegeair, In Race for Small-Business Loans, Winning Hinged on Where Firms Bank, WSJ, Apr. 20, 2020.

[57] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Paycheck Protection Program Lending Facility, Apr. 16, 2020, https://www.federalreserve.gov/publications/files/paycheck-protection-program-lending-facility-4-16-20.pdf

[58] https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance#section-header-0.

[59] Federal Reserve Board announces temporary change to its supplementary leverage ratio rule to ease strains in the Treasury market resulting from the coronavirus and increase banking organizations’ ability to provide credit to households and businesses, Press Release, Apr. 1, 2020, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200401a.htm.

[60] On the role of private equity firms in the markets, see Louka, supra note 2, at 276.

[61] On the clout of pension funds and SWFs in the markets, see Louka, supra note 2, at 272-73, 277-79 .

[62] Konrad Putzier and Peter Grant, Real-Estate Investors Eye Potential Bonanza in Distressed Sales, WSJ, Apr. 7, 2020.

[63]Heather Gillers, Coronavirus Shutdown Weighs on Higher-Risk Muni Issuers, WSJ, Apr. 27, 2020.

[64] Sec. 5001, CARES Act.

[65] FRS, Federal Reserve Board announces an expansion of the scope and duration of the Municipal Liquidity Facility, Press Release, Apr. 27, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200427a.htm

[66] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Municipal Liquidity Facility, Apr. 16, 2020, https://www.federalreserve.gov/publications/files/municipal-liquidity-facility-4-16-20.pdf.

[67] Nick Timiraos and Jon Hilsenrath, The Federal Reserve is Changing What it Means to Be a Central Bank, WSJ, Apr. 28, 2020.

[68]  FRS, Transcript of Chair Powell’s Press Conference, at 7, Apr. 29, 2020, https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20200429.pdf.

[69] See supra notes 43-45.

[70] See Powell Transcript, supra note 68, at 15.

[71] Sec. 6428, CARES Act

[72] US Congress Joint Committee on Taxation , Description of the tax provisions of Public Law 116-136, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, at 106,  Apr. 23, 2020, https://www.jct.gov/publications.html?func=startdown&id=5256.

[73] Sec. 4120, CARES Act.

[74] Sec. 4022(b), CARES Act.

[75] Sec, 4022(b)& (c)(1), CARES Act.

[76] Coordinated central bank action to further enhance the provision of U.S. dollar liquidity, Press Release, Mar. 20, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200320a.htm.

[77] On swap lines, see Louka, supra note 2, at 109-111.

[78] Federal Reserve announces the establishment of temporary U.S. dollar liquidity arrangements with other central banks, Press Release, Mar. 19, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200319b.htm

[79] Federal Reserve announces establishment of a temporary FIMA Repo Facility to help support the smooth functioning of financial markets, Press Release, Mar. 31, 2019, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200331a.htm.

[80] Id.

[81] Gunjan Banerji, Why Is the Stock Market Rallying When the Economy Is So Bad?, WSJ, May 8, 2020.