United States + COVID-19

19.1 The Federal Reserve System’s (FRS) response to the crisis was three-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), corporations, municipal governments and even to main street businesses.  

These efforts transformed the central bank (CB) 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 submissive to fiscal authorities (FAs) during crises.

The US Congress, which had 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. The Treasury made additionally one-time lump-sum payments to individuals, families, companies, states and municipalities mostly affected by the pandemic and beefed up unemployment benefits.   

The total amount of fiscal infusions, whose purpose was to provide some relief from misery and hardship,[3]  were calculated to be more than $3.6 trillion.[4]  This fiscal largesse 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 emergency lockdowns 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] About 42% of pandemic-related job losses were expected to be permanent.[7] 

At the global level, the FRS resumed 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 policy very much like the 2008 Quantitative Easing (QE).[13]  Eventually, given the dire circumstances in the financial markets, it directed the Federal Reserve Bank of New York (FRBNY) to buy Treasuries and MBS [14] in the amounts needed to maintain the FFR in the target range of 0 to 0.25%.[15]  

As a result, its asset portfolio ballooned from $4.2 trillion in February 2020 to more than $6.6 trillion in April 2020[16] 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 to stimulate economic recovery after the financial crisis.

The FRS made it clear that its intention was to keep on easing monetary conditions, as needed, to support the economy. [17] The bank realized that only ‘aggressive efforts’ could limit the losses to jobs and incomes and promote a swift recovery.[18]  Therefore, it was ready 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 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 to $4.2 trillion credit to financial institutions and US companies.[24]

The Primary Dealer Credit Facility (PDCF) provided loans 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 businesses and municipalities.  In 2020, the commercial paper market was worth more than $1 trillion.   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.  The MMLF assisted the MMFs in meeting demands for redemptions by investors and prevented the ‘forced liquidation’ of commercial paper and municipal bonds into the ‘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]

Businesses big enough to tap the bond market could take advantage of two facilities established by the FRS to support credit to large companies:

(1) the $500 billion Primary Market Corporate Credit Facility (PMCCF). This facility supported new bond and loan issuance by big companies; [33]  and

(2) the $250 billion Secondary Market Corporate Credit Facility (SMCCF). The purpose of this facility was to support the market for outstanding corporate bonds.[34]

The PMCCF facilitated the provision of new credit to companies so that they could 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 that SPV of $10 billion.[35]   

Carnival, a cruise company, was striving to obtain loans from hedge funds at the annual rate of 15%[36] when the PMCCF was adopted. The mere announcement of the facility lowered the cost of credit and made it possible for Carnival to tap the broader bond market at more favorable rates than those offered by the hedge funds.[37]   Ford, a car manufacturer, was also able to issue $8 billion of new debt. 

The PMCCF was successful in preventing what everybody expected it would happen due to the pandemic: a cascade of corporate bankruptcies.  The FRS bond-market intervention dimmed the hopes of hedge funds and private equity firms[38] that expected to make extraordinary profits by acquiring companies at bargain prices. The yields on investment-grade bonds dropped from their peak of 4.58% in March 2020 to about 2.75% a month later. The yields of junk bonds fell from 11.4% in March to 5.6% in August 2020. Companies with investment-grade ratings were able to issue $840 billion in debt in the first six months of 2020. Riskier companies were able to issue $180 billion in debt. The FRS, in other words, was successful in deblocking the corporate bond market.

The SMCCF was the facility in charge of purchasing already issued corporate debt.   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.’[39] These were companies (e.g., airlines, oil producers) whose debt, before mid-March 2020, was considered investment-grade, but was downgraded subsequently to junk because of expectations that they would become insolvent due to the pandemic.

Airlines were in big trouble as air travel almost stopped. Oil companies were facing bankruptcies due the slump in oil demand triggered by the pandemic. The car industry was also under stress. 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.[40]

The Term Asset-Backed Securities Loan Facility (TALF) was initially put together during the 2008 financial crisis.[41] 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).[42]  

Financial firms, using the loans provided through TALF, could buy securities sold off at bargain-basement prices due the pandemic. The firms expected to be able to resell these securities, when the market recovered, making a hefty profit.[43]  The Treasury, using the ESF, made a $10 billion investment in this facility to shield the FRS from potential losses.[44]

The Treasury used $75 billion from the ESF to back the Main Street Lending Program,[45] 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 and too small to access the corporate debt market. Initially, the FRS defined such companies 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 eventually included three facilities: the Main Street New Loan Facility (MSNLF) which provided new loans[46] and the Main Street Expanded Loan Facility (MSELF) that made it possible for business to upsize their pre-pandemic loans.[47]   

On April 30, 2020, the FRS broadened the Main Street Lending Program by creating the Main Street Priority Loan Facility (MSPLF). [48] 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. At the time, more than 19 000 mid-size firms employed between 30 to 40 million people in the United States.[49]  The loans provided by the three facilities were expected to be vital for the survival of these businesses.  Unfortunately, they 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 give loans to other borrowers.  Having to keep a percentage of the loans 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.[50] 

Businesses using the Main Street program had to shallow some strict conditionality.  They had to maintain almost all their workforce and to restrict their dividends and share buybacks.[51]  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 banks. At the same time, the terms of the loans had to be enticing enough to encourage businesses to participate in the program and obtain the financing they needed to keep operating during the pandemic.

The Main Street program was not as successful as the rest of the government lending programs. Investment-grade firms were not eager to borrow under the program at interest rates that ranged between 3.17% to 3.3%. They could find better terms in the market given that the central bank’s support had slashed the cost of credit in the United States.

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.[52]  By April 16, 2020, more than $1.4 million loans were approved, a total amount of $335 billion, and the program was running out of money.[53]

Loans granted under the program could be used for payroll, health insurance, utilities, and mortgage interest or rent.[54] Small businesses occur many more expenses, though. They have to pay their suppliers and mortgage principal.[55] Furthermore, the SBA stipulated that, in order for a loan to be forgiven, only 25% of the loan could be used for non-payroll expenses.[56]  The rest 75% had to be devoted to paying the salaries of employees. This 25/75 conditionality failed to take into account the needs of businesses located in big cities, where a big chunk of expenses goes to rent.[57]

The 25/75 conditionality turned out to be of touch with reality. Even after the lift-off of quarantines and lockdowns, businesses continued to close down and lay off staff when they were faced with tepid demand.

On April 24, 2020, the PPP program was replenished with an additional $310 billion[58] — 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 aimed to address complaints by small banks that big banks were the sole beneficiaries of the previous PPP outlay of $349 billion. Big banks were better equipped, at least initially, than community banks to channel the government money to businesses in need.[59]

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.[60] The FRS encouraged financial institutions to participate in other programs: the Economic Injury Disaster Loan program[61]and the Small Business Debt Relief Program.  Banks could exclude loans granted to small businesses from their capital ratios and this freed them to lend more. The FRS loosened the capital requirements for banks to encourage them to lend to struggling businesses and individuals.[62]  As of August 8, 2020, the banks processed successfully, through the SBA, about 5.2 million PPP loans worth a total of $525 billion.[63]

Meanwhile, private equity firms[64] and various hedge funds, with billions of dollars in cash, raised from pension funds and Sovereign Wealth Funds (SWFs),[65] 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, many restaurants and hotels were unable to pay rent.  Landlords, in turn, had difficulties making their mortgage payments.

Firms with a lot of cash were eager to buy distressed properties and securities with the goal to resell them when the market normalized.  Banks prefer to sell off the real assets they hold as collateral, even at severely discounted prices, to firms with expertise in distressed debt. Banks avoid, this way, the administrative costs of foreclosure, including potential lawsuits by disgruntled owners. As the pandemic was ravaging the economy, bankruptcies were common place.  An investor 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.’[66] 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 riskier 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 municipal bond market.[67]

The CARES act established a $150 billion Coronavirus Relief Fund through which the Treasury made direct payments to states and local governments.[68]  The FRS established additionally the Municipal Liquidity Facility.  The facility was used to provide credit to states, cities and counties to help them manage the pandemic.  The Treasury made a $35 billion investment in this facility so as to mitigate the central bank’s potential losses.  This amount leveraged 10 times could provide $350 billion in 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[69]— a much more generous program than the program it had initially envisioned.[70]  The FRS expanded the program to cover smaller cities and counties when members of Congress pointed out that 35 cities densely populated by African Americans and less-densely populated rural communities should also benefit from the FRS’ largesse.[71]

We must underline here that all the FRS’ programs and those 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 espoused during the pandemic, as lender of last resort to the whole economy, the FRS remained a lender.   It provided credit to illiquid companies until they solved their liquidity problems.   The FRS could not lend to insolvent companies.  It could not distribute grants.[72]   It could not authorize 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 when the Treasury committed to absorb the losses.  The bank’s efforts to support lackluster companies and securities built up confidence in the economy.  The FRS offered companies unable to finance themselves the much-needed breathing space.  But bailing out insolvent companies and distributing unemployment benefits was the job of the Treasury. 

The FRS 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 supply funds to those in need without grossly violating its mandate.[73] Individuals and Families

The Treasury provided a one-time payment of $1 200 to those earning less than $75 000 per year.  Married couples making less than $150 000 received a cash infusion of $2 400 plus $500 for each child.[74]  The estimated cost of the program was expected to be $292.4 billion.[75]  Those who lost their jobs received $600 per week on top of the existing unemployment benefits.  Additionally, $32 billion was put aside to provide relief for aviation workers.[76] 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.[77] Other Programs

Other government programs supported 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,[78] the standing swap arrangements with the CBs of Canada, England, Switzerland, Japan and the European Central Bank (ECB), to increase the dollar liquidity in the financial markets.[79]

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.[80] India and Turkey, that coveted swap lines with the FRS, were denied such lines.

On March 31, 2020, the CB established a temporary repurchase agreement Facility for Foreign and International Monetary Authorities (FIMA Repo Facility).[81] The FIMA Repo Facility made it possible for foreign CBs to use the US government bonds, they already held in their FX reserves,  as collateral for short-term dollar borrowing.[82] 

Through the FIMA, countries having FX reserves in the form of Treasuries could readily convert those Treasuries into dollars.  They could then 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 bolstered the role of the FRS as global lender of last resort and further promoted the use of dollar as the prime global reserve currency.[83]

By the end of May 2020, the FRS had provided $449 billion to foreign CBs through the swap lines and the FIMA. This benefited the United States by preventing foreign CBs from panic-selling their assets (including Treasuries) and exacerbating the financial chaos caused by the pandemic.

19.1.5 Tweaking the Inflation Rate

The CB’s massive stimulus and the Treasury’s fiscal largesse 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.’  Some feared, though, that slathering money around in the economy would not stave off a recession and severe unemployment.

The FRS assured the markets, all through the pandemic, that it was not in a rush to raise interest rates. In fact, in late August 2020, it abandoned its target of an annual 2% inflation rate.[84] It declared that its new target would be an average inflation rate of 2%.  The bank stipulated that it was ready to tolerate an inflation rate above 2% for a period of time so as to compensate for periods that inflation fell short of  2%.[85] This symmetrical target was more suitable for anchoring the public’s inflation expectations and could become useful in averting a persistent and debilitating deflation; a deflation that was already stymieing the growth of other developed economies (Japan and the European Union).

[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).

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

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

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

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

[13] Louka, supra note 2, at 100.

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

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

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

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

[19] FRS, 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 established 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 note 2, at 97.

[27] Exchange Traded Funds (ETFs).  For the definition of ETFs, see Louka, supra note 2, at 145.

[28] FRS, 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.

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

[30] FRS, 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, 2020.020.

[31] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Money Market Mutual Fund Liquidity Facility, Mar. 25, 2020.

[32] Id.

[33] FRBNY, Primary Market Corporate Credit Facility: Program Terms and Conditions, July 28, 2020, https://www.newyorkfed.org/markets/primary-market-corporate-credit-facility/primary-market-corporate-credit-facility-terms-and-conditions.

[34] Id.

[35] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Primary Market Corporate Credit Facility, Mar. 25, 2020.

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

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

[38] Private equity firms had $4 trillion under management, as of May 2020, that they were hoping to be able to invest during an economic downturn. See Can private-equity firms turn a crisis into an opportunity? More Money, More Problems, Economist, May 30, 2020.

[39] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Secondary Market Corporate Credit Facility, Mar. 30, 2020.

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

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

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

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

[44] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Term Asset-Backed Securities Loan Facility, Mar. 30, 2020.

[45] FRS, Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy, Press Release, Apr. 9, 2020.

[46] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Main Street New Loan Facility, Apr. 16, 2020.

[47] FRS, Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Main Street Expanded Loan Facility, Apr. 16, 2020.

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

[49] Mid-size firms are defined as firms having between 500 to 15 000 employees based on the 2017 Census Bureau Data (cited in WSJ).

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

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

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

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

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

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

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

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

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

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

[60] 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

[61] Economic Injury Disaster Loan Emergency Advance, http://www.sba.gov.

[62] FRS, 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.

[63] US SBA, Paycheck Protection Program (PPP) Report, Approvals through 08/08/2020, https://www.sba.gov/sites/default/files/2020-08/PPP_Report%20-%202020-08-10-508.pdf.

[64] On private equity firms, see Louka, supra note 2, at 276.

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

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

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

[68] Sec. 5001, CARES Act.

[69] 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.

[70] FRS,  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.

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

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

[73] Id. at 15.

[74] Sec. 6428, CARES Act

[75] 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.

[76] Sec. 4120, CARES Act.

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

[78] FRS, 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.

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

[80] FRS,  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.

[81] FRS, 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.

[82] Id.

[83] See Louka, supra note 2, at 67.

[84] Id. at 80.

[85] FRS, Federal Open Market Committee announces approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy, Press Release,  Aug. 27, 2020 https://www.federalreserve.gov/newsevents/pressreleases/monetary20200827a.htm.