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1 1 (April 10, 2020)

handle is hein.crs/govebad0001 and id is 1 raw text is: Congressional SResearch Service Federal Reserve: Emergency Lending in Response to COVID-19 April 10, 2020 The coronavirus (COVID-19) has created significant economic and financial disruption. In response, the Federal Reserve (Fed) has taken a number of actions to promote economic and financial stability. This Insight covers actions taken by the Fed in its lender of last resort role-actions intended to provide liquidity directly to firms to ensure they have continued access to needed funding. The Fed finances this assistance by expanding its balance sheet. For information on the Fed's monetary policy actions in response to COVID-19, see CRS Insight IN11330, Federal Reserve: Monetary Policy Actions in Response to COVID-19, by Marc Labonte. Discount Window In a March 15 announcement, the Fed encouraged banks (insured depository institutions) to borrow from the Fed's discount window to meet their liquidity needs. This is the Fed's traditional tool in its lender of last resort function. Discount window lending is negligible in normal conditions, but has surged since March. The Fed also encouraged banks to use intraday credit available through the Fed's payment systems as a source of liquidity. Emergency Credit Facilities In 2008, the Fed created a series of emergency credit facilities to support liquidity in the nonbank financial system. This extended the Fed's traditional role as lender of last resort from the banking system to the overall financial system for the first time since the Great Depression. To create these facilities, the Fed relied on its emergency lending authority (Section 13(3) of the Federal Reserve Act). This authority, amended by the Dodd-Frank Act (P.L. 111-203), places a number of restrictions on the Fed, including that the facilities can only operate in unusual and exigent circumstances. Emergency authority was not used again until 2020. To date, the Fed has created nine emergency facilities-some new, and some reviving 2008 facilities-in response to COVID-19: * On March 17, the Fed announced it would revive the commercial paper funding facility (CPFF) to purchase commercial paper, which is an important source of short-term funding for financial firms, nonfinancial firms, and asset-backed securities (ABS). Congressional Research Service https://crsreports. congress.gov IN11327 CRS INSIGHT Prepared for Members and Committees of Congress

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