The central bank, in collaboration with the finance department, has introduced emergency credit programs to maintain credit flow, including programs to buy corporate bonds and short-term business debt. It has announced plans to launch a Main Street credit program aimed at businesses that are not served by government small business support programs.
Details of this program, which were previously unknown, are expected this week. Treasury Secretary Steven Mnuchin said in a CNBC interview on Wednesday that he spoke to Mr. Powell daily and that “we hope to have an announcement with details this week and put it into operation as soon as possible.”
Congress has donated $ 454 billion to the Treasury Department to support the Fed’s emergency programs by insuring against losses. This pot of money could help more than $ 4 trillion in lending and buying bonds, depending on how much protection the central bank requires to cover the credit risk.
The crucial question now is how quickly these programs, which are legally and logistically complex, can be put into operation.
The Fed’s commercial paper program, which will support the short-term business credit market, was announced on March 17 and is expected to run on April 14. The corporate bond purchase programs announced on March 23 are still a few weeks away Charles L. Evans, president of the Federal Reserve Bank of Chicago, said in a virtual discussion with the Chicago Economic Club on Wednesday.
There are also questions about who the programs will help. The Fed is expected to make additional efforts to support state and local governments, and companies with imperfect bond ratings are pushing for relief.
The Fed’s programs could give larger companies access to the finance they need to survive the coming weeks and months without firing employees. Despite the support, the economy is expected to experience a deep shock – the central bank’s goal is to set it up to snap back as soon as the virus subsides and the Americans can get back to work.
The economy “will be less successful from this crisis than we are,” said Evans on Wednesday.
Alan Rappeport contributed to the reporting.