WASHINGTON–The Federal Reserve continues to announce new credit facilities to assure credit continues to flow to consumers and businesses.
The latest to be announced by the Federal Reserve is a Primary Dealer Credit Facility, or PDCF.
“The facility will allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households,” the Fed said. “The PDCF will offer overnight and term funding with maturities up to 90 days and will be available on March 20, 2020. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including commercial paper and municipal bonds, and a broad range of equity securities. The interest rate charged will be the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.”
As CUToday.info reported here, the Fed joined with other agencies in announcing numerous steps to provide banks with additional flexibility to support households and businesses.
Other Facilities Announced
In addition, the Fed has separately announced the creation of a Commercial Paper Funding Facility to also support the flow of credit. The Fed noted commercial paper markets directly finance a wide range of economic activity, supplying credit and funding for auto loans and mortgages as well as liquidity to meet the operational needs of a range of companies.
“By ensuring the smooth functioning of this market, particularly in times of strain, the Federal Reserve is providing credit that will support families, businesses, and jobs across the economy,” the Fed said.
According to the Fed, the CPFF will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper rated A1/P1 (as of March 17, 2020) directly from eligible companies.