Fed's Powell says $600 billion Main Street Lending Program and remaining initiatives will begin by June

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  • The four Federal Reserve aid programs that haven’t launched yet – including its $US600 billion Main Street Lending Program – will be operational by the end of May, chair Jerome Powell said during a Tuesday Senate hearing.
  • “People are working literally around the clock and have been for weeks” to get the credit pools up and running, he added.
  • Speaking at the same hearing, Treasury Secretary Steven Mnuchin said the department plans to use all $US500 billion Congress allocated for economic relief.
  • Mnuchin added the Treasury is “fully prepared to take losses in certain scenarios” on its emergency loans.
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The four Federal Reserve lending programs not yet operational will begin issuing emergency loans by the end of the month, chairman Jerome Powell said Tuesday.

The central bank chief reiterated his plan to use the “full range of tools” to aid the economy while testifying to the Senate Banking Committee. While the majority of the Fed’s aid programs were announced in March, several are still being worked on and are extremely complex to implement, Powell said.

“We expect all of them to be stood up and ready to go by the end of this month,” Powell said of the remaining programs. “People are working literally around the clock and have been for weeks.”

Here are the four facilities not yet in place:

  • $US600 billion Main Street Lending Program

    • Will lend to mid-sized companies with less than 15,000 employees or less than $US5 billion in annual revenue
  • Primary Market Corporate Credit Facility

    • Will purchase corporate bonds from investment-grade firms and those that fell into junk status after March 22
  • Municipal Liquidity Facility

    • Will buy debt from investment-grade state and local governments
  • Term Asset-Backed Securities Loan Facility

    • Will buy credit-backed securities including auto loans, student loans, and small business loans

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The monetary authority most recently launched its Secondary Market Corporate Credit Facility to purchase corporate-debt exchange-traded funds. The facility took in $US305 billion of ETFs in its first day of operation, according to a Fed release.

Speaking during the same Senate hearing, Treasury Secretary Steven Mnuchin said he plans to use all of the $US500 billion allocated by Congress to issue loans and support the Fed’s programs. He added that the Treasury is “fully prepared to take losses in certain scenarios” on the loaned capital.

The Treasury has so far committed up to $US195 billion to its lending efforts. About $US46 billion of the congressionally allocated aid is designated specifically to airlines.

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Though the Fed has only recently started corporate credit purchases, the debt market rallied on news of the related programs’ March 23 announcement. Investors viewed the facilities as a backstop for credit health, and both the stock and bond markets surged through April.

Mnuchin noted that the announcement bump might be enough to help struggling companies issue their own bonds. The secretary used Boeing as an example, highlighting how the beleaguered plane manufacturer was able to draw on public interest for its debt instead of using government programs.

“In the best-case scenario, the markets open up and we don’t need to use these facilities,” he said.

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