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Known as the Primary Dealer Credit Facility, the institution will offer overnight and term funding with maturities up to 90 days. “Primary dealers” refer to large institutions that have been authorized to trade securities directly with the U.S. government. They play a key role in providing liquidity in the market for U.S. Treasury Securities.
The program is intended to increase the amount of bank reserves, thereby improving financial conditions more broadly.
“The global coronavirus outbreak has contributed to significant financial market volatility,” Secretary Steven Mnuchin said in a statement. “The establishment of a PDCF will help address illiquidity, mitigate disruptions in funding markets, support smooth market functioning and help facilitate the availability of credit to American workers and businesses.”
The last time the Fed opened this type of credit facility was March 2008. The current version will be in place for at least six months, and offerings start on Friday.
Earlier in the day the Fed announced it would open another credit facility dedicated to boosting term lending in the commercial market, essentially helping businesses secure loans from nonbank investors.
The central bank had previously cut interest rates twice, including a cut to near zero on Sunday.
Other agencies are also taking steps toward shoring up the economy.
The IRS said it would allow individuals and businesses owing up to $1 million this tax season to defer payments for 90 days. Businesses, corporations and sole proprietorships owing up to $10 million would be offered the same option.
Treasury Secretary Steven Mnuchin said that the White House is considering a relief package valued at $1 trillion, which could include direct cash relief for Americans. A source familiar with the matter told FOX Business that those checks could be valued at more than $1,000, which the amount proposed by Republican Utah Sen. Mitt Romney.