Economy & Business

The Fed is extending its lending programs until the end of the year

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2020/07/30 20 :05

Today's Vocabulary

1. myriad (adj)
very large in number, or having great  variety

 

2. bonds (n)
an official paper given by the government or a company to show that you have lent them money that they will pay back to you at a particular interest rate

3. liquidity (n)
the fact  of being available in the form of money,  ratherr than investments or property , or of being  able  to be  changed into money easily


4. equity (n)
the value of a company, divided into many equal parts owned by the shareholders, or one of the equal parts into which the value of a company is divided

5. collateral (n)
valuable property owned  by someone who wants to borrow money, that they agree will become  the property of the company or person who lends the money  if the debt is not paid back

 

The Fed is extending its lending programs until the end of the year

The Federal Reserve said Tuesday that it is extending its menu of lending programs to businesses, governments and individuals to the end of 2020.

Originally set to expire Sept. 30, the myriad facilities, stretching from credit to small businesses up to the purchase of junk bonds now will stretch to Dec. 31.

The Fed began rolling out the initiatives as market functioning broke down in March. A lack of liquidity stemming from fears over the coronavirus crisis froze markets and pushed the central bank into various credit facilities, a number of which had their origins during the financial crisis.

“The extraordinary Federal Reserve response to the COVID-19 pandemic, supported by Treasury’s equity capital, has played a vital role in improving liquidity and restoring market function,” Treasury Secretary Steve Mnuchin said. “Through this extension, we will continue to support the flow of credit to American workers, businesses and municipalities.”

Treasury had to sign off on the extension as it provides funding, which the Fed can then use as collateral to lever up.

Programs covered include facilities for primary dealers and money markets, corporate bond purchases on both the primary and secondary markets and the most recent rollout, the Main Street Lending Program. 

A lending program for local and state governments already had been set to run to Dec. 31 and the commercial paper facility, which provides short-term funding for businesses, expires March 17, 2021.

Resource: https://www.cnbc.com/2020/07/28/the-fed-is-extending-its-lending-programs-until-the-end-of-the-year.html

Discussion
  1. Why is FEd extending its lending programs?
  2. What does the lending program include?

"All loans, in the eyes of honest borrowers, must eventually be repaid. All credit is debt. Proposals for an increased volume of credit, therefore, are merely another name for proposals for an increased burden of debt. They would seem considerably less inviting if they were habitually referred to by the second name instead of by the first."

HENRY HAZLITT

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