Yesterday the Fed opened the registration process for its Commercial Paper Funding Facility (CPFF) and at the same time released an updated set of Frequently Asked Questions (FAQs) relating to the facility’s operations. The CPFF will begin buying commercial paper on the 14th April, and operate in accordance with additional details explained in the release. The commercial paper market directly finances a huge range of economic activity, from supplying credit lines for mortgages and autos loans to providing liquidity to a large range of businesses and municipalities. The Fed hopes that by ensuring the smooth functioning of these markets, especially in these current times, the CPFF will help provide credit that will in turn help support businesses, families and jobs across a wide section of the economy.
The CPFF will provide liquidity to US commercial paper issuers through a special purpose vehicle (SPV), that will in turn buy eligible three-month asset-backed, municipal commercial and corporate paper from eligible issuers using funds provided by the Fed. The Fed also announced it will establish a term funding facility to facilitate lending to small businesses by buying the SBA’s payroll protection program (PPP) loans from banks. At time of writing there were little details about how this would work, however, the statement notes that additional details will be released later this week.
Also, the Italian government announced it had approved an emergency decree that will offer over USD430bn worth of bank loans and liquidity to companies hit by the ongoing crisis. This liquidity, added to that announced last month, will allow banks to offer credit totalling over USD800bn to try to help Europe’s third largest economy continue to function. Giuseppe Conte, the Prime Minister, said in a cabinet meeting ‘This is real firepower. I cannot remember such powerful measures being introduced in the history of our republic to help with the financing of our businesses’ whilst also promising a further package later this month to help the people most financially hurt by the epidemic.