Fed moves to ensure liquidity in money market mutual funds
The Treasury Dept will provide $10 billion in credit protection guarantees for the loans to banks and other financial institutions
Economist Stephen Moore and Forbes Media chairman Steve Forbes say while government loans will enable businesses to stay afloat, they won't add stimulus to the economy.
The Federal Reserve announced late Wednesday that it will establish an emergency lending facility to support the flow of money to loan to households and businesses.
The Money Market Mutual Fund Liquidity Facility, or MMLF, will make loans available, through the Federal Reserve Bank of Boston, to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.
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The Fed hopes to spur more lending to firms that are seeking to raise cash as their revenues plummet amid the spread of the coronavirus.
The program is the third facility the Fed has revived from the financial crisis days of 2008, when the central bank set up an alphabet soup of programs intended to keep financial markets functioning.
The Treasury Dept will provide $10 billion in credit protection guarantees for the loans to banks and other financial institutions using this facility.
FED TAKES STEPS TO HELP BUSINESSES GET SHORT-TERM FUNDING
Money market mutual funds are owned by individual investors in brokerage accounts but also by institutional investors and businesses.
Many of the funds have sought in the past two weeks to sell assets to raise cash as many investors redeem shares in the funds.
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Yet with demand for cash rising as stocks plunge and the economy slows sharply, money market funds have struggled to find buyers for their assets.
FOX Business' Edward Lawrence and the Associated Press contributed this article.