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Business & Finance

Fed expands municipal liquidity program to include transit

  • Governors will be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating so-called government activities.
  • Currently only US states and cities with a population of at least 250,000 residents or counties
Published June 4, 2020

WASHINGTON: The Federal Reserve said on Wednesday it will allow governors of US states to designate transit agencies, airports, utilities and other institutions to borrow under its municipal liquidity program as the central bank tries to mitigate economic fallout from the coronavirus outbreak.

Governors will be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating so-called government activities, the Fed said in a statement.

The central bank also said it is expanding its program to allow all US states to be able to have at least two cities or counties eligible to directly issue notes to the municipal liquidity facility regardless of population.

Currently only US states and cities with a population of at least 250,000 residents or counties with a population of at least 500,000 residents have been able to make use of the program.

The Fed has come under pressures to expand its population criteria from lawmakers whose states had no local jurisdications that met the population thresholds.

On Tuesday, llinois became the first state or local government to tap the Fed's borrowing program. Analysts have said the program, announced in April, was set up to be the lender of last resort and would make the most sense for lower-rated governments.

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