Fed opens Municipal Liquidity Facility to smaller cities and counties

Register now

WASHINGTON — The Federal Reserve is expanding the reach of its Municipal Liquidity Facility to smaller U.S. cities and counties as pressure mounts on the federal government to support localities that are short on cash due to the coronavirus pandemic.

The Municipal Liquidity Facility will still purchase up to $500 billion in short-term notes, but will now be available to counties with at least 500,000 residents and cities with at least 250,000 residents. Previously, the facility only made short-term financing available to cities with a population of more than 1 million or counties with a population of greater than 2 million.

“The new population thresholds allow substantially more entities to borrow directly from the MLF than the initial plan announced on April 9,” the Fed said in a release.

The notes that municipalities will be able to sell through the facility are intended to help cities and states get through a period of time with limited spending and lower tax revenues as many operate under stay-at-home orders.

The Fed also said Monday that it is considering allowing government entities that issue bonds backed by their own revenue to participate in the Municipal Liquidity Facility as eligible issuers.

The central bank said it would continue to monitor conditions in the municipal security markets and “will evaluate whether additional measures are needed to support the flow of credit and liquidity to state and local governments.”

For reprint and licensing requests for this article, click here.
Federal Reserve Coronavirus Munis Liquidity State and local finance