The Federal Reserve Board (Board) recently announced its commitment to publicizing substantial amounts of information on its facilities and programs that use funds authorized under the CARES Act. To a large degree, this move is required under section 13(3) of the Federal Reserve Act, which as amended by the Dodd-Frank Act of 2010 requires the Board to report the identities of the participants in its emergency lending programs. But the facilities established for COVID-19 relief are categorically different from those created for the 2008 financial crisis, because the participants are not the beneficiaries of the programs.
As we previously explained, CARES Act title IV authorized the Department of the Treasury to invest funds in any of several emergency programs that are or will be established by the Board. While the most widely known is the Main Street Lending Program (MSLP), CARES Act funds are being invested in at least eight different Board programs and facilities.
In its announcement, the Board says it will update its COVID-19 web page monthly with the following information:
- Names and details of participants in each facility;
- Amounts borrowed and interest rate charged; and
- Overall costs, revenues, and fees for each facility.
The Board also explicitly confirmed that this reporting will apply to all programs that receive CARES Act investments from Treasury. Therefore, in addition to the MSLP, the reporting will cover the Primary Market Corporate Credit Facility (PMCCF), the Secondary Market Corporate Credit Facility, the Paycheck Protection Program Liquidity Facility, and the Term Asset-Backed Securities Loan Facility.
It is important to understand that most of these Board programs are functionally pass-through arrangements. The participants in the facilities are banks that, because of the funding provided by the facility, will in turn provide loans and other relief where it is needed. The goal of the programs is not to help the banks but to use the banks as a transmission mechanism to get support to consumers and businesses being impacted by COVID-19.
Therefore, the participants in the Board programs and facilities will largely be financial institutions. Since Dodd-Frank, financial institutions have become accustomed to this kind of regulatory reporting. It is unclear, however, whether the Board intends to also report the names of the ultimate borrowers that benefited from the facilities. The statutory authority in section 13(3) may not support public reporting of the private loan agreements between borrowers and their financial institutions, but there is likely to be strong public and political interest in that information.
Furthermore, unlike most of the other facilities, the participants in the PMCCF will be the beneficiaries of the program. The PMCCF is a facility through which the Reserve Bank of New York may purchase bonds directly from corporate issuers. Companies seeking to utilize the PMCCF will need to consider how this reporting may affect the value of the relief offered by the facility.
We are already tracking the desirability of these programs among the intended beneficiaries, and we will continue to monitor how the Board balances the need for transparency with the policy goals of providing COVID-19 relief.