FOR IMMEDIATE RELEASE
July 14, 2020
Improve Fed Facility to Help Municipalities Handle COVID-19 Crisis
A group of state treasurers, local officials, labor unions, and public interest groups today sent a letter to the Federal Reserve seeking improvements to the central banks’ Municipal Lending Facility. An excerpt is below. The full letter can be found here.
States and localities provide critical public services, and more than 1.5 million state and local jobs have been lost since February. Without credit support like that which should be provided by this Facility, deeper job losses and service cuts can be expected as states grapple with unprecedented fiscal challenges in the face of the coronavirus crisis. Supporting states and localities is critical for economic recovery and for assisting communities impacted by the dual public health and economic crisis we face. While loans such as those provided by the MLF cannot replace grant assistance, adequate credit assistance is one part of helping states and localities avoid cutbacks which will deepen our current economic crisis.
Unfortunately, the terms on which the Federal Reserve provides credit to states and localities through its Municipal Liquidity Facility (MLF) are inadequate and act as a major barrier for state and local governments that might need to use the facility. These terms are far more restrictive than the terms on which credit is being provided to private businesses, despite the fact that defaults on state and local general obligation credit are extremely rare compared to defaults by private sector businesses.