As of Thursday, April 9, Treasury and the Federal Reserve are finally starting to set set up the facilities need to use the $500 billion in funds for “severely distressed sectors” contained in the $2.2 trillion CARES relief act. The money has to be allocated by December 31, 2020.
In this initial round, the Fed is stepping up to lend $600 billion to small and medium-sized businesses; $850 billion to bond issuers to fund corporations and household borrowing for items like automobiles; and $500 billion to support state and municipal liquidity. This lending is backed up by $195 billion in Treasury funds from the CARES act.
What should Treasury and the Fed do with the rest of the $500 billion? Some will go directly to the airlines and industries essential to national security, like airplane manufacturing.
But Treasury must think strategically as it decides how to dole out the money over the rest of the year.
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