In times of crisis, the Fed can lend more or less directly to businesses and governments using its emergency authorities. The Secretary of the Treasury, Steven Mnuchin, must approve the programs and the Treasury department supports the programs with a layer of funding intended to absorb the losses.
The actions of the central bank to date, taken when the Treasury had far less money to provide a safeguard, offer a glimpse of how it could use the new credits.
For individuals: Indirectly. The Fed implements a lending program that provides eligible businesses with cheap loans in exchange for asset-backed securities – essentially, debt pools – built on newly issued credit card debt, student loans, loans automobiles and the like. By creating a great incentive, the program should make loans available and cheaper for consumers.
For small businesses: The main support for small businesses comes from the Small Business Administration, but the Fed also takes bundles of business loans as collateral for loans, which could help small businesses access financing. And the central street business loan program, which has so far been in little detail, should help businesses too large to qualify for small business loans but too small to have easy access to capital markets.
For large companies: The Fed has unveiled several programs to help. One will support a type of short-term financing known as commercial paper, and another will buy corporate debt. A third program will buy newly issued debt or provide direct business loans.
For local governments: The Fed has unveiled programs to help municipal bond markets by allowing banks to use certain types of local debt as collateral to access loans. But authorities have stopped buying local debt, and many lawmakers are urging them to think bigger.