Regulatory Developments Relating to the Pandemic
Federal Reserve Board Adopts Final Rules Regarding Liquidity Facilities
On September 29, the Federal Reserve Board adopted without change three interim final rules issued in March, April, and May, 2020 pertaining to the Money Market Mutual Fund Liquidity Facility (MMFLF) and Paycheck Protection Program Liquidity Facility (PPPLF). The Federal Reserve launched the liquidity facilities earlier this year to support the economy in light of the coronavirus response. The final rule neutralizes the regulatory capital and liquidity coverage ratio effects of participating in the MMFLF and PPPLF because there is no credit or market risk in association with exposures pledged to these facilities. The Board stated that as a result, the final rule will support the flow of credit to households and businesses affected by the coronavirus. The effective date of this final rule is 60 days after the date of publication in the Federal Register.
Treasury Department Concludes CARES Act Loans to Seven Major Airlines
On September 29, Treasury Department announced that it has made
loans to seven large passenger air carriers under the Coronavirus
Aid, Relief, and Economic Security (CARES) Act. The loans were made
to Alaska Airlines, American Airlines, Frontier Airlines, JetBlue
Airways, Hawaiian Airlines, SkyWest Airlines, and United Airlines.
Under the program, each carrier may draw on up to $7.5 billion in
funds. The CARES Act authorizes the Treasury Department to make
loans to provide liquidity to eligible air transportation
businesses related to losses incurred as a result of the
coronavirus pandemic. It requires borrowers to provide warrants,
equity interests, or senior debt instruments as appropriate
taxpayer compensation. Participating borrowers must also commit to
certain requirements under the CARES Act regarding the maintenance
of employment levels and limiting employee compensation, dividends,
and share repurchases.
Legislative Proposals
H.R. 8406: The HEROES Act
On September 29, 2020, Democrats in the House of Representatives introduced a slimmed-down version of the HEROES Act, a bill that the House originally passed in May of this year as a follow-up to the CARES Act. The revised bill largely extends provisions of the CARES Act, including a second round of $1,200 stimulus checks for qualifying individuals, $436 billion for state and local governments, an extension of the Paycheck Protection Program (PPP), temporary funding for $600 weekly unemployment benefits, and $75 billion for coronavirus testing. The next afternoon, Treasury Secretary Steven Mnuchin presented a $1.6 trillion counteroffer to House Speaker Nancy Pelosi (D-CA), but they were not able to reach an agreement. On the evening of October 1, 2020, the House of Representatives passed the bill by a vote of 214-207.
S. 4699: The Providing Resources for Emergency Preparedness and Resilient Enterprises (PREPARE) Act
On September 24, 2020, Senators Marco Rubio (R-FL) and Angus King (I-ME) introduced legislation that would reauthorize small businesses under the Small Business Administration's Pre-Disaster Mitigation Pilot Program to take out low-interest loans in order to mitigate damage from future disasters, such as future pandemics.
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