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Fed Extends Liquidity Support for PPP Loans to June 30

  • Federal Reserve Board extends liquidity facility backing Paycheck Protection Program
  • Facility has been extended several times and is now set to sunset on June 30
  • PPP is still set to expire on March 31 but several business groups and lenders have lobbied for it to be extended

Summary by Dirk Langeveld

The Federal Reserve Board is extending its Paycheck Protection Program Liquidity Facility for an additional three months, ensuring more support for financial institutions offering PPP loans.

The facility had been set to expire on March 31, but will now be extended through June 30. The decision follows previous extensions implemented in August and December.

The Paycheck Protection Program Liquidity Facility was first established in April 2020 as a way to assist commercial lenders in providing PPP loans to small businesses. The facility provides loans to lenders, who in turn pledge the PPP loans they approve as collateral on the funds from the Fed. The goal is to provide lenders with enough liquidity to quickly provide loans to small businesses suffering financial losses due to the COVID-19 pandemic.

The extension had been requested by community financial development institutions and non-bank Small Business Administration lenders, who said the facility was crucial to their ability to offer PPP loans. Under the Economic Aid Act passed in December, PPP received an additional $284.5 billion in funding. The program has disbursed just under $165 billion to approximately 2.4 million borrowers as of March 7.

The latest round of PPP is set to close on March 31, although the program will receive an additional $7.25 billion in funding if the American Rescue Plan is approved. Several lenders and business groups are lobbying for the deadline to be extended, and the U.S. Chamber of Commerce has called for the program to remain in place through the end of the year.

The Fed said three other emergency programs set up in response to the pandemic – the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility – have not seen signifiant usage and will expire as planned on March 31.

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