Fed to sell assets from an emergency loan program

The Federal Reserve says it will begin selling the holdings of one of its emergency loan programs created last year to stabilize financial markets at the height of the pandemic crisis.

WASHINGTON – The Federal Reserve said on Wednesday it would begin selling holdings of an emergency loan program it created last year to stabilize financial markets at the height of the pandemic crisis.

The Fed will begin closing the portfolio of the secondary corporate credit facility, which had $14.2 billion in assets at the end of last year.

The Fed said that asset sales from the facility would be “gradual and orderly and aimed at minimizing the potential for any adverse effects on market functioning.”

The corporate facility was one of several emergency lending vehicles that were closed on December 31 in a decision by then-Treasury Secretary Steven Mnuchin.

Speculation has mounted as the Fed’s announcement that the central bank may prepare to decide when it can begin cutting $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities. These purchases are being made to give momentum to the economy by putting pressure on long-term interest rates.

The Fed said its announcement to sell off a small amount of holdings in a corporate credit facility was not related to the conduct of monetary policy. The sale from the Corporate Loan Fund is expected to be completed by the end of the year.

The emergency loan programs came in response to the near-freezing of credit markets in March 2020 as the pandemic triggered a lockdown in the United States and resulted in the loss of 22 million jobs last spring.

In his December decision, Mnuchin said in a letter to Fed Chairman Jerome Powell that the programs he was allowing to end had “clearly achieved his objectives.”


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