Washington, D.C. – Congressional Progressive Caucus Co-Chairs Congressman Mark Pocan (WI-02) and Congresswoman Pramila Jayapal (WA-07) released the following statement responding to the Federal Reserve’s announcement unveiling changes to the Municipal Liquidity Facility (MLF):
“Last week, we sent a letter to Chairman Powell, along with more than 50 of our colleagues, urging him to make necessary improvements to the Federal Reserve’s Municipal Liquidity Facility to improve its usefulness to states and cities. Congress intended for the MLF to help local governments avoid painful cuts at a time when more resources are needed to fight a deadly virus. This week’s announcement, lowering penalty rates across the board for MLF-eligible entities, was a needed step in the right direction and appeared to recognize that the MLF’s purchase of one bond in three months is not meeting that objective.
“However, this one change is insufficient to prevent more layoffs and economic turmoil. The Federal Reserve needs to recognize that, unlike lending to corporations and financial markets, lending to state and local governments has a different primary goal of quickly getting municipalities the resources they need to avoid destructive austerity and layoffs.
“We appreciate that the Federal Reserve has shown it is willing to make improvements to the Municipal Liquidity Facility – now it must also implement additional substantial changes that we noted in our letter. For the MLF to be an effective tool in our economic recovery, the Federal Reserve should align assistance to states and cities with its emergency lending offered to the private sector and extend the maturity period of the loans.
“Chairman Powell himself has emphasized that public sector layoffs and budget cuts made the last recession worse. Further improving the MLF is one key way that the Fed can avoid repeating the mistakes from the last crisis. We can’t afford to shortchange this recovery – Chairman Powell must make meaningful improvements to the MLF before the damage to our communities becomes irreparable.”