Progressive Leaders Urge Federal Reserve Chairman Powell to Improve Lending Terms for States and Cities, Stave Off Public Sector Layoffs and Cuts
August 6, 2020
Washington, D.C. – Today, Congressional Progressive Caucus Co-Chairs Congressman Mark Pocan (WI-02) and Congresswoman Pramila Jayapal (WA-07) led a letter, along with Congresswoman Rashida Tlaib (MI-13) and Congressman Joe Neguse (CO-02), urging Federal Reserve Chairman Jerome Powell to improve lending terms for states and municipalities. The letter, which has been endorsed by 13 organizations including the American Federation of State, County, and Municipal Employees (AFSCME), Service Employees International Union (SEIU), and the Center for Popular Democracy’s Fed Up Campaign, was signed by more than 50 members of Congress.
In the letter, the Members of Congress call on Chairman Powell to take immediate action to make critical improvements to the Municipal Liquidity Facility (MLF), so states and municipalities can benefit from the program as intended. The letter notes, “At present, the harsh terms and penalty rates for the MLF make it functionally unusable for the vast majority of the state and local governments that are technically eligible, which severely undermines the program’s intent to help states and cities struggling from unprecedented financial hardship. The unusually harsh penalty rate on users of the MLF, coupled with an arbitrarily set and short three-year time limit on the lending, makes it unusable to a majority of potential local government participants. As a result, very little of the facility’s $500 billion capacity is being used now, or is likely to ever be used, unless the Federal Reserve makes dramatic changes to the lending terms.”
“There have been 1.5 million public sector layoffs since March, and unless the Fed aligns its assistance to states and cities with its emergency lending to the private sector, mass unemployment and emergency conditions will persist for years,” wrote Jayapal, Pocan, Tlaib & Neguse in the letter to Chairman Powell. “To that end, it must be noted that many of the Federal Reserve’s corporate lending programs contain terms that are far more favorable than those included in the MLF. This includes, for example, far cheaper pricing, far longer terms, and even payment deferrals for corporations borrowing from the Main Street Lending Program, the Secondary Corporate Credit Facility, and the Term Asset-Backed Securities Loan Facility. Given the severity of the need and the Federal Reserve’s exceptional creativity and flexibility in its corporate lending programs, which have moved the institution’s support of the private sector far beyond what anyone thought was possible, we cannot accept that the MLF remain an outlier when it comes to providing the meaningful fiscal support intended by Congress.”
The full letter, which was signed by 53 members of Congress, is available here. It’s been endorsed by the following organizations: American Federation of State, County, and Municipal Employees (AFSCME), Service Employees International Union (SEIU), Communications Workers of America (CWA), National Education Association (NEA), the Center for Popular Democracy’s Fed Up Campaign, Demand Progress Education Fund, American Family Voices, Social Security Works, Progressive Change Campaign Committee (PCCC), American Economic Liberties Project, Greenpeace USA, Friends of the Earth, and Americans for Financial Reform.