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Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act

Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act (P.L.116-136) Updated August 5, 2020: “The Coronavirus Aid, Relief, and Economic Security Act (CARES Act;H.R. 748)was signed into law as P.L. 116-136on March 27, 2020,to assist those affected by the economic impact of Coronavirus Disease 2019(COVID-19). This assistance is targeted to consumers, businesses, and the financial services sector. A key part of this assistance is provided to eligible businesses, states, and municipalities in Division A, Title IV of the CARES Act.Title IV allocates $500 billion to the Department of the Treasury,through the Exchange Stabilization Fund (ESF),to make loans and guarantees for three specified industries—passenger airlines, cargo airlines, and businesses critical to national security—and to support Federal Reserve lending facilities. Some have characterized this as a “bailout” of private industry;others assert it is necessary to avoid employment losses and maintain economic stability. Of the $500 billion, Treasury can make up to $25 billion available to passenger airlines, up to $4 billion to cargo airlines, and up to $17 billion to businesses critical to maintaining national security. Treasury can make the remainder—up to $454 billion, plus whatever is not used to assist the specified industries—available to the Federal Reserve. Recipients are legally required to repay assistance with interest, although the ultimate subsidy involved will not be known until terms, such as interest rates and fees, have been decided…”

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