The Federal Reserve Is Adding Another Program To Keep Money Flowing For Big Financial Institutions

The Federal Reserve is adding another weapon in its effort to make sure households and businesses get the funding they need as the economy deals with the coronavirus crisis.

In the central bank's latest effort to keep credit markets flowing, the Fed announced a Primary Dealer Credit Facility, which will provide up to 90 days. The offerings will begin Friday and the program will be in place for at least six months, the Fed said in a late-day news release.

Though the overriding intent of the facility is to keep money flowing through the economy, it is targeted specifically at "primary dealers," or the nation's 24 largest institutions that buy government securities directly through the government instead of an intermediary. The dealers offer various securities in exchange for the funding.

"The global coronavirus outbreak has contributed to significant financial market volatility," Treasury Secretary Steven Mnuchin said in a statement. "The establishment of a PDCF will help address illiquidity, mitigate disruptions in funding markets, support smooth market functioning and help facilitate the availability of credit to American workers and businesses."

The program came into being during the financial crisis and provided funding for some of the nation's largest banks that were in trouble due to toxic assets on their balance sheets. In all, the facility provided nearly $9 trillion in loans for banks that used it.

The financing most often happens on an overnight basis and is similar to the repo funding that institutions supply to each other for short-term operations.

Such programs are run in conjunction with the Treasury Department, which provides backstops against the Fed losing the money it provides for the institutions.

This is breaking news. Check back here for updates.

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