New $2.3T Fed plan to aid localities, companies

S&P jumps 12% in week, its best performance in 45 years

WASHINGTON— The Federal Reserve unleashed a new series of moves Thursday to try to make loans available to states, localities and companies that have been hard hit by the coronavirus.

In doing so, the Fed will pump an additional $2.3 trillion into the U.S. economy. The central bank, in part, is drawing on money made available in Congress’ new economic relief package to buy municipal bonds as well as debt that did not previously qualify for federal backing.

The extraordinary rescue package comes on top of efforts the Fed has already made to bolster the economy, including cutting its benchmark interest rate to near zero and supplying more than $1 trillion to purchase Treasury and mortgage-backed securities to help keep credit flowing.

On the same day that the number of Americans seeking unemployment benefits reached 16.8 million in just three weeks, Chairman Jerome Powell said the Fed fully intended to use its powers

“forcefully, proactively and aggressively until we are confident that we are solidly on the road to recovery.”

Meanwhile, Wall Street — propelled by the Fed’s announcement — closed out its best week in 45 years Thursday.

The S&P 500 rose 39.84 points, or 1.4%, to 2,789.92. The Dow Jones Industrial Average added 285.80, or 1.2%, to 23,719.37, and the Nasdaq climbed 62.67, or 0.8%, to 8,153.58.

For the week, the S&P 500 jumped 12.1%, its best performance since late 1974. Markets will be closed for Good Friday.

In his remarks, Powell said there was “every reason to believe that the economic rebound, when it comes, can be robust” because the economy was doing well before the virus hit.

The Fed said it was activating a Main Street Lending Program authorized by the CARES Act, the largest economic relief package ever passed by Congress.

Among the actions taken Thursday, the Fed activated a loan program for municipal governments, as well as additional support for the Paycheck Protection Program, which the Small Business Administration rolled out last week. The program provides loans to businesses with fewer than 500 employees.

The Main Street lending program “will make a significant difference for the 40,000 medium-sized businesses that employ 35 million Americans,” Treasury Secretary Steven Mnuchin said.

The government’s pay protection plan for small businesses is off to a rocky start. Businesses have had difficulty getting banks to provide the loans. The banks have said that the government has not made clear how they should process such loans.

The Fed on Thursday said it would purchase up to $500 billion of municipal bonds to help state and local governments borrow enough to cover day-to-day operations.

Both state and local governments are facing precipitous drops in revenue as sales tax receipts plunge and millions of Americans lose jobs and pay less income tax. At the same time, governments are facing rising social safety net costs, as the ranks of recipients swell.