Fed extends PPP liquidity facility, will allow three other programs to close

The Federal Reserve on Monday announced it would keep its program for buying Paycheck Protection Program (PPP) loans from banks open for additional three months and allow three other facilities to expire at the end of March.

The Fed will keep its PPP liquidity facility open through June 30, allowing lenders to sell PPP loans to the central bank and use the proceeds to make new loans to small businesses. 

The Senate-passed version of President Biden’s $1.9 trillion economic relief plan includes an additional $284 billion for PPP loans, which can be forgiven entirely if used by a business to cover payroll, rent and other basic expenses. The bill is expected to pass the House and be signed by Biden on Tuesday.

The PPP facility is one of more than a dozen emergency lending programs set up by the Fed during the onset of the coronavirus pandemic as financial markets nearly broke down in panic.

All but four of the Fed’s emergency facilities were shut down at the end of 2020, and the bank announced Monday that the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility will close on March 30 after minimal usage since the summer.