Warren, Colleagues Urge Fed to Reconsider Arbitrary Population Requirements That Lock Most Cities and Counties Out of CARES Act Budget Help
Current Eligibility Criteria Means New Fed Lending Program Will Directly Benefit Only 15 Counties and 10 Cities, Excluding Many with the Greatest Needs
Under Fed’s Arbitrary Thresholds, No City or County in Massachusetts Will Qualify for Direct Assistance
United States Senators Elizabeth Warren (D-Mass.), Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Consumer Protection and Financial Institutions, Chris Van Hollen (D-Md.), Senate Democratic Leader Chuck Schumer (D-N.Y.), and Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, yesterday sent a letter to Federal Reserve (Fed) Chairman Jerome Powell expressing concern with the arbitrary population thresholds used to determine eligibility for the Fed’s recently announced Municipal Liquidity Facility program.
The senators urged Chairman Powell to expand eligibility for the program, which was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and allows the Fed to purchase up to $500 billion of debt from eligible cities and counties.
“Congress intended for the law to channel badly needed resources to state and local governments that are fighting on the front lines of the coronavirus pandemic while grappling with a historic economic slowdown and billions of dollars in lost revenue,” the senators wrote. “By imposing the limits set out in its Municipal Liquidity Facility program, the Federal Reserve is denying the vast majority of our country’s local governments direct access to funding, leaving them in desperate straits.”
The COVID-19 pandemic has caused significant revenue shortfalls and has also increased costs for local governments, with a National League of Cities report finding that more than 2,100 cities are planning for major budget shortfalls this year as a result of unexpected increase in expenditures and loss in revenue. These communities, which will need to scale back projects and services to focus on curbing the spread of the virus, need the expeditious support of the federal government to fill these short and long-term gaps in funding. The new Fed program will purchase debt only from states, cities with at least one million residents, and counties with at least two million residents--and will directly purchase debt from only 15 counties and 10 cities nationwide. This will exclude most cities and counties from direct assistance, including some of the hardest-hit communities. Every city and county in Massachusetts, for instance, will be excluded from the new Federal Reserve program because of the population criteria.
In their letter, the senators urged Chairman Powell to revise the terms of the program to allow more cities and counties to participate, noting that without this support, these governments will be forced to cut services or raise taxes—both of which can harm public health and the economy when they are most vulnerable.
“This limitation is arbitrary and unacceptable and will hurt hundreds of communities nationwide,” the senators continued. “As we continue to navigate this difficult time for our Nation, we must stay united in our resolve to combat this virus and the economic crisis it has created, and the federal government must provide all states and counties with much-needed assistance.”
Senators Warren, Van Hollen and Brown also joined Senator Joe Manchin (D-W.Va.) and 29 other senators in writing to Senate Majority Leader Mitch McConnell and Secretary Mnuchin calling for state, local, and tribal governments to receive dedicated, flexible funding in the next COVID-19 emergency funding package.
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