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The Fed conducted large scale overnight repo operations from late 2019 until
July 2020 to address disruptions in the U.S.
Treasury, Agency debt and Agency MBS financing markets. These operations ceased in July 2020 after the central bank successfully
tamed volatile funding costs that had threatened to cause disruption across the
financial system.
The Fed has taken a number of other actions to stabilize markets as a result
of the impacts of the COVID-19 pandemic. On
Sunday, March 15, 2020, the Fed announced a $700 billion asset purchase program to provide liquidity to the U.S. Treasury and
Agency MBS markets. Specifically, the Fed announced that it would purchase at least $500 billion of U.S. Treasuries and at least $200
billion of Agency MBS. The Fed also lowered the Fed Funds rate to a range
of 0.0% – 0.25%, after having already lowered the Fed
Funds rate by 50 bps on March 3, 2020. On June 30, 2020, Fed Chairman Powell
announced expectations to maintain interest rates at
this level until the Fed is confident that the economy has weathered recent events
and is on track to achieve maximum employment
and price stability goals. The Federal Open Market Committee (“FOMC”) continued
to reaffirm this commitment at all subsequent
meetings through December of 2021, as well as an intention to allow inflation to
climb modestly above their 2% target and maintain that
level for a period sufficient for inflation to average 2% long term.
On January 26, 2022, the FOMC reiterated its goals of maximum
employment and a 2% long-run inflation rate and stated that, with a strong labor market
and inflation well above 2%, it expected it
would soon be appropriate to raise the target federal funds rate.
In response to the deterioration in the markets for U.S. Treasuries, Agency MBS and other mortgage
and fixed income markets as
investors liquidated investments in response to the economic crisis resulting from
the actions to contain and minimize the impacts of
the COVID-19 pandemic, on the morning of Monday, March 23, 2020, the Fed announced a program to acquire U.S. Treasuries and
Agency MBS in the amounts needed to support smooth market functioning. With
these purchases, market conditions improved
substantially, and in early April, the Fed began to gradually reduce the pace of these purchases. Through November of 2021, the Fed
was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency MBS each month. In November
of 2021, it began
tapering its net asset purchases each month, reducing them to $70 billion,
$60 billion and $40 billion of U.S. Treasuries and $35 billion,
$30 billion and $20 billion of Agency MBS in November of 2021, December of
2021 and January of 2022, respectively.
On January 26,
2022, the FOMC announced that it would continue to increase its holdings of U.S. Treasuries by $20 billion per
month and its holdings
of Agency RMBS by $10 billion per month for February of 2022 and would end
its net asset purchases entirely by early March of 2022.
The CARES Act was passed by Congress and signed into law by President Trump on March 27, 2020.
The CARES Act provided
many forms of direct support to individuals and small businesses in order to stem the
steep decline in economic activity.
This over $2
trillion COVID-19 relief bill, among other things, provided for direct payments to each
American making up to $75,000 a year, increased
unemployment benefits for up to four months (on top of state benefits), funding
to hospitals and health providers, loans and
investments to businesses, states and municipalities and grants to the airline industry. On April 24, 2020, President Trump signed an
additional funding bill into law that provides an additional $484 billion of funding
to individuals, small businesses, hospitals, health care
providers and additional coronavirus testing efforts. Various provisions of the CARES Act began to expire in July 2020, including a
moratorium on evictions (July 25, 2020), expanded unemployment benefits (July
31, 2020), and a moratorium on foreclosures (August
31, 2020). On August 8, 2020, President Trump issued Executive Order 13945, directing the
Department of Health and Human
Services, the Centers for Disease Control and Prevention (“CDC”),
the Department of Housing and Urban Development, and
Department of the Treasury to take measures to temporarily halt residential evictions and foreclosures,
including through temporary
On December 27, 2020, President Trump signed into law an additional $900 billion coronavirus aid package
as part of the
Consolidated Appropriations Act, 2021, providing for extensions of many
of the CARES Act policies and programs as well as additional
relief. The package provided for, among other things, direct payments to most Americans with a gross income of less
than $75,000 a
year, extension of unemployment benefits through March 14, 2021, funding for procurement of vaccines and health
providers, loans to
qualified businesses, funding for rental assistance and funding for schools.
On January 29, 2021, the CDC issued guidance extending
eviction moratoriums for covered persons through March 31, 2021. The FHFA subsequently extended the foreclosure
moratorium
begun under the CARES Act for loans backed by Fannie Mae and Freddie
Mac and the eviction moratorium for real estate owned by