Municipal Liquidity Facility

On April 9, 2020, the Federal Reserve announced the establishment of the Municipal Liquidity Facility (MLF), to help state and local governments better manage the cash flow pressures they are facing as a result of the increase in state and local government expenditures related to the COVID-19 pandemic and the delay and decrease of certain tax and other revenues.

The MLF, which has been authorized under Section 13(3) of the Federal Reserve Act, will support lending to U.S. states (including the District of Columbia), U.S. counties with a population of more than 500,000 residents, U.S. cities with a population of more than 250,000 residents, and Multi-State Entities. Under the MLF, the Federal Reserve Bank of New York will commit to lend to a special purpose vehicle (SPV) on a recourse basis. The SPV will purchase eligible notes directly from Eligible Issuers at the time of issuance. The New York Fed will be secured by all the assets of the SPV. The Department of the Treasury, using funds appropriated to the Exchange Stabilization Fund under section 4027 of the Coronavirus Aid, Relief, and Economic Security Act, will make an initial equity investment of $35 billion in the SPV in connection with the Facility. The SPV will have the ability to purchase up to $500 billion of Eligible Notes. The Federal Reserve will continue to closely monitor conditions in the primary and secondary markets for municipal securities and will evaluate whether additional measures are needed to support the flow of credit and liquidity to state and local governments.

Additional information will be published before the facility is launched.


Vendors

In April 2020, the New York Fed selected PFM Financial Advisors LLC (PFM) through an RFP process to provide short-term consulting services to help the New York Fed design and set up the MLF. PFM was selected based on, among other things, its knowledge of and experience in the municipal securities market, as well as its assurances that it could effectively advise the New York Fed within the short timeframe outlined in the RFP. The New York Fed also selected two law firms, Arent Fox LLP and Orrick, Herrington & Sutcliffe LLP, after a search process, to advise it with respect to design, setup and execution of the facility.

In May 2020, the SPV established by the New York Fed in connection with this facility, Municipal Liquidity Facility LLC, designated BLX Group LLC (BLX) as its administrative agent. In serving as the administrative agent, BLX will receive notices of interest and applications from Eligible Issuers interested in selling notes to the SPV. BLX will review those notices and applications based on criteria established by the New York Fed and will be available to respond to questions from Eligible Issuers. Decisions to purchase Eligible Notes will be in the sole discretion of the SPV.

In May 2020, the New York Fed retained The Bank of New York Mellon (BNYM) through an RFP process to serve as the custodian and administrator for the MLF. BNYM also performs certain ancillary, settlement-related services for the MLF that were not covered by the RFP. A BNYM affiliate, Mellon Investments Corporation, was chosen through the same RFP process to provide investment management services for the MLF’s liquidity account. BNYM and its affiliate were selected chiefly for their operational capabilities and favorable pricing.

Another BNYM affiliate, BNY Mellon Capital Markets, LLC (BNYMCM), was retained on a short-term basis to provide settlement and competitive bidding-related services for the MLF. BNYMCM was chosen for these roles principally to speed the MLF to market based on BNYMCM’s experience in the municipal securities market, its operational capabilities, and synergies with the other BNYM affiliates.

Facility Agreements
Announcements
New York Fed Releases Notice of Interest for the Municipal Liquidity Facility
May 15, 2020

Updated Program Terms and Conditions
May 11, 2020

Federal Reserve Publishes Updates to the Term Sheet for the Municipal Liquidity Facility
May 11, 2020

Updated Program Terms and Conditions
April 27, 2020

Federal Reserve Board Announces An Expansion of the Scope and Duration of the Municipal Liquidity Facility
April 27, 2020

Report to Congress Pursuant to Section 13(3) of the Federal Reserve Act: Municipal Liquidity Facility
April 16, 2020

Program Terms and Conditions
April 9, 2020

Federal Reserve Takes Additional Actions to Provide Up to $2.3 Trillion in Loans to Support the Economy
April 9, 2020
Data
Contacts

Contact for General Inquiries
MLF@ny.frb.org

Contacts for Media Inquiries
Andrea Priest
andrea.priest@ny.frb.org

Suzanne Elio
suzanne.elio@ny.frb.org