Museum & Visits Regional Economy Data & Statistics Careers Blog Press Center

Municipal Liquidity Facility

As of December 31, 2020, the MLF has ceased purchasing eligible notes. The materials and information on the web pages associated with this facility will remain available.

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 faced 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 was authorized under Section 13(3) of the Federal Reserve Act, supported 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 committed to lend to a special purpose vehicle (SPV) on a recourse basis. The SPV purchased eligible notes directly from Eligible Issuers at the time of issuance. The New York Fed was 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, made an initial equity investment of $35 billion in the SPV in connection with the Facility. The SPV had the ability to purchase up to $500 billion of Eligible Notes. The Federal Reserve continued to closely monitor conditions in the primary and secondary markets for municipal securities and evaluated whether additional measures were needed to support the flow of credit and liquidity to state and local governments.

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 received notices of interest and applications from Eligible Issuers interested in selling notes to the SPV. BLX reviewed those notices and applications based on criteria established by the New York Fed and was available to respond to questions from Eligible Issuers. Decisions to purchase Eligible Notes was in the sole discretion of the SPV. The New York Fed terminated the relationship with BLX, effective November 30, 2022.

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 performed 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.

In June 2020, the New York Fed selected Eaton Vance Management (EVM) through an RFP process to serve as the credit risk service provider for the MLF. EVM was responsible for providing services to help monitor the credit risk profiles of eligible issuers that access the MLF. EVM provided the MLF with credit opinions, regular portfolio risk and analytics reporting, and updates on current conditions and trends in the municipal securities market.

Quarterly reports on the costs associated with the vendors supporting this facility are available in Vendor Information.

Facility Agreements