ASA Calls for Extension of Municipal Liquidity Facility
Urges Treasury and Fed to expand eligible issuers, allow for lower rates and longer repayment terms to support America’s municipalities
WASHINGTON – The American Securities Association (ASA) today sent a letter to Treasury Secretary Mnuchin and Federal Reserve Chairman Powell in support of the Municipal Liquidity Facility (MLF) and called for its extension beyond 2020 with some conditions.
“We appreciate the leadership of Secretary Mnuchin and Chairman Powell to stabilize financial markets, provide credit to the economy, and support the American people through the COVID-19 pandemic,” said ASA CEO Chris Iacovella. “The Municipal Liquidity Facility has provided confidence to Main Street municipalities and its extension will ensure essential services like local hospitals and schools have access to capital during this critical time.”
“The municipalities that our members serve may not be the largest in terms of population, but they are among the hardest hit by the COVID-19 pandemic,” ASA Head of Government Affairs and Director of Fixed Income Policy Kelli McMorrow wrote in the letter. “Without continued access to credit, the liquidity problems these cities and towns currently face may become insurmountable.”
“Some of these municipalities may have been able to get through 2020, but another full year of downward pressure on these revenue streams could prove to be extremely challenging,” McMorrow wrote. “Additionally, access to the MLF in 2021 would provide a necessary backstop should there be a market disruption or an inability for certain issuers to access more traditional capital markets.”
In the letter, ASA called for an expansion of the MLF’s eligibility for issuers to include more small and medium-sized towns and cities that do not reach the current population threshold for participation, especially hard-hit rural communities.
Additionally, ASA believes the current MLF rates are significantly higher than necessary, and that the MLF’s current 36-month repayment term is too short. “While we understand and support that the federal government should not provide rates that consistently beat market rates, as one person suggested, ‘They are charging a felony rate instead of a misdemeanor,’” McMorrow wrote in the letter.
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