Congress Passes Additional COVID-19 Relief
Late yesterday, Monday, December 21, after months of gridlock between Treasury and Congressional leadership, Congress passed a $900 billion bill containing additional COVID-19 relief. The bill included funds to fight COVID and provide American households and business with financial relief. The final piece of the deal came when a compromise was reached on a last minute sticking point on an amendment offered by Sen. Pat Toomey (R, PA) to prevent the extension of further emergency Federal Reserve lending programs without Congressional approval including any further use of the remaining $429 billion in unused CARES Act funds. While the final compromise does not wholly prohibit the Federal Reserve’s 13(3) powers, it does prevent the Federal Reserve from using the remaining Emergency Stabilization Funds that Congress appropriated in March of this year to launch any program “that is the same” as any of the CARES-backed programs. The original amendment offered by Sen. Toomey would have prevented the Fed from propping up “similar” facilities, but Democrats claimed it was too broad thereby impeding the Fed from adequately responding to any future economic emergencies. Toomey acknowledged “[t]he Democrats made fair point – that was too broad” and upon reaching agreement, Sen. Toomey stated “I am very pleased with the conclusions that we have come to on how we have handled the 13(3) CARES facilities.”
Of particular note to the securitization market, the Term Asset-Backed Securities Loan Facility or TALF was explicitly exempted in the final bill leaving the Fed with the flexibility to restart the TALF program if they deem necessary. However, the current Fed plan is to let it expire at year end given the program has seen little usage given the market has largely rebounded from the liquidity crisis in March.
The legislation also extends the Center for Disease Control (CDC) eviction moratorium until January 31, 2021, includes $25 billion in emergency rental assistance from Treasury to state and local governments, $284.5 billion for the Paycheck Protection Program, $20 billion for the Economic Injury Disaster Loan advance program, and $12 billion in funding for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs). These actions along with the bills authorization of a second round of economic-impact payments to households and the extension of the unemployment subsidies will provide much needed economic support to struggling households and small businesses to make ends meet.
Important to our membership the bill also delays compliance with Current Expected Credit Loss (CECL) accounting standards and allows financial institutions to determine if they will suspend the Generally Accepted Accounting Principles (GAAP) requirements for recognizing any potential COVID-related losses from a troubled debt restructuring (TDR) related to a loan modification until January 2022.
President Trump is expected to sign the measure into law.