The central bank's sweeping actions suggest a cash shortage gripping sectors directly hit by the pandemic. Banks were supposed to be protected by Dodd-Frank but are still vulnerable to a funding domino effect.
The rush to unload mortgage-backed securities signals that a credit meltdown that began with corporate bonds is spreading to other corners of the market.
The Federal Reserve committed Monday to conducting more asset purchases of Treasury securities and mortgage-backed securities and announced $300 billion in new financing for credit facilities.
With the government’s backing and thanks to the unprecedented capital levels they built up since the 2008 financial crisis, banks could provide relief in a way that they never have before.
Accommodations for borrowers affected by the coronavirus pandemic, such as payment delays and fee waivers, are "positive and proactive actions that can manage or mitigate adverse impacts," the regulators said.
The agencies said banks could receive Community Reinvestment Act credit for activities addressing the virus fallout, and clarified earlier guidance encouraging banks to dip into their capital buffers.
Mark Calabria said Fannie Mae and Freddie Mac are currently equipped to handle elevated delinquencies, but they might need congressional or Federal Reserve help if fallout from the coronavirus persists.
The expansion of the dollar swap lines allows foreign central banks to meet the needs of companies and financial institutions rushing for dollars as the global payments system undergoes severe strain due to the coronavirus.
