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1 1 (January 8, 2021)

handle is hein.crs/govebjz0001 and id is 1 raw text is: Congressional ~.Research Service CARES Act Title IV Financial Assistance Ends January 8, 2021 Under Title IV of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136), the U.S. Department of the Treasury made loans to specified industries and investments in Federal Reserve programs, authorized until the end of 2020. While Coronavirus Disease 2019 (COVID-19) confirmed cases and deaths continue to reach new highs, financial conditions stabilized shortly after enactment of the CARES Act. This raised the question of whether assistance should be extended at least until the pandemic ended or allowed to expire because financial stability had been restored. The December COVID-19-related relief package (specifically, Division N, Title X, of P.L. 116-260) did not change the year-end expiration date and permanently closed down all but one of the Fed programs backed by CARES funding. In effect, those programs may be revived only by a future act of Congress and not at the Federal Reserve and Treasury Secretary's discretion. This Insight provides some preliminary observations on Title IV assistance. For more information, see CRS Report R46329, Treasury and Federal Reserve Financial Assistance in Title IV of the CARESAct (P L. 116-136). Size. The amount of assistance pledged under Title IV (almost $22 billion in loans to industry and $195 billion to Fed programs) turned out to be significantly less than the $500 billion that was authorized. It also turned out to be more than was needed, because the Fed provided only $41 billion to recipients in programs backed by the $195 billion, which will be used only if those programs experience losses. As a result, a fraction of the Title IV funds pledged were needed, and P.L. 116-260 rescinded the unobligated funds. There are at least two possible explanations for the lack of uptake. First, financial conditions, which were highly unstable early in the pandemic, normalized shortly after the CARES Act was enacted and the Fed programs were announced. Programs that might have been highly subscribed if financial instability persisted were less needed or desired once financial conditions normalized. Second, the terms and conditions of the Fed's programs were not as attractive as comparable sources of private credit despite repeated modifications by the Fed to make them more attractive. These explanations are not mutually exclusive, because those private sources of credit might not have been available (at least on similar terms) if financial conditions had not normalized. Cost. The final cost to the government of Title IV assistance will not be known until loans are repaid and securities mature, which will take years. At this point, it is certain to be lower than $500 billion, because only $63 billion of assistance is outstanding, most if not all of which will be repaid with interest. Still, Congressional Research Service https://crsreports.congress.gov IN11567 CRS INSIGHT Prepared for Membersand Committeesof Congress