https://www.bnnbloomberg.ca/senators-urge-fed-to-buy-long-term-debt-from-states-localities-1.1436757 (Bloomberg) -- A bipartisan group of senators want the Federal Reserve to buy longer-term debt issued by state and local governments to help ease the impact of coronavirus on municipal services. “State and local governments are on the front lines in the fight against Covid-19,” the senators wrote in a letter to Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin on Thursday. “These entities are quickly deploying desperately-needed funds to hospitals, public health departments, nursing homes, water and power utilities, public transit, and other essential services.” The authors of the letter -- Democrats Bob Menendez of New Jersey and Sherrod Brown of Ohio, and Republicans Thom Tillis of North Carolina and Lisa Murkowski of Alaska -- note that “the municipal bond market has been under extraordinary stress” and that the Treasury and Fed must “ensure sufficient access to medium- and long-term capital for state and local governments.” “Establishing a facility to purchase municipal bonds from issuers and in the secondary market across all points of the yield curve would ensure state and local governments across the country can meet their financing needs as they respond to the health crisis and lay the foundation for future economic growth,” they wrote. Stimulus Authority The senators note that under Section 4003 of the recently passed stimulus legislation, the CARES Act, Treasury and the Fed have the authority to design such a program. At the moment, the Fed is only lending to municipalities that issue debt maturing in three years or less. Municipal debt can be sold for as long as 30 years. This issue is coming to the fore as the two parties fight each other and among themselves about how much aid to extend to state and local governments. House Speaker Nancy Pelosi unveiled legislation this week that would provide roughly $1 trillion to state and local governments. Senate Majority Leader Mitch McConnell has called the legislation a “Democratic wish list” and has said that state aid can’t be used by legislatures to plug deficits in pension plans for public employees. Meanwhile, some Republicans are pushing to get help to states. Senator Mitt Romney of Utah was seen entering a recent meeting with a sign that said “Blue states aren’t the only ones who are screwed.” And Menendez is working on legislation with Republican Senator Bill Cassidy of Louisiana that would establish a $500 billion fund for states. Menendez said during a recent press conference that other Republicans are considering signing on to his legislation. ©2020 Bloomberg L.P.
I disagree. States, especially the tax and spend blue ones must be forced to feel extreme pain brought on by their own reckless policies, and then reduced to junk rating, and then be forced into bankruptcy. Just last week, the county where I live in NY approved a $1.75 million improvement plan on a local park/recreation area. To hear of this in the middle of an economic collapse left me totally stunned. Whatever aid or bond sale proceeds comes our way will be squandered in record speed. That is the way of the Blue state.
We are beyond any point of no return. Fiscal responsibility is dead. Now we print print, and we can, because we are world reserve currency. It might go on for decades more.
Yes this may be true but you cannot make local governments think that they are now back by the Fed. Instead of fixing infrastructure they will likely give themselves fatter benefit packages and shut down every flu season.
Great way to spark inflation and ruin the currency. Retired people and future generations will be absolutely screwed.
This country is so screwed. What a joke. They are de-facto bankrupt no matter what happens. The truth is they wasted all the tax revenue, entered into reckless pension liability, and have been back-room dealing and selling out the tax payer for decades with sweetheart deals for their friends and their own personal business interests. They need to let the whole pension system just collapse. It's inevitable. The reserve currency status is worth more than any of the individual state solvencies.
if reckless corporations can get bailed out over COVID, I don't see why states who've had to shoulder the costs of COVID can't. To quote Cuomo, "go ahead Mitch, let Cali & NY file for bankruptcy, see how the market reacts".