U.S. Treasury approves revival of Fed primary dealer backstop

U.S. Treasury Secretary Steven Mnuchin on Tuesday said he approved the creation of a new primary dealer credit facility to ease credit market disruptions caused by the coronavirus epidemic, resurrecting the second 2008 financial crisis-era backstop in less than a day.

The facility, managed by the Federal Reserve Bank of New York, will offer loans up to 90 days to the two dozen Wall Street primary dealers who are important conduits for the sale of a broad range of bonds and other financial assets.

Mnuchin said the primary dealer credit facility would be in place for at least six months and may be extended as conditions warrant. Earlier on Tuesday, Mnuchin approved a Fed backstop for the $1 trillion commercial paper market, using $10 billion from the Treasury’s Exchange Stabilization Fund