Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act (P.L. 116-136)

Changes from August 5, 2020 to January 6, 2021

This page shows textual changes in the document between the two versions indicated in the dates above. Textual matter removed in the later version is indicated with ~~red strikethrough~~ and textual matter added in the later version is indicated with blue.

Treasury and Federal Reserve Financial
~~August 5, 2020~~January 6, 2021
Assistance in Title IV of the CARES Act
Andrew P. Scott,
(P.L. 116-136)
Coordinator
Analyst in Financial Analyst in Financial
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; ~~H.R. 748) was signed~~
~~Economics~~
~~into law as P.L. 116-136 on March 27, 2020,~~P.L. 116-136) was Economics enacted to assist those affected by the economic impact of to assist those affected by the economic impact of

Coronavirus Disease 2019 (COVID-Coronavirus Disease 2019 (COVID- 19). This assistance is targeted to consumers, businesses, and 19). This assistance is targeted to consumers, businesses, and
~~William T. Egar~~
the financial services sector. A key the financial services sector. A key Marc Labonte part of this assistance is provided to eligible businesses, part of this assistance is provided to eligible businesses,
~~Analyst in American~~
states, and municipalities in Division A, states, and municipalities in Division A, Specialist in Title IV,~~Title IV~~ of the CARES Act. of the CARES Act.
~~National Government~~

Title IV allocates $500 billion to the Department of the Treasury, Title IV allocates $500 billion to the Department of the Treasury, ~~through the Exchange~~
~~Raj Gnanarajah~~
Macroeconomic Policy through the Exchange Stabilization Fund (ESF), to make loans and guarantees for three specified Stabilization Fund (ESF), to make loans and guarantees for three specified industries—passenger industries—passenger
~~Analyst in Financial~~
airlines, cargo airlines, and businesses critical to national security—and to support Federal airlines, cargo airlines, and businesses critical to national security—and to support Federal
Reserve lending facilities. Some have characterized this as a “bailout” of private Reserve lending facilities. Some have characterized this as a “bailout” of private ~~industry~~
~~Economics~~
Rachel Y. Tang industry; others assert that it was~~; others~~

~~assert it is~~ necessary to avoid employment losses and maintain economic necessary to avoid employment losses and maintain economic ~~stability.~~ Analyst in Transportation and Industry stability. Of the $500 Of the $500
billion, Treasury can make up to $25 billion available to passenger airlines, up to $4 billion, Treasury can make up to $25 billion available to passenger airlines, up to $4 ~~billion to~~
~~Marc Labonte~~
Ben Wilhelm billion to cargo airlines, and up to $17 billion to businesses critical to maintaining national cargo airlines, and up to $17 billion to businesses critical to maintaining national ~~security.~~
~~Specialist~~ Analyst in Government security. in
Treasury can make the remainder—up to $454 billionTreasury can make the remainder—up to $454 billion, plus whatever is not used to assist plus whatever is not used to assist ~~the~~
~~Macroeconomic Policy~~
Organization and the specified industries—available to the Federal Reserve. specified industries—available to the Federal Reserve. The authority to enter into new Management transactions terminated on December 31, 2020. After the end of the year, remaining funds can still be used to support existing transactions until 2026. Recipients are legally required to repay Recipients are legally required to repay

assistance with interestassistance with interest~~, although the~~. The ultimate subsidy involved will not be ultimate subsidy involved will not be ~~known until terms,~~
~~Rachel Y. Tang~~
~~such as interest rates and fees, have been decided.~~
~~Analyst in Transportation~~
~~and Industry~~
kno wn until loans and investments have been repaid, but Treasury has recorded subsidies of $19 billion so far. As of the end of 2020, Treasury had approved over $21.1 billion in loans to 24 air carriers, repair station operators, and ticket agents and almost $736 million in loans to companies deemed critical to national security, including a $700 million loan to a trucking company. Most funding under Title IV has been used to backstop a series of Federal Reserve emergency Most funding under Title IV has been used to backstop a series of Federal Reserve emergency

programs created in response to COVID-19. These programs assist affected businesses or programs created in response to COVID-19. These programs assist affected businesses or
~~Baird Webel~~
markets by making loans or purchasing assets. markets by making loans or purchasing assets. ~~To date, $215 billion of ESF funding has been~~
~~Acting Section Research~~
~~made available by the Treasury~~The Treasury made $195 billion available under the CARES Act to reimburse the Federal Reserve for potential losses on these programs. These programs supported markets for corporate bonds, municipal bonds, and asset-backed securities and also included a “Main Street Lending” program to help businesses and nonprofits with under 15,000 employees or $ ~~to reimburse the Federal Reserve for potential losses on any~~
~~Manager~~
~~transactions in these programs. However, the Fed does not appear to be classifying all of this~~

~~funding as CARES Act funding. In testimony on June 30, 2020, Chair Powell identified five~~
~~programs as having $195 billion in CARES Act funding backing them. These programs support~~
~~Ben Wilhelm~~
~~markets for corporate bonds, municipal bonds, and asset-backed securities, as well as a loan~~
~~Analyst in Government~~
~~program to help businesses with under 10,000 employees or under $2.~~5 billion 5 billion in revenues maintain employment. The Treasury Secretary decided against extending these programs past the end of 2020. The Fed had outstanding assistance of $41.1 billion at the end of 2020. Title IV also provides up to $32 billion to continue payment of employee wages, salaries, and benefits at passenger and cargo air carriers and certain contractors. These grants do not need to be repaid, but Treasury determined that larger recipients are required to provide Treasury with financial instruments as appropriate compensation. As of the end of 2020, Treasury had approved almost $25 billion in payroll assistance to 352 passenger airlines, $828 million to 39 cargo airlines, and $2.4 billion to 220 contractors. P.L. 116-260, enacted on December 27, 2020, provided an additional $16 billion for payroll support. Title IV~~in revenues~~
~~Organization and~~
~~maintain employment. In addition, Treasury has announced one loan of $700 million to a~~
~~Management~~
~~trucking company under the national security program and letters of intent with ten major~~

~~airlines, which may result in future loans. The authority to enter into new transactions terminates~~
~~on December 31, 2020.~~

~~Title IV also provides up to $32 billion to continue payment of employee wages, salaries, and benefits at airline-related~~
~~industries. The Treasury Secretary has discretion to determine what compensation to seek for this assistance and has~~
~~reportedly chosen not to seek compensation from smaller recipients. According to the Treasury Secretary’s statement on June~~
~~30, 2020, Treasury has approved over $27 billion in payroll assistance to more than 500 airlines and other aviation~~
~~businesses, including passenger airlines, cargo carriers, and eligible contractors.~~
~~This~~ assistance carries a number of terms and conditions. All funding faces certain conditions, such as limiting eligibility to assistance carries a number of terms and conditions. All funding faces certain conditions, such as limiting eligibility to
U.S. businesses, as defined by the act, and following rules to avoid conflicts of interest. Firms receiving loans, loan U.S. businesses, as defined by the act, and following rules to avoid conflicts of interest. Firms receiving loans, loan
guarantees, or grants directly from Treasury must maintain at least 90% of guarantees, or grants directly from Treasury must maintain at least 90% of ~~March 24, 2020,~~pre-pandemic employment levels; face controls employment levels; face controls
placed on share buybacks, dividends, and executive salaries; and must provide Treasury specific compensation (e.g., warrants placed on share buybacks, dividends, and executive salaries; and must provide Treasury specific compensation (e.g., warrants
or equity). In addition, Title IV establishes a special inspector general and a Congressional Oversight Commission to overseeor equity). In addition, Title IV establishes a special inspector general and a Congressional Oversight Commission to oversee
the operations carried out under the title. Finally, the key agencies involved in providing this assistance (i.e., the Federal the operations carried out under the title. Finally, the key agencies involved in providing this assistance (i.e., the Federal
Reserve and Treasury) and the Government Accountability Office must make available Reserve and Treasury) and the Government Accountability Office must make available ~~to the public and Congress~~ a series of a series of
reports on operations reports on operations under Title IV. Most of the money available under Title IV was unused or unneeded when authority expired at the end of 2020. P.L. 116-260 rescinded $429 billion, prohibited the Fed from providing further assistance under programs backed by the CARES Act, and prohibited the use of ESF funds to reopen the Fed’s facilities for corporate bonds, municipal bonds, and Main Street Lending~~under Title IV of the act.~~
~~Going forward, Congress may consider changing the expiration date on these funds or reallocating unused funds to other~~
~~industries or for unrelated uses. Less than half of the funding available under Title IV has been pledged, to date~~. .
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Introduction1
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act; H.R. 748) into law as P.L. 116-136. The CARES Act is a wide-ranging act to (CARES Act; H.R. 748) into law as P.L. 116-136. The CARES Act is a wide-ranging act to
provide relief to consumers, provide relief to consumers, ~~small~~ smal businesses, and certain industries amid the economic businesses, and certain industries amid the economic ~~fallout~~fal out of of
COVID-19, which featured unprecedented business disruptions.2~~COVID-19.2 The law contains two divisions. Division A contains six titles aimed at making funds~~
~~available to different entities through various programs, including rebate checks to taxpayers;~~
~~loans to small businesses for payroll; protections for consumers with outstanding payments (e.g.,~~
~~mortgages, student loans, and rental and health care payments); loans and loan guarantees and~~
~~other investments to help the financial industry and other selected industries; and other public~~
~~funds for federal, state, local, and tribal government programs aimed at managing the disaster~~
~~recovery from the national health crisis. Division B provides FY2020 supplemental~~
~~appropriations for federal agencies to respond to COVID-19.3 (Hereinafter, title and section~~
~~references in this report refer to Division A, unless otherwise specified.)~~
Title IV of the CARES Act contains numerous provisions aimed broadly at stabilizing the Title IV of the CARES Act contains numerous provisions aimed broadly at stabilizing the
economy and helping affected households and businesses.economy and helping affected households and businesses.3 It has received considerable attention It has received considerable attention
for containing funding for industry and financial services.4 for containing funding for industry and financial services.4 ~~Specifically~~Specifical y, Section 4003 directs the , Section 4003 directs the
Department of the Treasury (Treasury) and the Federal Reserve (Fed) to make up to $500 Department of the Treasury (Treasury) and the Federal Reserve (Fed) to make up to $500 ~~billion~~bil ion
availableavailable to support various businesses in the aviation sectorto support various businesses in the aviation sector~~, as well~~ as wel as the financial system. as the financial system.
Some have characterized this as a “bailout” of private industry; others assert Some have characterized this as a “bailout” of private industry; others assert that it is necessary to it is necessary to
avoid employment losses and maintain economic stability—the two views are not necessarily avoid employment losses and maintain economic stability—the two views are not necessarily
~~mutually exclusive.~~
~~Title IV also permits federal guarantees for uninsured bank deposits and money market funds,~~
~~which are beyond the scope of this report.5 In addition to the financial assistance provided in Title~~
~~IV, the CARES Act provides financial assistance to small businesses in Title I (including the~~
~~Payroll Protection Program) and assistance to states and municipalities in Title V. See CRS~~
~~Report R46284, COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options, by~~
~~Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry for information specifically about~~
~~assistance targeting small businesses found in Title I of the CARES Act~~mutual y exclusive. Section 4112 directs Treasury to provide $25 bil ion to continue payment of employee wages, salaries, and benefits at passenger air carriers; $4 bil ion for similar purposes at cargo air carriers; and $3 bil ion for employees of certain contractors that provide direct services to air carriers. Authority to use these funds expired at the end of 2020. P.L. 116-260, enacted on December 27, 2020, rescinded $429 bil ion from Title IV, prohibited the Fed from providing further assistance under programs backed by the CARES Act, and prohibited Exchange Stabilization Fund (ESF) funds from being used to reopen the Fed’s facilities for corporate bonds, municipal bonds, and Main Street Lending. .
This report provides an overview of Section 4003 and related provisions and explains the terms This report provides an overview of Section 4003 and related provisions and explains the terms
and conditions associated with the assistance. and conditions associated with the assistance. ~~The report’s Appendix compares these provisions~~
~~to the 2008 Troubled Asset Relief Program (TARP).~~

~~1 This section was written by Andrew Scott.~~
~~2 Access to all the current CRS~~ Additional y, it discusses the funds made available in Section 4112 of Title IV for worker support at air carriers and related businesses. Financial Assistance in Division A, Title IV5 Title IV provisions provide funding for eligible businesses, states, and municipalities as defined by the act.6 In particular, Section 4027 appropriates $500 bil ion to the ESF for use by the 1 T his section was written by Andrew Scott. 2 Congressional access to all the current CRS products pertaining to different aspects of the COVID-19 pandemic can be found at products pertaining to different aspects of the COVID-19 pandemic can be found at
https://www.crs.gov/resources/coronavirus-disease-2019.https://www.crs.gov/resources/coronavirus-disease-2019.
3 For a list of CRSFor a list of CRS experts on various parts of the experts on various parts of the ~~Coronavirus Aid, Relief, and Economic Security Act (CARES Act;~~
CARES Act (P.L. 116-136), P.L. 116-136), ~~congressional clients may see CRS~~ see CRS Report R46299, Report R46299, Coronavirus Aid, Relief, and ~~Economic~~Econom ic Security
(CARES) Act: CRS Experts, by William L. Painter and Diane P. Horn., by William L. Painter and Diane P. Horn.
~~4 For more on Title IV of the CARES Act, see CRS Report R46301,~~ ~~Title IV Provisions of the CARES Act (P.L. 116-~~
~~136), coordinated by Andrew P. Scott.~~
~~5 For more information, see CRS~~ 3 T he CARES Act also provides financial assistance to small businesses in T itle I (including the Payroll Protection Program) and assistance to states and municipalities in T itle V. See CRS Report R46284, COVID-19 Relief Assistance to Sm all Businesses: Issues and Policy Options, by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry ; and CRS Report R46298, The Coronavirus Relief Fund (CARES Act, Title V): Background and State and Local Data , by Grant A. Driessen. 4 T itle IV also permits federal guarantees for uninsured bank deposits and money market funds, which are beyond the scope of this report. For more information, see CRS Insight IN11307, Insight IN11307, The CARES Act (P.L. 116-136) Section 4008: FDIC Bank Debt
Guarantee Authority, by David W. Perkins; and CRS, by David W. Perkins; and CRS In FocusIn Focus IF11320, IF11320, Money Market Mutual Funds: A Financial
Stability Case Study, by Eva Su. For more on T itle IV of the CARES Act, see CRS Report R46301, Title IV Provisions~~Study, by Eva Su.~~
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~~Financial Assistance in Division A, Title IV6~~
~~Title IV provisions provide funding for eligible businesses, states, and municipalities, as defined~~
~~by the act.7 In particular, Section 4027 appropriates $500 billion to the Exchange Stabilization~~
~~Fund (ESF) for use by the Treasury Secretary,8 and Section 4003 allows~~ of the CARES Act (P.L. 116-136), coordinated by Andrew P. Scott . 5 T his section was written by Andrew Scott. 6 Eligible businesses is defined by the act as air carriers and U.S. businesses that have “not otherwise received adequate Congressional Research Service 1 link to page 12 link to page 12 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Treasury Secretary,7 and Section 4003 al ows Treasury to use the $500 bil ion ~~Treasury to use the $500~~
~~billion~~ to support eligible businesses, states, and municipalities that have suffered losses due to to support eligible businesses, states, and municipalities that have suffered losses due to
COVID-19.COVID-19.98 As discussed in the next section, Section 4003 As discussed in the next section, Section 4003 ~~allocates~~al ocates up to $46 up to $46 ~~billion~~ bil ion for for
Treasury to directly provide loans and loan guarantees as follows: (1) not more than $25 Treasury to directly provide loans and loan guarantees as follows: (1) not more than $25 ~~billion~~
bil ion for passenger air carriers (and certain related businesses), (2) not more than $4 for passenger air carriers (and certain related businesses), (2) not more than $4 ~~billion~~bil ion for cargo for cargo
air carriers, and (3) not more than $17 air carriers, and (3) not more than $17 ~~billion~~ bil ion for businesses critical to maintaining national for businesses critical to maintaining national
security. Treasury may make funds security. Treasury may make funds from the remaining $454 from the remaining $454 ~~billion~~bil ion, plus any unpledged funding , plus any unpledged funding
from the $46 from the $46 ~~billion, available to~~ bil ion, available to support Fed facilities to provide liquiditysupport Fed facilities to provide liquidity to the financial system to the financial system
through lending to eligible businesses, states, and municipalities (described in the through lending to eligible businesses, states, and municipalities (described in the “Federal
Reserve Emergency Facilities Backed by ~~the ESF”~~ CARES Act Funding” section, below).section, below).
Section 4029 terminates this authority on December 31, 2020, and Section 4029 terminates this authority on December 31, 2020, and ~~allows~~al ows outstanding loans and outstanding loans and
guarantees to be modified, restructured, or otherwise amendedguarantees to be modified, restructured, or otherwise amended, after that date subject to a restriction: subject to a restriction: ~~the~~
The duration of assistance to the passenger air industry cannot be extended beyond five years from the duration of assistance to the passenger air industry cannot be extended beyond five years from the
initial origination date.initial origination date.
Section 4027 al ows funding to be used for those and a limited number of other purposes after 2020. Because loans and investments wil not mature for several years, Section 4027 does not return unused funding to the Treasury general fund until January 1, 2026, at which point it can be used only for deficit reduction. Section 4003 requires recipients to repay this assistance with interest, fees, and Section 4003 requires recipients to repay this assistance with interest, fees, and, in some cases, in some cases,
compensation in the form of warrants, equity, or senior debt. Under the Federal Credit Reform compensation in the form of warrants, equity, or senior debt. Under the Federal Credit Reform
Act (FCRA; P.L. 101-508), the Office of Management and Budget and the Congressional Budget Act (FCRA; P.L. 101-508), the Office of Management and Budget and the Congressional Budget
Office Office (CBO) are to estimate the subsidy associated with this assistance based on the difference between are to estimate the subsidy associated with this assistance based on the difference between
the present discounted value of both the assistance and income received by Treasury the present discounted value of both the assistance and income received by Treasury from from
principal and interest payments (along with other forms of compensation).principal and interest payments (along with other forms of compensation).109 The ultimate size of The ultimate size of
this subsidy this subsidy ~~will~~ wil not be known until it becomes clear to what extent firms are able to repay assistance.10 To date, Treasury has estimated subsidies of about $20 bil ion~~not be known until terms, such as interest rates and fees, have been decided and~~
~~it becomes clear to what extent firms are able to repay~~.11 By contrast, .11 By contrast, Sections 4112, 4113, and 4120 provide up to $32 bil ion in grants to continue payment of employee wages, salaries, and benefits at airline-related industries. The Treasury Secretary has ~~Sections 4112, 4113, and~~

~~6 This section was written by Andrew Scott.~~
~~7 Eligible businesses are defined by the act as air carriers and U.S. businesses “that ha[ve] not otherwise received~~
~~adequate~~ economic relief in the form of loans or loan guarantees provided under this Act.” economic relief in the form of loans or loan guarantees provided under this Act.” States ~~are~~is defined defined by the act by the act
~~as including~~ as including the District of Columbia,the District of Columbia, U.S. territories, multistate entities, and Indian U.S. territories, multistate entities, and Indian ~~Tribes.~~
~~8 The~~tribes. 7 T he original purpose of the original purpose of the ~~Exchange Stabilization Fund (ESF)~~ESF was was to allow the to allow the ~~Department of the Treasury~~
~~(Treasury)~~T reasury to intervene in foreign exchange markets to stabilize the value of the dollar, but the to intervene in foreign exchange markets to stabilize the value of the dollar, but the ~~Treasury~~T reasury Secretary has Secretary has
~~broad~~ broad discretion on when discretion on when and how it can be used.it can be used. It has been usedIt has been used in response to the 2008 financial crisis and COVID-19.in response to the 2008 financial crisis and COVID-19. For For
more information, see CRSmore information, see CRS In FocusIn Focus IF11474, IF11474, Treasury’s Exchange Stabilization Fund and COVID-19, by Marc , by Marc
Labonte, Baird Webel, and Martin A. Weiss. Labonte, Baird Webel, and Martin A. Weiss.
98 Up to $100 million of the total may be used Up to $100 million of the total may be used on administrative costs. on administrative costs.
109 If the former were greater than the latter, the assistance would If the former were greater than the latter, the assistance would be deemedbe deemed to have been provided with a positive to have been provided with a positive
subsidysubsidy~~; if~~. If the latter were greater than the former, it would be the latter were greater than the former, it would be a negative subsidy. a negative subsidy.
~~11 The~~10 T he act specifies that the assistance should be recorded act specifies that the assistance should be recorded ~~in the budget under the Federal Credit Reform Act (FCRA;~~
in the budget under FCRA (P.L. 101-508), which means that the subsidyP.L. 101-508), which means that the subsidy value of the assistance—as opposed to the total funds provided—isvalue of the assistance—as opposed to the total funds provided—is
recorded as spending in the federal budget.recorded as spending in the federal budget. ~~Some~~ Some argue that the present discounted value calculation underestimates the argue that the present discounted value calculation underestimates the
size of the subsidysize of the subsidy ~~because~~ because it is calculated usingit is calculated using the government’s borrowing cost instead of a private borrowing rate the government’s borrowing cost instead of a private borrowing rate
that includes risk. In its cost estimate of the CARESthat includes risk. In its cost estimate of the CARES ~~Act, the Congressional Budget Office (CBO)~~ Act, CBO estimated a subsidyestimated a subsidy
cost of $1 billion for the assistance to specified industriescost of $1 billion for the assistance to specified industries and zero subsidyand zero subsidy cost for assistance to cost for assistance to ~~Federal Reserve~~
Fed programs. CBOprograms. CBO ~~assumed~~ assumed that only half of the funds availablethat only half of the funds available for specific for specific ~~industries would be~~ industries would be lent out at a 10% subsidylent out at a 10% subsidy
rate and rate and that the Fed programs wouldthe Fed programs would not be subsidizednot be subsidized ~~because~~ because the Fed’s 2008 programs didthe Fed’s 2008 programs did not suffer losses.not suffer losses. However, asHowever, as
~~discussed below,~~ discussed below, the terms and purposes of some of the Fed’s COVID-19 programs are fundamentally different from the terms and purposes of some of the Fed’s COVID-19 programs are fundamentally different from
its 2008 programs. CBO,its 2008 programs. CBO, H.R. 748H.R. 748, CARES Act, , P.L. 116-136P.L. 116-136 , April 16, 2020, April 16, 2020, at https://www.cbo.gov/publication/https://www.cbo.gov/publication/
56334. For more information, see CRS56334. For more information, see CRS Report R44193, Report R44193, Federal ~~Credit Programs: Comparing~~Credit Program s: Com paring Fair Value and the
Federal Credit Reform Act (FCRA) , by Raj, by Raj ~~Gnanarajah~~ Gnanarajah. 11 U.S. T reasury, Exchange Stabilization Fund Statement of Financial Position , October 31, 2020, footnote 1, https://home.treasury.gov/system/files/206/ESF-Monthly-FS-October-2020.pdf. .
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~~4120 provide up to $32 billion in grants to continue payment of employee wages, salaries, and~~
~~benefits at airline-related industries. The Treasury Secretary has discretion whether to seek~~
~~compensation for these grants.~~
discretion whether to seek compensation for this assistance and has sought compensation only for larger grant recipients. Treasury has broad discretion to decide how much of each part of the funding to make available Treasury has broad discretion to decide how much of each part of the funding to make available
to the specified industries or the Fed, in what form, and for what purpose. These funds are made to the specified industries or the Fed, in what form, and for what purpose. These funds are made
availableavailable with certain terms and conditions, however (as discussed in the with certain terms and conditions, however (as discussed in the “Terms and Conditions””
section, below). For example, Section 4004 sets executive compensation limits on certain section, below). For example, Section 4004 sets executive compensation limits on certain
companies receiving assistancecompanies receiving assistance;, Section 4019 restricts eligible recipients of assistance to avoid Section 4019 restricts eligible recipients of assistance to avoid
conflicts of interestconflicts of interest;, Sections 4114 and 4116 limit recipient firms from taking certain actions Sections 4114 and 4116 limit recipient firms from taking certain actions;, and and
Sections 4025 and 4115 prohibit conditioning assistance on entering into collective bargaining Sections 4025 and 4115 prohibit conditioning assistance on entering into collective bargaining
negotiations. negotiations.
In addition, several provisions provide enhanced oversight for the Title IV funding programs. In addition, several provisions provide enhanced oversight for the Title IV funding programs.
Sections 4018 and 4020 establish a Sections 4018 and 4020 establish a ~~Special Inspector General~~special inspector general and a Congressional Oversight and a Congressional Oversight
Commission to monitor activities made pursuant to provisions in Title IV, and Section 4026 Commission to monitor activities made pursuant to provisions in Title IV, and Section 4026
requires reports from the key agencies—namely Treasury and the Fed—on their Title IV requires reports from the key agencies—namely Treasury and the Fed—on their Title IV
activities. activities.
The next two sections The next two sections ~~focuses~~focus on the financial assistance provisions granted to specified on the financial assistance provisions granted to specified
industries industries and for Fed programs, updated as of and for Fed programs, updated as of ~~July 27~~December 30, 2020. , 2020.
Loans, Loan Guarantees, and Other Support for Selected
Industries12
Congress chose to make direct Treasury support available to three specific industries (passenger Congress chose to make direct Treasury support available to three specific industries (passenger
and cargo airline industries, as and cargo airline industries, as ~~well~~ wel as certain national security businesses) that it deemed as certain national security businesses) that it deemed
particularly in need of support. This assistance may not meet certain statutory requirements for a particularly in need of support. This assistance may not meet certain statutory requirements for a
~~Fed~~Federal Reserve program (i.e., that program (i.e., that ~~Fed~~Federal Reserve assistance be broadly based and not for the purpose of avoiding assistance be broadly based and not for the purpose of avoiding
bankruptcy),13 and it comes with more terms and conditions than assistance for recipients of bankruptcy),13 and it comes with more terms and conditions than assistance for recipients of ~~Fed~~
Federal Reserve programs supported by the CARES Act. The Title IV support for programs supported by the CARES Act. The Title IV support for these industries comes in three these industries comes in three
main forms: loans and loan guarantees, main forms: loans and loan guarantees, ~~tax holidays for certain~~suspension of certain aviation excise taxes, excise taxes,14 and payroll grants and payroll grants
for air carrier workers. for air carrier workers.
Loans and Loan Guarantees
Section 4003 makes up to $46 Section 4003 makes up to $46 ~~billion available~~ bil ion available for federal loans and loan guarantees directly for federal loans and loan guarantees directly
from Treasury to the aviation sector and to businesses critical to maintaining national security: from Treasury to the aviation sector and to businesses critical to maintaining national security:
 not more than $25  not more than $25 ~~billion~~ bil ion for passenger air carriers, eligible businesses certified for passenger air carriers, eligible businesses certified
to perform inspection, repair, replace, or overhaul services, and ticket agents; to perform inspection, repair, replace, or overhaul services, and ticket agents;14
~~ not more than $4 billion for cargo air carriers; and~~

~~12 This section was written by Rachel Tang.~~
~~13 12 U.S.C. §343.~~
~~14 As defined in 49 U.S.C.~~ 15 12 T his section was written by Rachel T ang. 13 12 U.S.C. §343. 14 Section 4007 institutes a suspension of excise taxes—including taxes on airline passenger ticket sales, segment fees, air cargo fees, and aviation fuel taxes paid by both commercial and general aviation aircraft —until December 31, 2020. T hese taxes and fees have been the primary revenue sources for the federal Airpo rt and Airways T rust Fund, which support s multiple federal aviation programs. For details about the trust fund revenue sources, see CRS Report R42781, Federal Civil Aviation Program s: In Brief, by Bart Elias and Rachel Y. T ang. 15 As defined in 49 U.S.C. §40102 (a)(45), §40102 (a)(45), ticket agent means a person (except an air carrier, a foreign air carrier, or an means a person (except an air carrier, a foreign air carrier, or an
employee of an air carrier or foreign air carrier) that as a principal or agent sells,employee of an air carrier or foreign air carrier) that as a principal or agent sells, offers for sale, offers for sale, ~~negotiates~~negot iates for, or holds for, or holds
itself out asitself out as selling, providing, or arranging for, air transportation. Contingent on the Department of selling, providing, or arranging for, air transportation. Contingent on the Department of ~~Transportation~~T ransportation’s ’s
(DOT(DOT ’s) interpretation “’s) interpretation “ ticket agents” include most travel agents that negotiate and sell airline tickets as part ticket agents” include most travel agents that negotiate and sell airline tickets as part ~~of their~~
~~travel products, including those conducting businesses online, such as expedia.com and booking.com.~~o f their
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 not more than $  not more than $~~17 billion~~ 4 bil ion for cargo air carriers; and  not more than $17 bil ion for “businesses critical to maintaining national for “businesses critical to maintaining national
security”—a term that the act does not further define. On April 10, 2020, the security”—a term that the act does not further define. On April 10, 2020, the
Treasury Secretary released information on which types of firms would be Treasury Secretary released information on which types of firms would be
eligibleeligible under this definition.under this definition.1516
The Treasury Secretary is required under Section 4006 to coordinate with the Transportation The Treasury Secretary is required under Section 4006 to coordinate with the Transportation
Secretary to make these loans.Secretary to make these loans.1617 Other terms and conditions applying to this assistance are Other terms and conditions applying to this assistance are
discussed in discussed in “Terms and Conditions,” below. ” below.
According to the According to the ~~Congressional Oversight Commission (discussed below in~~ ~~“Oversight~~
~~Provisions”), Treasury had received 260~~Government Accountability Office (GAO), Treasury received 267 loan loan applications and approved 35 loans under Title IV.18 Expedited loan applications were due in April or May, the first loan was made in July, and most loans were not made until October 2020. No loan guarantees have been made under Title IV. Direct loans approved under Title IV are summarized in Table 1. As of the end of 2020, the Treasury had approved over $20.9 bil ion in loans to 22 passenger air carriers, repair station operators, and ticket agents and $0.2 bil ion to two cargo air carriers.19 Although Treasury cannot make new loans after the end of 2020, companies can draw on approved loan balances until March 26, 2021. As of December 5, 2020, the largest borrowers, accounting for most of the total amount approved, had drawn down only a smal fraction of their approved loan amounts.20 With regard to the loan program for businesses critical to national security, as of the end of 2020, the Treasury had approved $736 mil ion to 11 businesses under this program.21 Of particular note, on June 30, 2020, the Treasury reached an agreement with YRC Worldwide, a trucking company, to provide a $700 mil ion loan in exchange for a 29.6% equity stake.22 Treasury defined businesses critical to maintaining national security as those that either have the highest priority contract under the Defense Priorities Al ocations System regulations or those that operate under a top secret facility security clearance under the National Industrial Security Program regulations. Treasury stated that firms that do not meet either of these definitions may stil be considered for travel products, including those conducting businesses online, such as expedia.com and booking.com. 16 T reasury defined businesses critical ~~applications under Subtitle A as of June 2020, but~~
~~has only finalized one loan as of July 31, 2020.17 On June 30, 2020, Treasury reached an~~
~~agreement with YRC Worldwide Inc. to provide a $700 million loan in exchange for a 29.6%~~
~~equity stake. Treasury indicated that its decision was based on a certification by the Secretary of~~
~~Defense that YRC, a leading provider of critical military transportation and other hauling services~~
~~to the federal government, is critical to maintaining national security.18~~
~~On July 7, 2020, Treasury announced that 10 major airlines—Alaska Airlines, American Airlines,~~
~~Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Sky West Airlines,~~
~~Southwest Airlines, Spirit Airlines, and United Airlines—had signed letters of intent “setting out~~
~~the terms on which Treasury is prepared to extend loans under the CARES Act.”19 The letters of~~
~~intent did not indicate the loan amounts that the airlines were seeking or Treasury would approve.~~

~~15 Treasury defined~~ ~~businesses critical~~ to maintaining national security as those that either have the highest priority as those that either have the highest priority
contract under the Defense Priorities Allocations System regulations or those that operate under a top secret facility contract under the Defense Priorities Allocations System regulations or those that operate under a top secret facility
security clearance under the National Industrial Security Program regulations. security clearance under the National Industrial Security Program regulations. ~~Treasury~~T reasury stated that firms that do not stated that firms that do not
meet either of these definitions may still be consideredmeet either of these definitions may still be considered for loans, however. Seefor loans, however. See ~~Treasury~~ T reasury, , Q&A: Loans to Air Carriers
and Eligible Businesses and National Security Businesses,, updated as of April 10, 2020, at https://home.treasury.gov/updated as of April 10, 2020, at https://home.treasury.gov/
system/files/136/CARES-Airline-Loan-Supportsystem/files/136/CARES-Airline-Loan-Support -Q-and-A-national-security.pdf.-Q-and-A-national-security.pdf.
Reportedly, one intended recipient at Reportedly, one intended recipient at the time of enactment was the aerospace manufacturer Boeing. However, Boeing has not drawn a loan under T itle IV. 17 T reasury has issued procedures and minimum guidelines for applicants at https://home.treasury.gov/system/files/136/Procedures%20and%20Minimum%20Requirements%20for%20Loans.pdf . 18 According to GAO, some applications were withdrawn by the applicant and some were rejected or deemed ineligible by T reasury. See GAO, Financial Assistance: Lessons Learned from CARES Act Loan Program for Aviatio n and Other Eligible Businesses, GAO-21-198, December 10, 2020, https://www.gao.gov/assets/720/711174.pdf. 19 T reasury, “Loans to Air Carriers, Eligible Businesses, and National Security Businesses,” data current as of December 30, 2020, https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses. 20 T reasury, Report Under Section 4026(b)(1)(C) of the CARES Act, December 5, 2020, https://home.treasury.gov/system/files/136/4026b1C-Loan-Report-12-05-2020.pdf. 21 T reasury, “Loans to Air Carriers, Eligible Businesses, and National Security Businesses,” data current as of December 15, 2020. 22 T reasury, “UST T ranche A T erm Loan Credit Agreement,” July 7, 2020, https://home.treasury.gov/system/files/136/YRC-Documentation.pdf. Congressional Research Service 4 link to page 8 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act loans, however.23 For example, YRC Worldwide did not meet either definition, but the Treasury stated that its decision was based on a certification by the Secretary of Defense that YRC, a leading provider of critical military transportation and other hauling services to the federal government, is critical to maintaining national security.24 Although the public disclosures do not state on what grounds Treasury identified a business to be critical to national security, the Congressional Oversight Commission reports that only five out of 11 recipients met one of Treasury’s two explicit criteria, and the rest were approved at Treasury’s discretion.25 Proponents argued that these loans were important for maintaining U.S. jobs. In the transaction summaries, Treasury reported the number of employees at these companies, which varied from two to 157,000. Table 1 shows the range of loan amounts, terms, and employees at companies that received assistance. Section 4003 requires the Secretary to set the terms of the loans such that the interest rate reflects the loan’s risk but is not less than comparable interest rates before the pandemic. To that end, the Secretary selected an adjustable rate with a markup on the London Interbank Offered Rate (LIBOR),26 a commonly used reference rate. The markup varies based on the Treasury’s perception of the loan’s riskiness. Section 4003 also requires financial protection in the form of a warrant or equity interest in the case of a publicly traded company or a warrant, equity interest, or senior debt instrument in the case of a company that is not publicly traded. Except for YRC, Treasury accepted common stock warrants equal to 10% of the loan amount drawn or 3% payment-in-kind annual interest.27 Table 1. Direct Loans Under Title IV Data as of December 2020 Loan Amount Approved ($ Number of Company millions) Interest Rate Other Compensation Employees Passenger Air, Repair, and Ticket Agents ($20.9 bil ion of $25 bil ion approved) American Airlines $7,500.0 LIBOR+3.5% common stock warrants 157,000 equal to 10% of loan drawn United Airlines $5,170.0 LIBOR+3% common stock warrants 93,000 equal to 10% of loan drawn JetBlue $1,948.0 LIBOR+2.75% common stock warrants 23,000 equal to 10% of loan drawn Alaska Airlines $1,928.0 LIBOR+2.5% common stock warrants 22,000 equal to 10% of loan drawn 23 See T reasury, Q&A: Loans to Air Carriers and Eligible Businesses~~the time of enactment was the aerospace manufacturer Boeing. When asked about~~
~~the use of this funding, the Treasury Secretary reportedly was quoted as saying, “Right now, Boeing is saying they~~
~~don’t need it.” Quoted in Andrew Tangel and Doug Cameron, “Bailout Aids Boeing Even If It Doesn't Tap Funds,”~~
Wall Street Journal, March 28, 2020. Senator Pat Toomey reportedly was quoted as saying the $17 billion “is not
~~meant to be exclusively for Boeing.” Quoted in Gregory Wallace and Phil Mattingly, “Boeing Could Receive Billions~~
~~From Stimulus Package,” CNN, March 26, 2020. Senator Maria Cantwell reportedly said that the $17 billion was likely~~
~~to be used for aerospace manufacturers, including Boeing, and their supply chain. See Dominic Gates, “Cantwell:~~
~~Boeing may reject strings attached,” Seattle Times, March 26, 2020.~~
~~16 Treasury has issued procedures and minimum guidelines for applicants at https://home.treasury.gov/system/files/136/~~
~~Procedures%20and%20Minimum%20Requirements%20for%20Loans.pdf.~~
~~17 Congressional Oversight Commission, The Third Report of the Congressional Oversight Commission, July 20, 2020,~~
~~p. 14, at https://www.toomey.senate.gov/files/documents/Oversight%20Commission%20-~~
~~%203rd%20Report%20(FINAL)_7.20.20.pdf.~~
~~18 Treasury, “Treasury to Provide Loan to YRC Worldwide,” press release, July 1, 2020, at https://home.treasury.gov/~~
~~news/press-releases/sm1049. Treasury states that YRC is a leading provider of Department of Defense (DOD) supply~~
~~transportation and other delivery services for the U.S. government in its Section 4026(b)(1) report. See U.S. Treasury,~~
~~“Report Under Section 4026(b)(1) of the CARES Act on Loans to Air Carriers, Eligible Businesses,~~ and National and National
Security BusinessesSecurity Businesses~~,” July 15, 2020, at~~ , updated as of April 10, 2020, https://home.treasury.gov/system/files/136/https://home.treasury.gov/system/files/136/~~Section-4026b1-Loan-Report.pdf.~~
CARES-Airline-Loan-Support -Q-and-A-national-security.pdf. 24 According to the Congressional Oversight Commission, “YRC apparently did not meet either of the two national According to the Congressional Oversight Commission, “YRC apparently did not meet either of the two national
security eligibilitysecurity eligibility ~~criteria” described in the footnote above. See~~ criteria.” See Congressional Oversight Commission, Congressional Oversight Commission, The Third
Report of the Congressional Oversight ~~Commission~~Com m ission, July 20, 2020, p. 14, at https://www.toomey.senate.gov/files/, July 20, 2020, p. 14, at https://www.toomey.senate.gov/files/
documents/Oversight%20Commission%20-%203rd%20Report%20(FINAL)_7.20.20.pdf.documents/Oversight%20Commission%20-%203rd%20Report%20(FINAL)_7.20.20.pdf.
~~19 Treasury, “Statement from Secretary Steven T. Mnuchin on CARES Act Loans to Major Airlines,” press release,~~
~~July 7, 2020, at https://home.treasury.gov/news/press-releases/sm1054.~~
~~Congressional Research Service~~
4 25 Congressional Oversight Commission, The Eighth Report of the Congressional Oversight Commission , December 31, 2020, pp. 10-11, https://coc.senate.gov/sites/default/files/2021-01/COMMISSION%20December%20Report%2012 -31%20FINAL%2C%20appendix.pdf. 26 LIBOR is a short-term interbank borrowing rate. 27 T he value of these warrants to T reasury depends on the exercise price. CRS could not locate any info rmation on the terms of the exercise price. Congressional Research Service 5 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Loan Amount Approved ($ Number of Company millions) Interest Rate Other Compensation Employees SkyWest $725.0 LIBOR+3% common stock warrants 15,000 equal to 10% of loan drawn Hawai an Airlines, Inc. $622.0 LIBOR+2.5% common stock warrants 7,400 equal to 10% of loan drawn Republic Airways $58.0 LIBOR+3.5% common stock warrants 6,700 equal to 10% of loan drawn Frontier Airlines $574.0 LIBOR+2.5% common stock warrants 5,000 equal to 10% of loan drawn Mesa Airlines, Inc. $195.0 LIBOR+3.5% common stock warrants 3,540 equal to 10% of loan drawn Sun Country $45.0 LIBOR+3.5% 3% payment-in-kind annual 1,630 interest Southern Airways $1.8 LIBOR+3.5% 3% payment-in-kind annual 458 Express, LLC interest Ovation Travel Group $20.0 LIBOR+5.5% 3% payment-in-kind annual 250 interest Caribbean Sun Airlines, $6.8 LIBOR+3.5% 3% payment-in-kind annual 173 Inc. interest Eastern Airlines, LLC $15.0 LIBOR+3.5% 3% payment-in-kind annual 137 interest Elite Airways LLC $2.6 LIBOR+3.5% 3% payment-in-kind annual 110 interest American Jet $1.2 LIBOR+3.5% 3% payment-in-kind annual 44 International Corp. interest Al flight Corp. $4.7 LIBOR+3.5% 3% payment-in-kind annual 35 interest Timco Engine Center, $8.4 LIBOR+3.5% 3% payment-in-kind annual 25 Inc. interest Thomas Global Systems $1.4 LIBOR+3.5% 3% payment-in-kind annual 20 LLC interest Bristin Travel $0.5 LIBOR+3.5% 3% payment-in-kind annual 12 interest Aviation Management & $4.0 LIBOR+3.5% 3% payment-in-kind annual 6 Repairs, Inc. interest Aero Hydraulics $0.5 LIBOR+5.5% 3% payment-in-kind annual 2 interest Cargo Air Carriers ($0.2 bil ion of $4 bil ion approved) Legacy Airways $1.8 LIBOR+5.5% 3% payment-in-kind annual 19 interest Island Wings, Inc. $0.3 LIBOR+3.5% 3% payment-in-kind annual n/a interest Businesses Critical to National Security ($0.7 bil ion of $17 bil ion approved) Congressional Research Service 6 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Loan Amount Approved ($ Number of Company millions) Interest Rate Other Compensation Employees SemahTronix, LLC $2.0 LIBOR+3.5% 3% payment-in-kind annual 172 interest Wiser Imagery Services, $3.1 LIBOR+5.5% 3% payment-in-kind annual 135 LLC interest SpinLaunch, Inc. $2.5 LIBOR+3.5% 3% payment-in-kind annual 66 interest Semantic AI, Inc. $0.5 LIBOR+3.5% 3% payment-in-kind annual 51 interest Map Large, Inc. $10.0 LIBOR+5.5% 3% payment-in-kind annual 37 interest Core Avionics & $6.0 LIBOR+5.5% 3% payment-in-kind annual 25 Industrial, Inc. interest Meridian Rapid Defense $7.1 LIBOR+5.5% 3% payment-in-kind annual 14 Group, LLC interest Visual Semantics, Inc. $1.1 LIBOR+5.5% 3% payment-in-kind annual 9 interest Channel Logistics, LLC $2.5 LIBOR+3.5% 3% payment-in-kind annual 6 interest oVio Technologies, Inc. $1.2 LIBOR+5.5% 3% payment-in-kind annual 6 interest YRC Worldwide $700.0 LIBOR+3.5% 29.6% of common stock n/a Source: U.S. Treasury, various transaction summaries, at https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses. Notes: Al information as reported by Treasury. Recipients have until March 26, 2021, to draw the ful amount of the loan approved. LIBOR is the London Interbank Offered Rate, a short-term interbank borrowing rate. Air Carrier Worker Support28 Section 4120 appropriates $32 bil ion to assist aviation workers. From this amount, Section 4112 al ows the Treasury Secretary to provide  up to $25 bil ion for passenger air carriers,  up to $4 bil ion for cargo air carriers, and  up to $3 bil ion for contractors who provide ground services—such as catering services or on-airport functions—directly to air carriers. Al such assistance must be used exclusively for continuing the payment of employee wages, salaries, and benefits. Section 4117 gives the Treasury Secretary discretion to determine what compensation to seek for this assistance. Treasury announced it would not seek compensation from recipients receiving less than a minimum amount under the program. However, Treasury determined that passenger air carriers receiving payroll support of more than $100 mil ion, cargo 28 For detailed analysis of the payroll support program, see CRS Insight IN11482, CARES Act Payroll Support to Air Carriers and Contractors, by Rachel Y. T ang. Congressional Research Service 7 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act air carriers receiving more than $50 mil ion, and eligible contractors receiving more than $37.5 mil ion are required to provide financial instruments as appropriate compensation. For compensation, a fraction of the support above the minimum value must be repaid over 10 years with a 1% interest rate for the first five years (and an adjustable interest rate thereafter).29 Compensation also included 3% payment-in-kind interest for privately held companies and warrants for publicly held companies that would have value to the Treasury only if the recipient’s share price rises above its value on April 9, 2020 during the next five years.30 The Treasury Secretary is required to coordinate with the Transportation Secretary in implementing the relief for aviation workers. Section 4113 indicates that eligible airlines or contractors would receive an amount equal to their 2019 second- and third-quarter (from April 1, 2019 through September 30, 2019) salaries and benefits. If it were determined that the aggregate amount of eligible

~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~Suspension of Aviation Excise Taxes~~
~~Section 4007 institutes a suspension of excise taxes, including taxes on airline passenger ticket~~
~~sales, segment fees, air cargo fees, and aviation fuel taxes paid by both commercial and general~~
~~aviation aircraft, until December 31, 2020. These taxes and fees have been the primary revenue~~
~~sources for the federal Airport and Airways Trust Fund, which supports multiple federal aviation~~
~~programs.20~~
~~The congressional Joint Committee on Taxation estimated the tax revenue foregone as a result of~~
~~the authorized suspension to be over $4.3 billion.21 However, it is not possible to know the~~
~~amount of aviation taxes that would have been collected without the suspension, given the steep~~
~~decline in air travel as a result of the pandemic.22~~
~~Air Carrier Worker Support~~
~~Section 4120 appropriates $32 billion to assist aviation workers. From this amount, Section 4112~~
~~allows the Treasury Secretary to provide~~
~~ up to $25 billion for passenger air carriers,~~
~~ up to $4 billion for cargo air carriers, and~~
~~ up to $3 billion for contractors who provide ground services—such as catering~~
~~services or on-airport functions—directly to air carriers.~~
~~All such assistance must be used exclusively for continuing the payment of employee wages,~~
~~salaries, and benefits. Section 4117 gives the Treasury Secretary discretion to determine what~~
~~compensation to seek for this assistance. Treasury announced it would not seek compensation~~
~~from recipients receiving less than a minimum amount under the program.23 The Treasury~~
~~Secretary is required to coordinate with the Transportation Secretary in implementing the relief~~
~~for aviation workers.~~
~~Section 4113 indicates that eligible airlines or contractors would receive an amount equal to their~~
~~2019 second- and third-quarter (from April 1, 2019, through September 30, 2019) salaries and~~
~~benefits. The law required the Treasury Secretary to publish streamlined and expedited~~
~~procedures no later than 5 days from the enactment date and to make initial payments within 10~~

~~20 CRS Report R42781, Federal Civil Aviation Programs: In Brief, by Bart Elias and Rachel Y. Tang~~
~~21 The Joint Committee on Taxation, JCX-11R-20, April 23, 2020, at https://www.jct.gov/publications.html?func=~~
~~startdown&id=5255.~~
~~22 It is almost impossible to estimate the amount of tax revenues that would have been collected in the absence of the~~
~~suspension, without detailed knowledge of, for example, the number of revenue (ticketed) passengers, ticket prices~~
~~(7.5% ticket tax), the number of connections (segment tax), and the number of international passengers (international~~
~~departure/arrival tax). Projections are based on pre-pandemic numbers, thus it is difficult to parse the impact on air~~
~~travel demand. Moreover, other factors such as border restrictions and quarantine measures have considerable effect on~~
~~air travel as well.~~
~~23 Treasury announced that cargo air carriers receiving less than $50 million and cargo air contractors receiving less~~
~~than $37.5 million would not be required to provide compensation. See Treasury, “Treasury Implementing CARES Act~~
~~Programs for Aviation and National Security Industries,” press release, April 25, 2020, at https://home.treasury.gov/~~
~~news/press-releases/treasury-implementing-cares-act-programs-for-aviation-and-national-security-industries.~~
~~Reportedly, passenger air carriers receiving less than $100 million would not be required to provide compensation,~~
~~whereas “Major airlines must repay 30% of the funds in low-interest loans and grant Treasury warrants equal to 10% of~~
~~the loan amount.” See David Shepardson, “U.S. Treasury releases $2.9 billion in airline support, finalizes payroll~~
~~agreements,” Reuters, April 20, 2020, at https://www.reuters.com/article/us-health-coronavirus-usa-airlines/u-s-~~
~~treasury-releases-2-9-billion-in-airline-support-finalizes-payroll-agreements-idUSKBN22301Z.~~
~~Congressional Research Service~~
5

~~link to page 5 link to page 5 link to page 14~~ ~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~days from enactment to air carriers and contractors whose requests for such assistance are~~
~~approved.24 If it were determined that the aggregate amount of eligible~~ financial assistance financial assistance
exceeds exceeds the amount available, the Treasury Secretary would provide the available aid on a pro the amount available, the Treasury Secretary would provide the available aid on a pro
~~rata basis.~~
~~In his statement before the House Committee on Financial Services on June 30, 2020, Treasury~~
~~Secretary Steven Mnuchin reported that over $27 billion in payroll assistance had been approved~~
~~to be disbursed to more than 500 airlines and other aviation businesses, including passenger~~
~~airlines, cargo carriers, and eligible aviation-sector contractors.25~~
~~CARES Act Funding Available to the Federal Reserve26~~rata basis. As of the end of 2020, more than $28 bil ion in payroll support had been approved for disbursement to 611 recipients—nearly $25 bil ion to 352 passenger air carriers (some operating unscheduled service), $828 mil ion to 38 cargo carriers, and over $2.4 bil ion to 220 aviation- sector contractors. Of these, 32 recipients, receiving $26 bil ion of the payroll support, were required to provide compensation.31 Authority to issue payroll grants has not expired. However, the funding available for passenger air was nearly depleted by October, and the statutory requirement that recipients refrain from involuntary furloughs or pay-rate reductions expired on September 30, 2020. CARES Act Funding Available to the Federal Reserve32
The Federal Reserve, as the nation’s central bank, was created as a “lender of last resort” to the The Federal Reserve, as the nation’s central bank, was created as a “lender of last resort” to the
banking system when private sources of liquidity become unavailable.banking system when private sources of liquidity become unavailable.2733 This role is minimal This role is minimal in in
normal conditions but has been important in periods of financial instabilitynormal conditions but has been important in periods of financial instability~~, such as the 2007-~~
~~2009 financial crisis~~. Less frequently throughout its history, the Fed has also provided liquidity to . Less frequently throughout its history, the Fed has also provided liquidity to
firms that were not banks. In thefirms that were not banks. In the 2007-2009 financial crisis, the financial crisis, the ~~Fed~~Federal Reserve created a series of temporary facilities to created a series of temporary facilities to
lend to or purchase securities of nonbank financial firms and markets under emergency authority lend to or purchase securities of nonbank financial firms and markets under emergency authority
found in Section 13(3) of the Federal Reserve Actfound in Section 13(3) of the Federal Reserve Act ~~(12 U.S.C. §343). It has begun to do~~.34 It did so again so again
in response to COVID-19, even in response to COVID-19, even before enactment of the CARES Act.35 Although the CARES Act does not preclude the Fed from independently responding to COVID- 19 using its own funds, it is left to the Treasury Secretary to decide whether and how much of the 29 Loans were set equal to 30% of any amount a passenger airline received above $100 million, 56% of any amount a cargo airline received above $50 million, and 44% of any amount a contractor received above $37.5 million. 30 T erms and transaction information is available at https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/payroll-support-program-payments. 31 As of December 31, 2020, the most recent data on T reasury’s website is as of November 16, 2020. As T reasury is required to report new transactions on its website within 72 hours, this suggests that no new transactions have occurred in the intervening weeks. CRS calculations based on T reasury, “ Payroll Support Program Payments,” https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/payroll-support-program-payments. 32 T his section was written by Marc Labonte. 33 For background on the Fed, see CRS In Focus IF10054, Introduction to Financial Services: The Federal Reserve, by Marc Labonte. 34 12 U.S.C. §343. 35~~before enactment of the CARES Act.~~ For more information, see For more information, see
~~CRS~~ CRS Report R46411, Report R46411, The Federal Reserve’s Response to COVID-19: Policy Issues, by Marc , by Marc
~~Labonte.~~
~~Although the CARES Act does not preclude the Fed from independently responding to COVID-~~
~~19 using its own funds, it is left to the Treasury Secretary to decide whether and how much of the~~
Labonte. Congressional Research Service 8 link to page 4 link to page 4 link to page 15 link to page 23 link to page 23 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act CARES Act funds to provide to the Fed and on what general terms. After deducting assistance CARES Act funds to provide to the Fed and on what general terms. After deducting assistance
provided to the three specified industries, the remainder of the $500 provided to the three specified industries, the remainder of the $500 ~~billion~~bil ion—at least $454 —at least $454
~~billion—is available~~ bil ion—is available for Treasury to make loans, loan guarantees, or investments in programs or for Treasury to make loans, loan guarantees, or investments in programs or
facilities established by the Fed to “provid(e) liquidityfacilities established by the Fed to “provid(e) liquidity to the financial system that supports to the financial system that supports
lending to eligiblelending to eligible businesses, states, or municipalities.” As noted in the businesses, states, or municipalities.” As noted in the “Financial Assistance in
Division A, Title IV” section, eligible businesses and states are defined by the act. The Fed’s section, eligible businesses and states are defined by the act. The Fed’s
facilities may make loans, purchase newly issued obligations (e.g., debt securities) directly from facilities may make loans, purchase newly issued obligations (e.g., debt securities) directly from
issuers in primary markets, or purchase seasoned obligations from investors in secondary issuers in primary markets, or purchase seasoned obligations from investors in secondary
markets.markets.
The act provides Treasury and the Fed broad discretion on how to structure these programs or The act provides Treasury and the Fed broad discretion on how to structure these programs or
facilities. (Terms and conditions applying to this assistance are discussed in the section titled facilities. (Terms and conditions applying to this assistance are discussed in the section titled
“Terms and Conditions.”) ”) ~~Theoretically~~Theoretical y, the transactions could be structured in many different ways. In practice, Treasury has used CARES Act funding to make equity investments in Fed facilities as a backstop to cover any future losses, as described below. The act envisions the Fed using CARES Act funding to help two broad groups that had not been the targets of Fed emergency lending programs up to that point: (1) states (as defined by the act) and municipalities; and (2) medium-sized businesses, defined as those with between 500 and 10,000 employees, including nonfinancial businesses. Prior to the pandemic, the Fed had not lent to or purchased the securities of nonfinancial businesses and states and municipalities since the 1930s.36 The act encourages, but does not require, the Fed to work with the Treasury Secretary to create programs assisting these two groups and does not limit Fed assistance to these two groups only. Since enactment, the Fed has created programs to aid states and municipalities (the MLF) and smal - to medium-sized businesses (the MSLP). The intended recipient (medium-sized businesses) and purpose (to maintain employment) of the proposed facility are similar to the Fed’s MSLP (described below), but the terms differ. Federal Reserve Emergency Facilities Backed by CARES Act Funding In response to COVID-19, the Fed created several temporary emergency programs under Section 13(3) backed by Treasury investments using CARES Act funding. These facilities became fully operational between May 12, 2020, and September 4, 2020.37 On November 19, 2020, Treasury Secretary Mnuchin effectively terminated the facilities at the end of 2020.38 The facilities were:39 36 Howard Hackley, Lending Functions of the Federal Reserve Banks, Federal Reserve, 1973, p. 130. See also David Fettig, Lender of More Than Last Resort, Federal Reserve Bank of Minneapolis, December 1, 2002, https://www.minneapolisfed.org/publications/the-region/lender-of-more-than-last-resort; James Dolley, “ T he Industrial Advance Program of the Federal Reserve System,” Quarterly Journal of Econom ics, vol. 50, no. 2 (February 1936), p. 229; and David H. Small and James A. Clouse, The Scope of Monetary Policy Actions Authorized Under the Federal Reserve Act, Federal Reserve, Working P aper, July 19, 2004, https://www.federalreserve.gov/pubs/feds/2004/200440/200440pap.pdf. 37 GAO, Federal Reserve Lending Programs: Use of CARES Act -Supported Programs Has Been Limited and Flow of Credit Has Generally Improved, GAO-21-180, December 10, 2020, https://www.gao.gov/assets/720/711141.pdf. 38 T reasury Secretary Mnuchin, letter to Federal Reserve Board Chairman Powell, November 19, 2020, https://home.treasury.gov/system/files/136/letter11192020.pdf. Later, the MSLP was extended until January 8 in order to allow loan applications received before December 14 to be processed. See the section below entitled “ Winding Down CARES Act Programs.” 39 U.S. T reasury, Exchange Stabilization Fund Statement of Financial Position , October 31, 2020, footnote 2. In addition, the Fed created two facilities backed by ESF funding that are not identified as subject to the CARES Act —the Congressional Research Service 9 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act  Primary Market Corporate Credit Facility (PMCCF) and Secondary Market Corporate Credit Facility (SMCCF). The Fed created two new facilities to support corporate bond markets—the PMCCF to purchase newly issued corporate debt and syndicated loans from issuers and the SMCCF to purchase existing corporate debt or corporate debt exchange-traded funds on secondary markets.40 The issuer was required to have material operations in the United States and could not receive direct federal financial assistance related to COVID-19. The SMCCF began purchasing securities in May with the goal of holding a broad portfolio. In its last monthly report to Congress, the Fed stated that the PMCCF had not purchased any debt as of November 30.41  Term Asset-Backed Securities Loan Facility (TALF). To support asset-backed securities (ABS) markets, the TALF made nonrecourse, three-year loans to private investors to purchase newly issued, highly rated ABS backed by various types of nonmortgage loans.42 Eligible ABS included those backed by certain auto loans, student loans, credit card receivables, equipment loans, floorplan loans, insurance premium finance loans, smal business loans guaranteed by the Smal Business Administration (SBA), commercial real estate, or leveraged loans or servicing advance receivables.  Main Street Lending Program (MSLP). The MSLP bought new or expanded loans from depository institutions that were five-year loans~~, the transactions could be structured in many different~~

~~24 The procedures were published on March 30, 2020. See Treasury, Guidelines and Application Procedures for Payroll~~
~~Support to Air Carriers and Contractors under Division A, Title IV, Subtitle B of the Coronavirus Aid, Relief, and~~
~~Economic Security Act, at https://home.treasury.gov/system/files/136/~~
~~Guidelines%20and%20Procedures%20for%20Payroll%20Support%20to%20Air%20Carriers%20and%20Contractors.p~~
~~df.~~
~~25 Treasury, “Statement of Secretary Steven T, Mnuchin Before the House Committee on Financial Service,” press~~
~~release, June 30, 2020, at https://home.treasury.gov/news/press-releases/sm1046. More detailed payroll support~~
~~program data, including a list of participants and amounts of assistance provided, is available on the Treasury website~~
~~at https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/payroll-support-program-~~
~~payments.~~
~~26 This section was written by Marc Labonte.~~
~~27 For background on the Fed, see CRS In Focus IF10054, Introduction to Financial Services: The Federal Reserve, by~~
~~Marc Labonte.~~
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~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~ways. In practice, Treasury has used CARES Act funding to make equity investments in Fed~~
~~facilities as a backstop to cover any future losses, as described below.~~
~~Federal Reserve Emergency Facilities Backed by the ESF~~
~~In response to COVID-19, the Fed has created the following temporary emergency programs that~~
~~are backed by Treasury investments from the ESF:28~~
~~ Commercial Paper Funding Facility (CPFF). The CPFF purchases newly~~
~~issued commercial paper from all types of U.S. issuers who cannot find private-~~
~~sector buyers.29 Commercial paper is short-term debt issued by financial firms~~
~~(including banks), nonfinancial firms, and “asset backed” pass-through entities~~
~~that purchase loans.30~~
~~ Money Market Fund Liquidity Facility (MMLF). The MMLF makes~~
~~nonrecourse loans to financial institutions to purchase assets that money market~~
~~funds are selling to meet redemptions.31 This reduces the probability of runs on~~
~~money market funds caused by a fund’s inability to liquidate assets.32~~
 Primary Market Corporate Credit Facility (PMCCF) and Secondary
Market Corporate Credit Facility (SMCCF). The Fed created two new
~~facilities to support corporate bond markets—the PMCCF to purchase newly~~
~~issued corporate debt or syndicated loans from issuers and the SMCCF to~~
~~purchase existing corporate debt or corporate debt exchange-traded funds on~~
~~secondary markets.33 The issuer must have material operations in the United~~
~~States and cannot receive direct federal financial assistance related to COVID-19.~~
~~ Term Asset-Backed Securities Loan Facility (TALF). The TALF makes~~
~~nonrecourse, three-year loans to private investors to purchase newly issued,~~
~~highly rated asset-backed securities (ABS) backed by various nonmortgage~~
~~loans.34 Eligible ABS include those backed by certain auto loans, student loans,~~
~~credit card receivables, equipment loans, floorplan loans, insurance premium~~
~~finance loans, small business loans guaranteed by the Small Business~~
~~Administration (SBA), commercial real estate, leveraged loans, or servicing~~
~~advance receivables.~~

~~28 The Fed also created emergency facilities in response to COVID-19 that did not involve CARES Act funding. For~~
~~information on those facilities, see CRS Insight IN11327,~~ ~~Federal Reserve: Emergency Lending in Response to~~
~~COVID-19, by Marc Labonte.~~
~~29 Federal Reserve, “Federal Reserve Board Announces Establishment of a Commercial Paper Funding Facility (CPFF)~~
~~to Support the Flow of Credit to Households and Businesses,” press release, March 17, 2020, at~~
~~https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm.~~
~~30 For more on commercial paper, see CRS Insight IN11332,~~ ~~COVID-19: Commercial Paper Market Strains and~~
~~Federal Government Support, by Rena S. Miller.~~
~~31 Federal Reserve, “Federal Reserve Board broadens program of support for the flow of credit to households and~~
~~businesses by establishing a Money Market Mutual Fund Liquidity Facility (MMLF),” press release, March 18, 2020,~~
~~at https://www.federalreserve.gov/newsevents/pressreleases/monetary20200318a.htm.~~
~~32 For more on money market mutual funds, see CRS In Focus IF11320,~~ ~~Money Market Mutual Funds: A Financial~~
~~Stability Case Study, by Eva Su.~~
~~33 Federal Reserve, “Federal Reserve Announces Extensive New Measures to Support the Economy,” press release,~~
~~March 23, 2020, at https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm (hereinafter~~
~~cited as Federal Reserve, “New Measures to Support the Economy”).~~
~~34 Federal Reserve, “New Measures to Support the Economy.”~~
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~~ Main Street Lending Program (MSLP). The MSLP buys new or expanded~~
~~loans from banks or credit unions~~ to businesses and nonprofits with up to 15,000 to businesses and nonprofits with up to 15,000
employees or up to $5 employees or up to $5 ~~billion~~bil ion in revenues. in revenues. ~~These loans are to be five-year~~The loans loans
~~with~~ deferred principal deferred principal ~~repayment~~ for two years and interest repayment for one for two years and interest repayment for one
year, and year, and ~~the businesses would have~~borrowers had to make a “ to make a “~~commercially~~ reasonable effort” reasonable effort”
to retain employees. This program to retain employees. This program ~~may be~~was particularly attractive to businesses particularly attractive to businesses
~~too large to qualify for SBA assistance.~~
~~ Municipal Liquidity Facility (MLF). The MLF purchases shorter-term state~~
~~and municipal debt in response to higher yields and reduced liquidity in that~~
~~market. The facility purchases only debt in anticipation of taxes or dedicated~~
~~revenues of states, larger counties (with at least 500,000 residents), and larger~~
~~cities (with at least 250,000 residents). However, states without at least two~~
~~counties and cities that meet the minimum population limit can designate any~~
~~combination of their two largest counties or cities to participate.~~
~~Some programs were announced with an overall size limit (see Table 1). During the 2008~~
~~financial crisis, however, actual activity typically did not match the announced size. These~~
~~facilities extend the Fed’s traditional “lender of last resort” role for banks to be the “buyer of last~~
~~resort” for broad segments of financial markets that have become illiquid due to COVID-19 and~~
~~“lender of last resort” for nonfinancial firms. To extend its traditional role, the Fed has used its~~
~~Section 13(3) emergency lending authority. The Fed also used this authority to assist nonbank~~
~~financial firms and markets in the 2008 financial crisis. The 2020 facilities go beyond the scope~~
~~of the 2008 facilities by purchasing loans of nonfinancial businesses and debt of states and~~
~~municipalities. In some programs, the Fed purchases securities in affected markets directly. In~~
~~other programs, the Fed makes loans to financial institutions or investors to intervene in affected~~
~~markets; these loans are typically made on attractive terms to incentivize activity, including by~~
~~shifting the credit risk to the Fed.~~
~~By law, the Fed must structure these facilities to avoid expected losses, and the facilities charge~~
~~users interest and/or fees as compensation. To that end, Treasury has pledged ESF funds for each~~
~~of these facilities to protect the Fed from future losses—although these losses would still be borne~~
~~by the federal government.35 The Treasury Secretary approved each facility.~~
~~The loans and asset purchases of the facilities are funded by the Fed using its resources but are~~
~~backed by the ESF in the event of losses. Before enactment of P.L. 116-136, Treasury had already~~
~~made equity investments through the ESF in some Fed emergency programs created in response~~
~~to COVID-19. The MSLP and the MLF were created after the CARES Act’s enactment; the other~~
~~facilities were created or announced before the CARES Act. Because the CARES Act~~
~~appropriated $500 billion to the ESF, there is ambiguity about which of these programs backed by~~
~~ESF funding are subject to CARES Act requirements.36 The Fed has not provided consistent or~~
~~centralized information on which programs are subject to the CARES Act in its reporting to the~~

~~35 The ESF was not used to backstop 13(3) programs in 2008, but some programs were backed by other Treasury funds.~~
~~36 The ESF held $93 billion in assets before enactment of the CARES Act. It is unclear to what extent these assets~~
~~could hypothetically be used to support Fed programs in excess of the CARES Act funding.~~
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~~public or Congress.37 Table 1 is based on how the programs were characterized in testimony by~~
~~Fed Chair Jerome Powell on June 30, 2020.38~~
~~Table 1~~ ~~summarizes how much CARES Act funding has been~~too large to qualify for SBA assistance, such as the Paycheck Protection Program.43 The MSLP consisted of five facilities. Eligibility for each facility depended on the type of loan and type of borrower. “Medium-sized” businesses may have been too smal to issue publicly traded debt securities that the Fed was purchasing through the PMCCF and SMCCF and too large to qualify for SBA assistance provided by the CARES Act, such as the Payroll Protection Program.44  Municipal Liquidity Facility (MLF). The MLF purchased shorter-term state and municipal debt in response to higher yields and reduced liquidity in that market. The facility purchased only tax or revenue anticipation debt of states, Commercial Paper Funding Facility and the Money Market Liquidity Facility. T he Fed also created emergency facilities in response to COVID-19 that did not involve CARES Act funding. For information on those facilities, see CRS Insight IN11327, Federal Reserve: Em ergency Lending in Response to COVID-19, by Marc Labonte. 40 Federal Reserve, “Federal Reserve Announces Extensive New Measures to Support the Economy,” press release, March 23, 2020, at https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm (hereinafter cited as Federal Reserve, “New Measures to Support the Economy ”). 41 Federal Reserve, Periodic Report: Update on Outstanding Lending Facilities Authorized by the Board Under Section 13(3) of the Federal Reserve Act, September 7, 2020, https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-mslpf-nonlf-noelf-9-8-20.pdf#page=3. T he Fed’s weekly disclosures do not include a breakdown of activity between the PMCCF and SMCCF. 42 Federal Reserve, “New Measures to Support the Economy.” 43 For more information, see CRS In Focus IF11632, The Federal Reserve’s Main Street Lending Program , by Marc Labonte and Lida R. Weinstock. 44 For CARES Act assistance to small businesses through SBA programs, see CRS Report R46284, COVID-19 Relief Assistance to Sm all Businesses: Issues and Policy Options, by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry . Congressional Research Service 10 link to page 14 link to page 12 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act larger counties (with at least 500,000 residents), and larger cities (with at least 250,000 residents). However, states without at least two counties and cities that met the minimum population limit could designate any combination of their two largest counties or cities to participate.45 Table 2 summarizes how much CARES Act funding was pledged to each facility. In total, $195 bil ion was pledged.46 Several modifications were made to the facilities over the course of their operation to make them more attractive to recipients. Nevertheless, when the facilities closed at the end of 2020, outstanding assistance was smal ($41.1 bil ion) relative to their announced size (a combined $1.95 tril ion). As discussed below, the Fed and Treasury agreed to reduce this amount because it exceeds potential losses. Table 2 ~~pledged to each facility. In total,~~
~~$215 billion has been pledged to date, but if limited to the programs identified as CARES Act~~
~~programs by Chair Powell, that total is $195 billion. As long as there are unpledged CARES Act~~
~~and non-CARES Act funds remaining within the ESF—and less than half the amount authorized~~
~~under the CARES Act has been pledged to date under either measure—this distinction does not~~
~~limit the Fed’s future response. The distinction does determine which programs are subject to the~~
~~terms and conditions of the CARES Act, however, which are summarized in Table 2.~~
~~Table 1~~. Federal Reserve COVID-19 Emergency Programs Backed by CARES Act
Funding
( (~~billions of dollars)~~
~~Chair Powell~~
~~Announced~~
~~ESF Funds~~
~~Identified as~~

~~Size Limit~~
~~Pledged~~
~~CARES Act?~~
~~Facilities Created Prior to Enactment~~ bil ions of dol ars) Federal Reserve Funds Treasury (ESF) Assistance Announced Size Limit Outstanding 12/30/20 CARES Funds Pledged Facilities Announced Prior to Enactment of CARES Act Primary Market Corporate Credit $750 $14.1 $75 Facility/Secondary ~~of CARES Act~~

~~Commercial Paper Funding Facility~~
~~n/a~~
~~$10~~
N
~~Money Market Fund Liquidity Facility~~
~~n/a~~
~~$10~~
N
~~Primary Market Corporate Credit Facility/Secondary~~
Y
Market Corporate Credit Facility Market Corporate Credit Facility
~~$750~~
~~$75~~
~~Term Asset-Backed Securities~~ Term Asset-Backed $4.1 Securities Loan Facility Loan Facility
$100 $100
$10 $10
Y
Facilities ~~Created~~ Announced Since Enactment of CARES Act

Main Street Lending Main Street Lending ~~Program~~Programa
$600 $600
$ $75
Y16.5 $75
Municipal Liquidity Facility Municipal Liquidity Facility
$500 $500
$ $35
Y6.4 $35
Total
~~n/a~~
~~$215~~$1,950 $41.1
$195
Source: ~~Congressional Research Service (CRS).~~
Note: See the “Federal Reserve Emergency Facilities Backed by the ESF” section for details.

~~37 For example, the Fed appears to consider the PMCCF and SMCCF to be CARES Act programs, but the term sheets~~
~~for those programs do not identify them as such. Further, in one of the press releases announcing the disclosures~~
~~referenced by Chair Powell, the Fed stated that “... information it will publicly disclose for the TALF and the Paycheck~~
~~Protection Program Liquidity Facility (PPPLF) on a monthly basis.... The disclosures are similar to those announced in~~
~~April for the Board facilities that utilize CARES Act funds.” (See Federal Reserve, “Federal Reserve publishes updates~~
~~to the term sheet for the Term Asset-Backed Securities Loan Facility (TALF) and announces information to be~~
~~disclosed monthly for the TALF and the Paycheck Protection Program Liquidity Facility,” press release, May 12, 2020,~~
~~at https://www.federalreserve.gov/newsevents/pressreleases/monetary20200512a.htm.) This announcement would~~
~~seem to suggest that the Fed does not consider TALF to be subject to the CARES Act.~~
~~38 U.S. Congress, House Committee on Financial Services,~~ ~~Oversight of the Treasury Department’s and Federal~~
~~Reserve’s Pandemic Response, Statement by Jerome H. Powell, Chair of the Board of Governors of the Federal~~
~~Reserve System, 116th Cong., 2nd sess., June 30, 2020, at https://financialservices.house.gov/uploadedfiles/hhrg-116-~~
~~ba00-wstate-powellj-20200630.pdf.~~
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~~There has been talk of how the Fed can “leverage” the CARES Act funding of $454 billion (or~~
~~more) into greater amounts of assistance by combining it with the Fed’s funds.39 Although the use~~
~~of this term is more colloquial than technical from a financial perspective, Table 1 illustrates how~~
~~this is accomplished. For example, the MLF is planned to purchase up to $500 billion of assets~~
~~using $35 billion of CARES Act funding.~~
~~Tracking CARES Act Funding for Federal Reserve Programs~~
~~As required by law, the Fed has issued monthly reports to Congress describing the purpose and~~
~~details of each facility.40 In these reports and accompanying transaction records, the Fed has~~
~~disclosed “names and details of participants in each facility; amounts borrowed and interest rate~~
~~charged; and overall costs, revenues, and fees for each facility.”41 Total loans or asset purchases~~
~~through the facilities are published weekly as part of the Fed’s balance sheet.42 The Fed also~~
~~provides details on emergency facilities’ activities in quarterly reports.43 As of July, outstanding~~
~~assistance under the facilities has been small relative to 2008 financial crisis facilities, but several~~
~~of the facilities were only recently opened and have not ramped up activity yet.~~
~~Assistance to States and Municipalities and Medium-Sized Businesses~~
~~The act envisions the Fed using CARES Act funding to help two broad groups that had not been~~
~~the targets of Fed emergency lending programs up to that point: (1) states (as defined by the act)~~
~~and municipalities; and (2) medium-sized businesses, defined as those with between 500-10,000~~
~~employees, including nonfinancial businesses. The Fed has not lent to or purchased the securities~~
~~of nonfinancial businesses and states and municipalities since the 1930s.44 “Medium-sized”~~
~~businesses may be too small to issue publicly-traded debt securities that the Fed is purchasing~~
~~through the PMCCF and SMCCF and too large to qualify for SBA assistance provided by the~~

~~39 See, for example, Jeanna Smialek, “How the Fed’s Magic Money Machine Will Turn $454 Billion Into $4 Trillion,”~~
New York Times, March 26, 2020, at https://www.nytimes.com/2020/03/26/business/economy/fed-coronavirus-
~~stimulus.html.~~
~~40 See Federal Reserve, “Reports to Congress Pursuant to Section 13(3) of the Federal Reserve Act in response to~~
~~COVID-19,” available at https://www.federalreserve.gov/publications/reports-to-congress-in-response-to-covid-~~
~~19.htm.~~
~~41 Federal Reserve, “Federal Reserve Board outlines the extensive and timely public information it will make available~~
~~regarding its programs to support the flow of credit to households and businesses and thereby foster economic~~
~~recovery,” press release, April 23, 2020, at https://www.federalreserve.gov/newsevents/pressreleases/~~
~~monetary20200423a.htm. For emergency facilities that are not identified as CARES Act facilities in Table 1 (with the~~
~~exception of the Paycheck Protection Program Liquidity Facility), the Fed has not provided monthly transaction~~
~~records. However, these facilities are subject to Dodd-Frank disclosure requirements, under which the Fed must~~
~~publicly disclose transaction data a year after a facility is terminated or two years after lending ceases, whichever~~
~~comes first.~~
~~42 See Federal Reserve, “Factors Affecting Reserve Balances - H.4.1,” available at https://www.federalreserve.gov/~~
~~releases/h41/.~~
~~43 See Federal Reserve, “Quarterly Report on Federal Reserve Balance Sheet Developments,” available at~~
~~https://www.federalreserve.gov/monetarypolicy/quarterly-balance-sheet-developments-report.htm.~~
~~44 Howard Hackley, Lending Functions of the Federal Reserve Banks, Federal Reserve, 1973, p. 130. See also David~~
~~Fettig, Lender of More than Last Resort, Federal Reserve Bank of Minneapolis, December 1, 2002, at~~
~~https://www.minneapolisfed.org/publications/the-region/lender-of-more-than-last-resort; James Dolley, “The Industrial~~
~~Advance Program of the Federal Reserve System,” The Quarterly Journal of Economics, vol. 50, no. 2 (February 1936)~~
~~p. 229; and David H. Small and James A. Clouse,~~ ~~The Scope of Monetary Policy Actions Authorized under the Federal~~
~~Reserve Act, Federal Reserve, Working Paper, July 19, 2004, at https://www.federalreserve.gov/pubs/feds/2004/~~
~~200440/200440pap.pdf.~~
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~~CARES Act, such as the Payroll Protection Program.45 The act encourages, but does not require,~~
~~the Fed to work with the Treasury Secretary to create programs assisting these two groups and~~
~~does not limit Fed assistance to these two groups only.~~
~~In particular, Section 4003 presents a detailed proposal for assisting businesses with 500-10,000~~
~~employees. This proposal is not required by the act, but the Treasury Secretary “shall endeavor to~~
~~seek the implementation of” a Fed facility that provides financing to banks and other lenders to~~
~~make direct loans to U.S. “eligible businesses” (as defined) and nonprofits at an interest rate not~~
~~higher than 2% and with no principal or interest due for six months to retain their workforces.~~
~~There are a series of restrictions on the borrower.~~
~~Since enactment, the Fed has created programs to aid states and municipalities (the MLF) and~~
~~small- to medium-sized businesses (the MSLP). The intended recipient (medium-sized~~
~~businesses) and purpose (to maintain employment) of the proposed facility are similar to the~~
~~Fed’s MSLP (described above), but the terms differ. Section 4003 states that the medium-sized~~
~~business proposal outlined does not preclude the Fed from separately establishing the MSLP.~~
~~Terms and Conditions46~~
~~Section 4003 sets forth a number of terms and conditions for the assistance provided. Some of~~
~~these provisions apply broadly to both assistance extended to the Fed and the specified industries,~~
~~and others apply only to specified industries. Table 2 compares and contrasts the various terms~~
~~and conditions for each of these programs. In addition, there are oversight and reporting~~
~~requirements associated with the assistance, which are detailed in the section titled~~ ~~“Oversight~~
~~Provisions.”~~
~~Table 2. Comparison of Terms and Conditions Applying to the $500 Billion Provided~~
~~to the Exchange Stabilization Fund (ESF)~~
~~Specified Industry~~
~~Federal Reserve~~
~~Term~~
~~Assistance~~
~~Programs~~
~~Eligible borrowers affected by COVID-19~~
~~Businesses related to air~~
~~As defined, eligible~~
~~carriers, cargo air carriers,~~
~~businesses, states, and~~
~~or businesses critical to~~
~~municipalities~~
~~maintaining national security~~
~~Secretary sets terms, conditions, etc. on CARES~~
~~Applies~~
~~Applies~~
~~Act funding~~
~~10-day deadline for releasing application~~
~~Applies~~
~~Does not apply~~
~~procedures~~
~~Treasury may make loans or loan guarantees~~
~~Applies~~
~~Applies~~
~~Treasury may make investments~~
~~Does not apply~~
~~Applies~~
~~Secretary determination that credit is not~~
~~Applies~~
~~Does not apply~~
~~available, assistance is prudent, firm has losses;~~
~~interest rate reflects risk and market rates before~~
~~crisis~~

~~45 For CARES Act assistance to small businesses through Small Business Administration programs, see CRS Report~~
~~R46284, COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options, by Robert Jay Dilger, Bruce R.~~
~~Lindsay, and Sean Lowry.~~
~~46 This section was written by Andrew Scott, Marc Labonte, and Rachel Tang.~~
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~~Specified Industry~~
~~Federal Reserve~~
~~Term~~
~~Assistance~~
~~Programs~~
~~Duration is as short as practicable and no more~~
~~Applies~~
~~Does not apply~~
~~than five years~~
~~Share buybacks/dividends prohibited until 12~~
~~Applies~~
~~Applies to direct loans only,~~
~~months after repayment~~
~~Secretary may waivea~~
~~Maintaining employment levels required~~
~~Applies~~
~~Does not applya~~
~~Limited to U.S. businesses~~
~~Applies~~
~~Applies~~
~~Executive compensation restrictions~~
~~Applies~~
~~Applies to direct loans only,~~
~~Secretary may waive~~
~~Firm must issue equity, warrants, or other~~
~~Applies~~
~~Does not apply~~
~~compensation to government~~
~~Assistance ineligible for loan forgiveness~~
~~Applies~~
~~Applies~~
~~Order of priority on repayment of funds~~
~~Applies~~
~~Applies~~
~~Administrative authority~~
~~Applies~~
~~Applies~~
~~Use of private financial agents~~
~~Applies~~
~~Applies~~
~~Tax treatment for recipient~~
~~Applies~~
~~Applies~~
~~Special Inspector General jurisdiction~~
~~Applies~~
~~Applies to Treasury activities~~
~~Conflicts of interest~~
~~Applies~~
~~Applies~~
~~Congressional Oversight Commission jurisdiction Applies~~
~~Applies~~
~~Reporting, testimony requirements~~
~~Applies~~
~~Applies (subject to 12 U.S.C.~~
~~§343(3) requirements)~~
~~Public release of assistance or administrative~~
~~Applies~~
~~Does not apply~~
~~contract agreements~~
~~Government Accountability Office studies~~
~~Applies~~
~~Applies~~
~~Treasury funding appropriated to ESF~~
~~Applies~~
~~Applies~~
~~Rule of construction~~
~~Applies~~
~~Applies~~
Source: CRS analysis of terms and conditions found in Sections 4003, 4004, 4018, 4019, 4020, 4026, 4027,
~~4028, and 4029.~~
Notes: “Secretary” refers to Treasury Secretary. “Specified industries” refer to firms that are related to
~~commercial airlines, cargo airlines, or those “critical to maintaining national security.” Descriptions are~~
~~summarized—see the main text of this report for more detail.~~
~~a. The table does not include a number of restrictions that apply only to a Fed facility for mid-size businesses.~~
~~Loan and Loan Guarantee Terms and Conditions for Specified Industries~~
~~In an effort to ensure assistance is used to maintain employment levels and the ongoing viability~~
~~of the recipient, Section 4003 loans and loan guarantees must satisfy several terms and~~
~~conditions. To approve the loans, the Treasury Secretary must determine that other credit is not~~
~~reasonably available to the applicant at the time of the transaction. The intended obligation must~~
~~be prudently incurred by the borrower, and the loan must be sufficiently secured or made at a rate~~
~~that reflects the risk of the loan or loan guarantee—to the extent practicable—and not less than an~~
~~interest rate based on market conditions for comparable obligations prevalent prior to the~~
~~outbreak of COVID-19. The duration of the loan must be as short as practicable—not to exceed~~
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~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~five years. Further, Treasury may not issue a loan or loan guarantee unless it receives warrants,47~~
~~senior debt, or equity in the borrower.~~
~~Additional terms and conditions apply to the loan or loan guarantee recipient. The agreement~~
~~must provide that neither the borrower nor any affiliate may engage in stock buybacks, unless~~
~~contractually~~CRS based on various Federal Reserve documents and U.S. Treasury, Exchange Stabilization Fund Statement of Financial Position, July 31, 2020, footnote 2, https://home.treasury.gov/system/files/206/ESF_July_Trunc_Footnotes-82720.pdf. Note: See the “Federal Reserve Emergency Facilities Backed by CARES Act Funding” section for details. a. There are five facilities under the Main Street Lending Program—the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility, and the Nonprofit Organization Expanded Loan Facility. These facilities extended the Fed’s traditional “lender of last resort” role for banks to be the “buyer of last resort” for broad segments of financial markets that have become il iquid due to COVID-19 and “lender of last resort” for nonfinancial firms. The 2020 facilities go beyond the scope of the 2008 facilities by purchasing loans of nonfinancial businesses and debt of states and municipalities. In some programs, the Fed purchases securities in affected markets directly. In other programs, the Fed makes loans to financial institutions or investors to intervene in affected 45 For more information, see CRS In Focus IF11621, COVID-19: The Federal Reserve’s Municipal Liquidity Facility, by Grant A. Driessen and Marc Labonte. 46 An additional $20 billion in ESF funding was pledged for Fed programs not subject to the CARES Act. Congressional Research Service 11 link to page 16 link to page 14 link to page 16 link to page 19 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act markets; these loans are typical y made on attractive terms to incentivize activity, including by shifting the credit risk to the Fed. The loans and asset purchases of the facilities are funded by the Fed using its resources. By law, the Fed must structure these facilities to avoid expected losses, and the facilities charge users interest and/or fees as compensation.47 To that end, Treasury has pledged ESF funds for each of these facilities to protect the Fed from future losses—although these losses would stil be borne by the federal government.48 Because of the long maturity of some of these transactions, losses, if any, wil not be realized for some time after the facilities have expired. The Treasury Secretary approved the creation of each facility. The facilities have been structured as special purpose vehicles (SPVs) created and controlled by the Fed. This structure facilitates the pooling of Fed and Treasury funds and avoids legal restrictions on the purchase of assets that are ineligible for purchase under the Federal Reserve Act, such as corporate debt. Although legal y separated from the Fed, income and losses from the SPVs stil flow to the Fed (and Treasury, in cases where ESF funds are pledged), and the SPVs appear on the Fed’s consolidated balance sheet. The Fed created similar emergency facilities, some backed by ESF, that are not subject to the CARES Act during the pandemic.49 This distinction determines which programs are subject to the terms and conditions of the CARES Act, however, which are summarized in Table 3. There was talk of how the Fed could “leverage” the CARES Act funding of $454 bil ion (or more) into greater amounts of assistance by combining it with the Fed’s funds.50 Although the use of this term is more colloquial than technical from a financial perspective, Table 2 il ustrates how this was accomplished. For example, the MLF had planned to purchase up to $500 bil ion of assets using $35 bil ion of CARES Act funding. Terms and Conditions51 Title IV sets forth a number of terms and conditions for the assistance provided. Some of these provisions apply broadly to both assistance extended to the Fed and the specified industries, and others apply only to specified industries. Table 3 compares and contrasts the various terms and conditions for each of these programs. Oversight and reporting requirements associated with the assistance are discussed in more detail in the section titled “Oversight Provisions.” 47 12 U.S.C. §343. 48 T he ESF was not used to backstop Section 13(3) programs in 2008, but some programs were backed by other T reasury funds. 49 Fed facilities have not been identified as subject to the CARES Act based on when the facility was announced or whet her it is backed by ESF funding. Before enactment of P.L. 116-136, T reasury had already made equity investments through the ESF in some Fed emergency programs created in response to COVID-19. T he MSLP and the MLF were announced after the CARES Act’s enactment . All other facilities were created or announced before the CARES Act. 50 See, for example, Jeanna Smialek, “ How the Fed’s Magic Money Machine Will T urn $454 Billion Into $4 T rillion,” New York Tim es, March 26, 2020, at https://www.nytimes.com/2020/03/26/business/economy/fed-coronavirus-stimulus.html. 51 T his section was written by Andrew Scott, Marc Labonte, and Rachel T ang. Congressional Research Service 12 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Table 3. Comparison of Terms and Conditions Applying to the $500 Billion Provided to the Exchange Stabilization Fund (ESF) Specified Industry Section(s) of Assistance/Air Carrier Federal Reserve the CARES Term Worker Support Programs Act Treasury may make loans or loan Applies to specified Applies 4003 guarantees industry loans Treasury may make investments Does not apply Applies 4003 Eligible borrowers affected by Businesses related to air As defined, eligible 4003(b) COVID-19 carriers, cargo air carriers, businesses, states, and 4013 or businesses critical to municipalities maintaining national security; worker support applies to certain air carriers and contractors Secretary sets terms, conditions, Applies to specified Applies 4003(c)(1) etc. on CARES Act funding industry loans and air 4113 carrier worker support 10-day deadline for releasing Applies to specified Does not apply 4003(c)(1) application procedures industry loans Secretary determination that credit Applies to specified Does not apply 4003(c)(2) is not available, assistance is industry loans and prudent, firm has losses; interest guarantees rate reflects risk and market rates before crisis Duration is as short as practicable Applies to specified Does not apply 4003(c)(2) and no more than five years industry loans and guarantees Share buybacks/dividends Applies to specified Applies to direct loans 4003(c)(2) prohibited until 12 months after industry loans for 12 only, Secretary may waiveb 4003(c)(3) repayment months after repayment;c applies to air carrier worker support through September 2021 Maintaining employment levels Applies to specified Does not applyb 4003(c)(2) required industry loans up to 4 4114 months after pandemic;d applies to air carrier worker support through September 2020a Limited to U.S. businesses Applies to specified Applies 4003(c)(3) industry loanse Equity, warrants, or other Required for loans to Does not apply 4003(d) compensation to government specified industries; at 4117 Treasury’s discretion for air carrier worker support Assistance ineligible for loan Applies to specified Applies 4003(d) forgiveness industry loans Order of priority on repayment of Applies to specified Applies 4003(e) funds industry loans Congressional Research Service 13 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Specified Industry Section(s) of Assistance/Air Carrier Federal Reserve the CARES Term Worker Support Programs Act Administrative authority Applies to specified Applies 4003(f) industry loans Use of private financial agents Applies to specified Applies 4003(g) industry loans Tax treatment for recipient Applies to specified Applies 4003(h) industry loans Executive compensation Applies to specified Applies to direct loans 4004 restrictions industry loans through 12 only, Secretary may waive 4116 months after receipt of loan; applies to air carrier worker support through March 24, 2022f Air carrier’s continued service Applies to specified Does not apply 4005 obligation industry loansg 4113 Special inspector general Applies to specified Applies to Treasury 4018 jurisdiction industry loans activities Conflicts of interest Applies to specified Applies 4019 industry loansh Congressional Oversight Applies to specified Applies 4020 Commission jurisdiction industry loans Col ective bargaining agreements Applies to specified Does not apply 4025 industry loansi and air 4115 carrier worker support programsj Reporting, testimony requirements Applies to specified Applies (subject to 12 4026 industry loan programs and U.S.C. §343(3) 4118 air carrier worker support requirements) programs Public release of assistance or Applies to specified Does not apply 4026 administrative contract agreements industry loans Government Accountability Office Applies to specified Applies 4026 studies industry loans Appropriations Section 4027 of the CARES Section 4027 of the 4027 Act appropriates funds to CARES Act appropriates 4119 ESF for Treasury loans; funds to ESF for Treasury Section 4119 appropriates investments in Fed funds for the air carrier facilities worker support program Limits terms and conditions to be in Applies to specified Applies 4028 federal government’s self interest industry loans Termination of authority New loans and guarantees 4029 cannot be made after 2020 Source: CRS analysis of terms and conditions found in Title IV of the CARES Act. Notes: Secretary refers to Treasury Secretary. Specified industries refers to firms that are related to commercial airlines, cargo airlines, or those “critical to maintaining national security.” Descriptions in the first column would also apply to loan guarantees, but no loan guarantees were made under Title IV. Descriptions are summarized—see the table notes for more detail. Congressional Research Service 14 link to page 16 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act a. To be eligible for grants to cover employee salaries under Section 4113, an air carrier or contractor must agree to refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020. b. The table does not include a number of restrictions that apply only to a Fed facility for mid -size businesses. c. The agreement must provide that neither the borrower nor any affiliate may engage in stock buybacks, unless contractual y obligated to do so, or pay dividends until 12 months after the date the loan is no obligated to do so, or pay dividends until 12 months after the date the loan is no
longer outstanding.longer outstanding. d. Until SeptemberUntil September 30, 2020, the borrower30, 2020, the borrower must maintain its employmentmust maintain its employment ~~levels~~
levels as of March 24, 2020, to the as of March 24, 2020, to the extent practicable, and may not reduce its employmentextent practicable, and may not reduce its employment ~~levels by~~
~~more~~ levels by more than 10% from the levelsthan 10% from the levels on that date. on that date. e. The borrowerThe borrower must certify that it is a U.S.-domiciledmust certify that it is a U.S.-domiciled
business with significant operations in and a majoritybusiness with significant operations in and a majority of of its employeesits employees based in the United Statesbased in the United States.
~~The borrower must have incurred or must expect to incur covered losses such that the continued~~
~~operations of the business are or would be jeopardized, as determined by the Treasury Secretary.~~
~~Section 4004 states that~~ f. Treasury may enter into an agreement to makeTreasury may enter into an agreement to make a loan only if the borrowera loan only if the borrower
agrees to specified limitations on the compensation and severance pay of executives and agrees to specified limitations on the compensation and severance pay of executives and
~~employees~~ employees whose total compensation exceeded $425,000 in calendar year 2019. Total whose total compensation exceeded $425,000 in calendar year 2019. Total
compensation, as defined in the act, is capped at the individual’s 2019 compensation level,compensation, as defined in the act, is capped at the individual’s 2019 compensation level, or if or if
compensation exceeds $3 compensation exceeds $3 ~~million,~~ mil ion, it is also capped at $3 it is also capped at $3 ~~million~~ mil ion plus 50% of the 2019 plus 50% of the 2019
compensation levelcompensation level above $3 above $3 ~~million.~~ mil ion. Further, severanceFurther, severance pay for those individuals is capped at pay for those individuals is capped at
twice the individual’s 2019 compensation level. twice the individual’s 2019 compensation level.
g. Section 4005~~Section 4005 establishes an air carrier’s service obligation. It~~ requires an air carrier requires an air carrier receiving receiving
financial assistance under the act to maintain scheduled air financial assistance under the act to maintain scheduled air transportation service,transportation service, as the as the
Transportation Secretary deemsTransportation Secretary deems necessary, to ensure servicesnecessary, to ensure services to any point served by that air to any point served by that air
~~carrier~~ carrier before March 1, 2020, taking into consideration the air transportation needs of before March 1, 2020, taking into consideration the air transportation needs of ~~small and~~
~~remote communities~~ smal and remote communities and the needs of health care and pharmaceutical supply chains.and the needs of health care and pharmaceutical supply chains.48 Such Such
authority and any requirementsauthority and any requirements issued issued ~~shall~~ shal terminate on March 1, 2022.terminate on March 1, 2022.
~~Section 4019 establishes that certain entities are ineligible~~ In addition, the Transportation Secretary is authorized to require, to the extent practicable, that an air carrier receiving this support continue services to any point served by that carrier before March 1, 2020, considering factors similar to those described above for airline loans under Section 4005. h. Section 4019 establishes that certain entities are ineligible to participate in Section 4003 to participate in Section 4003
transactions. An transactions. An ~~ineligible~~ ineligible entity is a covered individual who owns a entity is a covered individual who owns a ~~controlling~~control ing interest in that in that
entity (defined as “not less than 20 percent, by vote or value, of the outstanding amount of any entity (defined as “not less than 20 percent, by vote or value, of the outstanding amount of any
class of equity interest in an entity”). Covered individuals are the President, the Vice President, an class of equity interest in an entity”). Covered individuals are the President, the Vice President, an
executive department head, a Member of Congress,executive department head, a Member of Congress, or the spouse, child, or spouse of a child of or the spouse, child, or spouse of a child of
~~any of those individuals.~~
~~Section 4115 protects collective bargaining agreements for a period lasting from the time~~
~~financial assistance is issued and ending on September 30, 2020.49~~

~~47 Warrants give the government the option to buy common stock in a company in the future at a predetermined price.~~
~~If the government does not wish to exercise that option in the future, it can sell the warrants back to the firm or to a~~
~~third party. If the company’s stock price subsequently rises (falls), the value of the warrant rises (falls). Warrants give~~
~~the government some upside profits if the stock price rises, while limiting the government’s exposure (the value of a~~
~~warrant cannot fall below zero) if the stock price falls. The value of the warrants depends primarily on their number~~
~~and the negotiated purchase price of the stock, both of which are at the discretion of the Treasury Secretary to~~
~~negotiate.~~
~~48 See DOT, Final Order: Continuation of Certain Air Service Under P.L. 116-136 §§ 4005 and 4114(b), Order 2020-~~
~~4-2, April 7, 2020, at https://www.transportation.gov/sites/dot.gov/files/2020-04/~~
~~CARES%20Final%20Order%20FINAL.PDF.~~
49 any of those individuals. i. Section 4025 prohibits any federal entity from conditioning the issuance of a loan or loan guarantee under provisions in Section 4003 on an air carrier’s or eligible business’s implementation of measures to enter into negotiations with the certified bargaining representative of a craft or class of employees of the air carrier or eligible business under the Railway Labor Act (45 U.S.C. §§151 et seq.) or the National Labor Relations Act (29 U.S.C. §§151 et seq.) regarding pay or other terms and conditions of employment. j. Section 4115 prohibits Treasury and other federal agencies from conditioning the provision of Section 4115 prohibits Treasury and other federal agencies from conditioning the provision of ~~payroll~~ payrol support support
payments on the applicant’s “implementationpayments on the applicant’s “implementation of measuresof measures to enter into negotiations with the to enter into negotiations with the ~~certified bargaining~~
~~representative~~ certified bargaining representative of a craft or class of employeesof a craft or class of employees of the applicant under the Railway Labor Act (45 U.S.C.of the applicant under the Railway Labor Act (45 U.S.C. §§151 et seq.) or §151 et seq.) or
the National Labor Relations Actthe National Labor Relations Act, (29 U.S.C. § (29 U.S.C. §§151 et seq.) regarding pay or other terms or conditions of employment151 et seq.) regarding pay or other terms or conditions of employment,”
” through September 30, 2020. Terms and Conditions and Restrictions for the Federal Reserve Facilities As shown in Table 3~~through September 30, 2020.~~
~~Congressional Research Service~~
13

~~link to page 8 link to page 14~~ ~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~Terms and Conditions for Air Carrier Worker Support~~
~~To be eligible for grants to cover employee salaries under Section 4113, an air carrier or~~
~~contractor must agree to~~
~~ refrain from conducting involuntary furloughs or reducing pay rates and benefits~~
~~until September 30, 2020;~~
~~ refrain from stock buybacks and dividends through September 30, 2021;~~
~~ comply with CARES Act provisions to protect collective bargaining agreements~~
~~regarding pay or other terms of employment for a period lasting from the time~~
~~financial assistance is issued and ending on September 30, 2020; and~~
~~ comply with limits on compensation of highly paid employees, similar to those~~
~~described above for airline loans, for a two-year period from March 24, 2020, to~~
~~March 24, 2022.~~
~~In addition, the Transportation Secretary is authorized to require, to the extent practicable, that an~~
~~air carrier receiving this support continue services to any point served by that carrier before~~
~~March 1, 2020, considering factors similar to those described above for airline loans under~~
~~Section 4005.~~
~~To compensate the government for this assistance, Section 4117 provides that the Treasury~~
~~Secretary may receive warrants, options, stock, and other financial instruments from recipients, as~~
~~determined appropriate by the Secretary. (See the “Air Carrier Worker Support” section for more~~
~~on Treasury’s determination for receiving compensation.)~~
~~Terms and Conditions and Restrictions for the Federal Reserve Facilities~~
~~As shown i~~n Table 2, some, but fewer, of the terms and conditions and restrictions placed on the some, but fewer, of the terms and conditions and restrictions placed on the
industry assistance also apply to the Fed. Fed assistance may go only to U.S. businesses (as industry assistance also apply to the Fed. Fed assistance may go only to U.S. businesses (as
defined), and the conflict of interest and reporting requirements also apply to the Fed. Restrictions defined), and the conflict of interest and reporting requirements also apply to the Fed. Restrictions
on executive compensation and capital distributions (stock buybacks and dividends) do not apply on executive compensation and capital distributions (stock buybacks and dividends) do not apply
to Fed programs unless the Fed is providing direct loans to recipients; in the case of the Fed to Fed programs unless the Fed is providing direct loans to recipients; in the case of the Fed
programs, the Treasury Secretary may waive these requirements “to protect the interests of the programs, the Treasury Secretary may waive these requirements “to protect the interests of the
Federal Government.” Federal Government.” ~~To date, these restrictions have been~~These restrictions were applied only to the Main Street applied only to the Main Street
Lending Program. Likewise, requirements to provide the government with warrants or other Lending Program. Likewise, requirements to provide the government with warrants or other
forms of compensation forms of compensation do not apply to the Fed programs. Fewer restrictions may have been do not apply to the Fed programs. Fewer restrictions may have been
placed on Fed programs than placed on Fed programs than Congressional Research Service 15 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act industry assistance because of the Fed’s independence from industry assistance because of the Fed’s independence from
Congress and the Administration, and Congress and the Administration, and because most of the Fed programs are not intended to because most of the Fed programs are not intended to
prevent recipients’ imminent failure.prevent recipients’ imminent failure.50
52 In addition to the conditions and restrictions in the CARES Act, In addition to the conditions and restrictions in the CARES Act, ~~the Fed typically has extended~~
~~assistance to nonbank entities under its emergency authority found in~~ Section 13(3) of the Federal Section 13(3) of the Federal
Reserve ActReserve Act~~. This authority~~ places a number of restrictions on the Fed’s places a number of restrictions on the Fed’s ~~activities~~facilities, many of which , many of which
were added or augmented by the Dodd-Frank Act (P.L. 111-203).were added or augmented by the Dodd-Frank Act (P.L. 111-203).5153 For example, actions taken For example, actions taken
under Section 13(3) must be broadly based and “for the purpose of providing liquidity to the under Section 13(3) must be broadly based and “for the purpose of providing liquidity to the
financial system, and not to aid a failingfinancial system, and not to aid a failing financial company.” Actions must also provide security financial company.” Actions must also provide security
(e.g., (e.g., ~~collateral)~~ col ateral) that is sufficient to protect the taxpayer and is based on sound risk management practices, which is why the Fed requested CARES Act funding to backstop the facilities. Unlike financial firms, some entities impacted by COVID-19 may not have securities that can be posted as collateral. Oversight Provisions54 To provide oversight of Title IV, the CARES Act created a special inspector general, ~~that is sufficient to protect the taxpayer and is based on sound risk management~~
~~practices. Unlike financial firms, some entities impacted by COVID-19 may not have securities~~

~~50 If the Fed were to create the medium-sized business lending program envisioned in Section 4003, additional terms~~
~~and restrictions would apply to that facility.~~
~~51 For more information, see CRS Report R44185, Federal Reserve: Emergency Lending, by Marc Labonte.~~
~~Congressional Research Service~~
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~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~that can be posted as collateral. The CARES Act only states that “any applicable requirements~~
~~under section 13(3) ... shall apply” to Fed programs created under the act. Nevertheless, after the~~
~~enactment of the CARES Act, the Fed created the MSLP and MLF under Section 13(3).~~
~~Oversight Provisions52~~
~~To provide oversight of Title IV, the CARES Act created a special inspector general,~~
Congressional Oversight Commission, and various reporting requirements. Congressional Oversight Commission, and various reporting requirements.
Special Inspector General for Pandemic ~~Recovery53~~Recovery55
Section 4018 establishes a Special Inspector General for Pandemic Recovery (SIGPR) within Section 4018 establishes a Special Inspector General for Pandemic Recovery (SIGPR) within
Treasury. The SIGPR is nominated by the President with the advice and consent of the Treasury. The SIGPR is nominated by the President with the advice and consent of the ~~Senate54~~Senate56
and may be removed from office in the manner prescribed in Section 3(b) of the Inspector and may be removed from office in the manner prescribed in Section 3(b) of the Inspector
General Act of 1978.General Act of 1978.5557 The SIGPR is tasked with conducting audits and investigations of The SIGPR is tasked with conducting audits and investigations of
Treasury’s activities pursuant to the CARES Act, including collecting and summarizing Treasury’s activities pursuant to the CARES Act, including collecting and summarizing ~~the~~
~~following~~ information regarding loans provided by Treasury~~information regarding loans provided by Treasury:~~
~~ “A description of the categories of the loans guarantees, and other investments~~
~~made by the Secretary”;~~
~~ “A listing of eligible businesses receiving loan, loan guarantees, and other~~
~~investments” by category;~~
~~ An explanation and justification for each loan or loan guarantee;~~
~~ Biographical information about each person hired to manage or service the loans,~~
~~loan guarantees, and other investments; and~~
~~ Financial information, including the total amount of each loan, loan guarantee,~~
~~and other investment and the repayment status and any gains or losses~~. .
The SIGPR is empowered to hire staff, enter into contracts, and broadly exercise the same The SIGPR is empowered to hire staff, enter into contracts, and broadly exercise the same
authority and status as inspectors general under the Inspector General Act of 1978.authority and status as inspectors general under the Inspector General Act of 1978.5658 The SIGPR The SIGPR
is required to report to the appropriate committees of Congress within 60 days of Senate is required to report to the appropriate committees of Congress within 60 days of Senate
confirmation, and quarterly thereafter, on the activities of the office over the preceding three confirmation, and quarterly thereafter, on the activities of the office over the preceding three
months, including detailed information on Treasury loan programs.months, including detailed information on Treasury loan programs.5759 The SIGPR position The SIGPR position
terminates five years after the enactment of the CARES Act (i.e., March 27, 2025). terminates five years after the enactment of the CARES Act (i.e., March 27, 2025).

~~52 This section was written by Ben Wilhelm and William Egar. For more on the CARES Act oversight provisions, see~~
~~CRS Report~~ 52 If the Fed were to create the medium-sized business lending program envisioned in Section 4003, additional terms and restrictions would apply to that facility. 53 For more information, see CRS Report R44185, Federal Reserve: Emergency Lending, by Marc Labonte. 54 T his section was written by Ben Wilhelm. For more on the CARES Act oversight provisions, see CRS Report R46315, R46315, Congressional Oversight Provisions in the Coronavirus Aid, Relief, and ~~Economic~~Econom ic Security
(CARES) Act (P.L. 116-136), by Ben Wilhelm and William T, by Ben Wilhelm and William T . Egar. . Egar.
5355 For more on the Special For more on the Special Inspector General for Pandemic Recovery (SIGPR),Inspector General for Pandemic Recovery (SIGPR), please seeplease see ~~CRS~~ CRS Insight IN11328, Insight IN11328,
Special Inspector General for ~~Pandemic~~Pandem ic Recovery: Responsibilities, Authority, and ~~Appointment~~Appointm ent , by Ben Wilhelm. , by Ben Wilhelm.
~~54 The~~56 T he current SIGPR is current SIGPR is Brian D. Miller, who wasBrian D. Miller, who was nominated by President nominated by President ~~Trump~~T rump on April 6, 2020, and confirmed by on April 6, 2020, and confirmed by
the Senate on Junethe Senate on June 2, 2020. He formerly served as a senior associate counsel in the Office of the House Counsel.2, 2020. He formerly served as a senior associate counsel in the Office of the House Counsel.
55 57 5 U.S.C. 5 U.S.C. Appendix. Appendix.
5658 See See also CRSalso CRS Report R45450, Report R45450, Statutory Inspectors General in the Federal Government: A Primer, by Kathryn A. , by Kathryn A.
Francis. Francis.

~~57 The~~ 59 T he SIGPR SIGPR is also requiredis also required ~~under §~~ under Section 4020(e)(4)(B) to report to the appropriate committees “whenever information or 4020(e)(4)(B) to report to the appropriate committees “whenever information or
assistance requested by the Special Inspector General is,assistance requested by the Special Inspector General is, in the judgment of the Specialin the judgment of the Special Inspector General, Inspector General,
unreasonably refusedunreasonably refused or not provided.” or not provided.” ~~The~~T he Administration objected to this provision in a signing Administration objected to this provision in a signing ~~statement,~~ stateme nt, available available
at https://www.whitehouse.gov/briefings-statements/statementat https://www.whitehouse.gov/briefings-statements/statement -by-the-president-by-the-president -38/.-38/.
Congressional Research Service Congressional Research Service
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Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act

From the $500 From the $500 ~~billion~~ bil ion appropriated in Title IV, Section 4018 directs that $25 appropriated in Title IV, Section 4018 directs that $25 ~~million shall be~~
mil ion shal be made availablemade available to the SIGPR as a nonexpiring appropriation. to the SIGPR as a nonexpiring appropriation.
Congressional Oversight ~~Commission58~~Commission60
Section 4020 establishes a five-member Congressional Oversight Commission in the legislative Section 4020 establishes a five-member Congressional Oversight Commission in the legislative
branch. The commission is directed to oversee implementation of Subtitle A of Title IV by the branch. The commission is directed to oversee implementation of Subtitle A of Title IV by the
federal government and to issue regular reports to Congress. federal government and to issue regular reports to Congress.
The commission is directed to report to Congress “not later than 30 days after the first exercise by The commission is directed to report to Congress “not later than 30 days after the first exercise by
the Secretary and the Board of Governors of the Federal Reserve System of the authority under the Secretary and the Board of Governors of the Federal Reserve System of the authority under
this subtitle and every 30 days thereafter.”~~this subtitle and every 30 days thereafter.” Such reports must include~~
~~(i) The use by the Secretary and the Board of Governors of the Federal Reserve System of~~
~~authority under this subtitle, including with respect to the use of contracting authority and~~
~~administration of the provisions of this subtitle.~~
~~(ii) The impact of loans, loan guarantees, and investments made under this subtitle on the~~
~~financial well-being of the people of the United States and the United States economy,~~
~~financial markets, and financial institutions.~~
~~(iii) The extent to which the information made available on transactions under this subtitle~~
~~has contributed to market transparency.~~
~~(iv) The effectiveness of loans, loan guarantees, and investments made under this subtitle~~
~~of minimizing long-term costs to the taxpayers and maximizing the benefits for taxpayers.59~~
The commission is authorized to hold hearings and gather evidence, obtain data and other The commission is authorized to hold hearings and gather evidence, obtain data and other
information from federal agencies upon request, hire staff, obtain the services of outside experts information from federal agencies upon request, hire staff, obtain the services of outside experts
and consultants, request the detail of federal employees, and enter into contracts to discharge its and consultants, request the detail of federal employees, and enter into contracts to discharge its
duties. duties.
Members of the commission are to be appointed by the Speaker of the House, the Senate majority Members of the commission are to be appointed by the Speaker of the House, the Senate majority
leader, the House minority leader, and the Senate minority leader.leader, the House minority leader, and the Senate minority leader.~~60 Appointed commissioners~~
~~who are not federal employees are to be paid “at a rate equal to the daily equivalent of the annual~~
~~rate of basic pay for level I of the Executive Schedule for each day (including travel time) during~~
~~which such member is engaged in the actual performance of duties vested in the Oversight~~
~~Commission” and reimbursed for travel expenses. For FY2020, Level I of the Executive Schedule~~
~~is $219,200 annually.61~~
~~Funding for the commission’s expenses is to be derived in equal amounts from the contingency~~
~~fund of the Senate and an “applicable” account of the House. The Treasury Secretary and the~~
~~Federal Reserve Board of Governors are instructed to “promptly” transfer funds to such accounts~~
~~for the reimbursement of commission expenses.~~

~~58 For more on the Congressional Oversight Commission, please see CRS Insight IN11304,~~ ~~COVID-19 Congressional~~
~~Oversight Commission (COC), by Jacob R. Straus and William T. Egar.~~
~~59 §4020(b)(2)(A).~~
~~60 The Speaker of the House, Senate majority leader, House minority leader, and Senate minority~~61 To date, congressional leaders have not appointed a head of the commission. Funding for the commission’s expenses is to be derived in equal amounts from the contingency fund of the Senate and an “applicable” account of the House. The Treasury Secretary and the Federal Reserve Board of Governors are instructed to “promptly” transfer funds to such accounts for the reimbursement of commission expenses. Schedule for Reports, Disclosures, and Testimony COC and the SIGPR are now operational and, together with GAO, have begun to provide required reports to Congress.  GAO. GAO has issued four reports as of December 2020.62 These reports have focused on issues including improvements to data being provided by the Treasury and strengthening planning and coordination for elements of the federal response.  COC. The COC has issued seven reports since its creation,63 the most recent of which was released November 30, 2020.64 COC has provided both general reports on the activities of the Treasury and the Fed and more detailed reports on individual transactions.  SIGPR. The SIGPR recently launched its website, which includes links to reports, news releases on SIGPR activity, and contact information, including a 60 For more on the Congressional Oversight Commission, please see CRS Insight IN11304, COVID-19 Congressional Oversight Com m ission (COC), by Jacob R. Straus and William T . Egar. 61 T he Speaker of the House, Senate majority leader, House minority leader, and Senate min ority leader are each leader are each
authorized to appoint one member of the Congressional Oversight Commission. A fifth member is to be appointed authorized to appoint one member of the Congressional Oversight Commission. A fifth member is to be appointed
jointly by the Speaker and Senate majority leaderjointly by the Speaker and Senate majority leader, after consultation with the House and Senate minority leaders after consultation with the House and Senate minority leaders~~; this~~. T his
member is to serve as chairperson of the commission. member is to serve as chairperson of the commission.
~~61 U.S. Office of Personnel Management, “Salary Table No. 2020-EX,” at https://www.opm.gov/policy-data-oversight/~~
~~pay-leave/salaries-wages/salary-tables/pdf/2020/EX.pdf.~~
~~Congressional Research Service~~
16

~~link to page 20~~62 Available at https://www.gao.gov/coronavirus/newest_covid-related_reports. 63 Available at https://coc.senate.gov/. 64 Congressional Oversight Commission, The Sixth Report of the Congressional Oversight Commission, October 29, 2020, https://coc.senate.gov/sites/default/files/2020-10/The%20Sixth%20Report_Final%20%28002%29_0.pdf . Congressional Research Service 17 link to page 22 link to page 14 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act

~~Schedule for Reports, Disclosures, and Testimony~~
~~In addition to the establishment of the SIGPR and the Congressional Oversight Commission, Title~~
hotline for individuals to report information to the office.65 The SIGPR submitted its most recent report to Congress on September 30, 2020,66 and noted that the office has already opened 21 preliminary investigations and is actively working with other inspectors general to investigate al egations of improper activity.67 The report also offered two recommendations for Congress. First, the SIGPR recommended passage of the SIGPR Expedited Hiring Authorities Act of 2020.68 Second, the SIGPR recommended that Congress adjust the due date for its reports to Congress to “30 days after the end of a calendar quarter” to align with submission schedules for other inspector general offices.69 In addition to the establishment of the SIGPR and the COC, Title IV requires the Treasury Secretary and the Fed Chair to issue reports, make disclosures, and IV requires the Treasury Secretary and the Fed Chair to issue reports, make disclosures, and
provide testimony before provide testimony before congressional committees for a number of specified purposescongressional committees for a number of specified purposes.
:  The Fed has issued monthly reports to Congress describing the purpose and details of each facility.70 In these reports and accompanying transaction records, the Fed has disclosed “names and details of participants in each facility; amounts borrowed and interest rate charged; and overal costs, revenues, and fees for each facility.”71 Total loans or asset purchases through the facilities are published weekly as part of the Fed’s balance sheet.72 The Fed also provides details on emergency facilities’ activities in quarterly reports.73  Treasury reports monthly on its investment of ESF funds in the Fed’s programs.74 In addition, the CARES Act requires Treasury to publish a description of assistance on its website within 72 hours, a report every 14 days for one year following enactment and every 30 days thereafter summarizing actions in that period, and summaries on loan and guarantee programs every 30 days.75 Collectively, these provisions require disclosure to Congress and the public of financial and other Collectively, these provisions require disclosure to Congress and the public of financial and other
details on each transaction under Section 4003(b). These requirements are detailed idetails on each transaction under Section 4003(b). These requirements are detailed in Table 3.
~~Table 3. Reporting, Disclosure, and Testimonial Requirements in Title IV~~
~~Submitted~~
~~Section~~
~~Requirement~~
~~Due Date~~
By
~~Submitted~~ 4. 65 https://www.sigpr.gov/. 66 SIGPR, Quarterly Report to Congress, September 30, 2020, https://www.sigpr.gov/sites/sigpr/files/2020-09/SIGPR-Quarterly-Report -to-Congress-September-30-2020_0.pdf. 67 SIGPR, Quarterly Report to Congress, September 30, 2020, p. 7. 68 S. 3751 (116th Congress). 69 SIGPR, Quarterly Report to Congress, September 30, 2020, p. 8. 70 See Federal Reserve, “ Reports to Congress Pursuant to Section 13(3) of the Federal Reserve Act in response to COVID-19,” https://www.federalreserve.gov/publications/reports-to-congress-in-response-to-covid-19.htm. 71 Federal Reserve, “Federal Reserve Board Outlines the Extensive and T imely Public Information It Will Make Available Regarding Its Programs to Support the Flow of Credit to Households and Businesses and T hereby Foster Economic Recovery,” press release, April 23, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200423a.htm. For emergency facilities that are not identified as CARES Act facilities in Table 2 (with the exception of the Paycheck Protection Program Liquidity Facility), the Fed has not provided monthly transaction records. However, these facilities are subject to Dodd-Frank disclosure requirements, under which the Fed must publicly disclose transaction data a year after a facility is terminated or two years after lending ceases, whichever comes first. 72 See Federal Reserve, “ Factors Affecting Reserve Balances - H.4.1,” https://www.federalreserve.gov/releases/h41/. 73 See Federal Reserve, “ Quarterly Report on Federal Reserve Balance Sheet Developments,” https://www.federalreserve.gov/monetarypolicy/quarterly-balance-sheet-developments-report.htm. 74 Reports are available at https://home.treasury.gov/policy-issues/international/exchange-stabilization-fund/esf-reports. 75 A list of reports and transaction summaries can be found on T reasury’s website at https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry. Congressional Research Service 18 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Table 4. Reporting, Disclosure, and Testimonial Requirements in Title IV Submitted Section Requirement Due Date By Submitted To
4026(a) 4026(a)
Online publication of Online publication of
Within 72 hours Within 72 hours
Secretary of Secretary of
Online publication Online publication

information about each information about each
after any covered after any covered
the Treasury the Treasury
transaction under transaction under
transaction transaction
§4003(b)(1), (2), or (3). §4003(b)(1), (2), or (3).

4026(b)(1)(A) 4026(b)(1)(A)
A summary report about A summary report about
Within seven days Within seven days
Secretary of Secretary of
Chairs and ranking Chairs and ranking
transactions to passenger transactions to passenger
after a covered after a covered
the Treasury the Treasury
members members of (1) House of (1) House
air, cargo air, and national air, cargo air, and national
transaction transaction
Financial Services Financial Services
security industries. security industries.
Committee; Committee; (2) House (2) House

Ways and Means Ways and Means
Committee;Committee; (3) Senate (3) Senate
Banking, Housing, and Banking, Housing, and
Urban Affairs Urban Affairs
Committee;Committee; and (4) and (4)
Senate Finance Senate Finance
Committee Committee
4026(b)(1)(B) 4026(b)(1)(B)
Summary reports Summary reports about about
Within 7 days of Within 7 days of
Secretary of Secretary of
Online publication Online publication
and and
each loan and loan each loan and loan
reporting to reporting to
the Treasury the Treasury
4026(b)(1)(C) 4026(b)(1)(C)
guarantee made to guarantee made to
Congress and Congress and
passenger air, cargo air, passenger air, cargo air, and every 30 days and every 30 days
national security industries. national security industries.
4026(b)(2)(A)(i) 4026(b)(2)(A)(i)
Reports with Reports with ~~all~~ al the the
Within 7 days Within 7 days
Federal Federal
(1) House Financial (1) House Financial
and and
information required by 12 information required by 12
after a covered after a covered
Reserve Reserve
Services Services Committee;Committee; and and
4026(b)(2)(A)(i 4026(b)(2)(A)(i ) U.S.C.) U.S.C. §343(3)(C)(i) for §343(3)(C)(i) for
transaction and transaction and
(2) Senate Banking, (2) Senate Banking,
transactions involving transactions involving
every 30 days every 30 days
Housing, and Urban Housing, and Urban
Federal Federal Reserve.Reserve.
Affairs Committee Affairs Committee
4026(b)(2)(B) 4026(b)(2)(B)
Publication of reports Publication of reports
Within seven days Within seven days
Federal Federal
Online publication Online publication
under §4026(b)(2)(A)(i) or under §4026(b)(2)(A)(i) or
of reporting to of reporting to
Reserve Reserve
§4026(b)(2)(A)(i ). §4026(b)(2)(A)(i ).
Congress Congress
4026(c) 4026(c)
Testimony on assistance Testimony on assistance
Quarterly Quarterly
Secretary of Secretary of
(1) House Financial (1) House Financial
program. program.
the Treasury the Treasury
Services Services Committee;Committee; and and
and Federal and Federal
(2) Senate Banking, (2) Senate Banking,
Reserve Reserve
Housing, and Urban Housing, and Urban
Chair Chair
Affairs Committee Affairs Committee
4026(d) 4026(d)
Guidance and application Guidance and application
No explicit No explicit
Secretary of Secretary of
Online publication Online publication
materials materials for loans and loan for loans and loan
deadline deadline
the Treasury the Treasury
guarantees to passenger air, guarantees to passenger air,
cargo air,cargo air, and national and national
security industries. security industries.
4026(e) Publication of relevant Not more than 24 Secretary of Online publication contracts. hours after the Treasury entering into a covered contract Congressional Research Service Congressional Research Service
1719

Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act

Submitted
Section
Requirement
Due Date
By
Submitted To 4026(f) Comptrol er General December To
~~4026(e)~~
~~Publication of relevant~~
~~Not more than 24~~
~~Secretary of~~
~~Online publication~~
~~contracts.~~
~~hours after~~
~~the Treasury~~
~~entering into a~~
~~covered contract~~
~~4026(f)~~
~~Comptrol er General~~
~~December~~ 27, 27,
Comptrol er Comptrol er
(1) Appropriations (1) Appropriations
report on economic report on economic relief relief
2020, and 2020, and ~~annually~~annual y
General General of of
Committees; Committees; (2) Budget (2) Budget
program. program.
thereafter thereafter
the United the United
Committees; Committees; (3) House (3) House
States States
Financial Services Financial Services
Committee;Committee; (4) House (4) House
Transportation and Transportation and
Infrastructure Infrastructure
Committee;Committee; (5) Senate (5) Senate
Banking, Housing, and Banking, Housing, and
Urban Affairs Urban Affairs
Committee;Committee; and (6) and (6)
Senate Commerce, Senate Commerce,
Science, and Science, and
Transportation Transportation
Committee Committee
4118 4118
Report on air carrier Report on air carrier
November November 1, 1,
Secretary of Secretary of
(1) House Energy and (1) House Energy and
worker worker support. support.
2020, and March 2020, and March
the Treasury the Treasury
Commerce, Commerce, Science, Science,
27, 2021 (updated 27, 2021 (updated
Space, and Technology, Space, and Technology,
report) report)
and Transportation and and Transportation and
Infrastructure Infrastructure
Committees;Committees; and (2) and (2)
Senate Banking, Housing, Senate Banking, Housing,
and Urban Affairs and Urban Affairs
Committee Committee
Source: CRS review CRS review of Division A of the CARES Act (P.L. 116-136). Winding Down CARES Act Programs76 As noted above, the Treasury Secretary cannot make any new loans, loan guarantees, or investments in Fed programs after the end of 2020. Given that the pandemic was ongoing and worsening at the end of 2020, Members of Congress debated whether this deadline should be changed, whether Fed programs backed by CARES funds should be extended after the end of the year, and whether the permitted uses of Title IV funds after 2020 should be modified. Some Members argued that the Fed programs should not be extended on the grounds that financial stability has been restored, and if Fed emergency facilities are extended too long, they may crowd out private credit.77 To that end, these Members also wanted to withdraw CARES funds pledged to Fed programs that were no longer needed. Other Members supported extending the programs because they thought it was premature to terminate the Fed’s facilities when the pandemic was worsening, which could potential y cause economic conditions to deteriorate in 2021.78 Further, they wanted to leave already-pledged funds in place because they did not want to unduly constrain the next Treasury Secretary’s actions. Section 4027 al ows funding to be used 76 T his section was written by Marc Labonte and Andrew Scott. 77 See, for example, Senate Committee on Banking, Housing, and Urban Affairs, “Crapo Statement at CARES Act Oversight Hearing,” press release, December 1, 2020, https://www.banking.senate.gov/newsroom/majority/crapo-statement -at-cares-act-oversight -hearing. 78 See, for example, House Financial Services Committee, “Waters Calls Out Mnuchin for Prematurely Ending Essential Emergency Lending Programs,” press release, December 2, 2020, https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=407043. Congressional Research Service 20 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act after the end of 2020 for loan modifications, restructuring, and other amendments; the exercise of options, warrants,79 or other investments made in 2020; or administrative costs. If inadequate funding remained after funding was withdrawn, then these functions could not be carried out. Further, if the Treasury Secretary and Fed decided to revive these programs in the future, a reduction in CARES funding could potential y limit the future size and scope of the programs. Secretary Mnuchin’s Decision to Allow the Fed’s CARES Programs to Expire On November 19, 2020, Treasury Secretary Mnuchin wrote a letter to Fed Chairman Powel , effectively terminating the Fed’s CARES Act facilities at the end of 202080 and asking the Fed to return the unused funds to the Treasury.81 In his opinion, by setting a December 31 termination date on Title IV funding, Congress signaled that it did not wish for these Fed facilities to continue providing assistance after that date. In this letter, the Treasury Secretary estimated $455 bil ion of the original $500 bil ion to have been unused. This comprises $429 bil ion in unused funds for Federal Reserve facilities, as wel as $26 bil ion in unused funds marked for Treasury direct loans.82 The Secretary contends that the Federal Reserve returning the funds it has received and does not need would al ow the unused funding to return to the Treasury’s general fund. Congress, he argues, could then re-appropriate the $455 bil ion for other purposes. However, Section 4027 states that none of the unused funding can be returned to the general fund until 2026.83 On November 20, Chairman Powel agreed to work with Treasury to return the unneeded funds.84 (As discussed in the next section, the overal budget deficit would be the same whether or not the unused funds are returned to the general fund.) The decision to extend the termination date on the facilities is governed by Section 13(3) of the Federal Reserve Act, not the CARES Act, and requires only a finding by five Fed governors of “unusual and exigent circumstances” and Treasury Secretary approval.85 (Non-CARES Act Fed emergency programs have already been extended into 2021 based on such a finding.) The CARES Act, by contrast, prevents the Treasury from providing further investments to backstop these facilities after the end of 2020. However, in practice the Fed would not need any further 79 T he warrants taken were not exercised in 2020. 80 By regulation, the expiration date of Fed facilities cannot be extended without approval by the T reasury Secretary. Later, the MSLP was extended until January 8 in order to allow loan applications received before December 14 to be processed. 81 Mnuchin, letter to Powell. 82 CRS calculations based on publicly available data at the time indicate that slightly less than $454 billion was unused at the time if one includes the pledged direct loan amounts and Fed assistance outstanding under its facilities backed by the CARES Act. 83 T his apparent contradiction between the law and the Secretary’s stated intentions might be explained by budget accounting rules under FCRA. T reasury has interpreted FCRA as requiring the subsidies on its loans and investments to be financed out of the $500 billion appropriated under the CARES Act and the unsubsidized portion of its loans and investments to be financed through ESF borrowing from the T reasury. When the Fed has returned CARES Act funding invested in its facilities to the ESF, those loans financing the unsubsidized portion of the investments would be repaid, and the proceeds would return to the general fund. However, the repayment of those loans would not necessarily affect the ESF’s access ability to use up to $500 billion from 2021 to 2026 for the purposes in Section 4027. See U.S. T reasury, Exchange Stabilization Fund Statem ent of Financial Position , October 31, 2020. 84 Federal Reserve Chairman Powell, letter to T reasury Secretary Mnuchin, November 20, 2020, https://www.federalreserve.gov/foia/files/mnuchin-letter-20201120.pdf. 85 Under law, the programs cannot be permanent, and under regulation, the Fed may extend the programs six months at a time with T reasury approval. Congressional Research Service 21 ~~of the CARES Act (P.L. 116-136).~~

~~Potential Legislative Changes to Title IV Financial Assistance~~
~~As the nation continues to grapple with the ongoing pandemic, the largest questions facing Title~~
~~IV financial assistance moving forward are~~
~~ when should the authority to provide assistance expire?~~
~~ what should be done with unused funds?~~
~~Both policy considerations can be viewed in the context of what actions have been taken so far~~
~~under Title IV and what needs might arise in the future. When the CARES Act was enacted,~~
~~Congress faced great uncertainty about how long the economic disruption caused by the~~
~~pandemic would last, and how extensive it would be. Economic disruptions are arguably~~
~~persisting for longer than many observers would have anticipated in March. In contrast, financial~~
~~market conditions have improved since then, so some firms have found private credit easier to~~
~~access.~~
~~Unlike some provisions of the CARES Act, authority to make new loans, loan guarantees, or~~
~~investments under Title IV is not tied to the end of the national emergency; instead, the authority~~
~~expires at the end of 2020. Congress could consider changing the expiration date or tying it to the~~
~~end of the national emergency in future legislation. One argument in favor of such a change is~~
~~Congressional Research Service~~
18

~~link to page 23~~ ~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~that pandemic disruptions have lasted longer than expected. An argument against such a change is~~
~~that this assistance was meant to address temporary dislocations, and extending such assistance~~
~~could have negative effects on the efficient allocation of capital by favoring certain industries~~
~~over others.~~
~~About four months after enactment, less than half of the $500 billion has been pledged.62 With~~
~~record budget deficits and other spending priorities stemming from the pandemic, Congress may~~
~~consider whether some of the unpledged funding could be reallocated to other uses.63 Congress~~
~~may consider extending eligibility for Treasury loans and loan guarantees under Title IV to other~~
~~affected industries or mandating the creation of new Fed facilities to assist specific groups. For~~
~~example, the House passed the HEROES Act (H.R. 6800), which includes provisions requiring~~
~~the Fed to create certain new emergency facilities backed by CARES Act funding.64~~
~~Alternatively, Congress could shift the unused funds to unrelated uses. For example, Congress~~
~~might reduce the amount authorized under Title IV and attempt to use it as a budgetary offset (or~~
~~“pay for”) for new initiatives. Due to scoring conventions, the Congressional Budget Office~~
~~(CBO) is unlikely to score such a proposal as significantly reducing the budget deficit, however.~~
~~In its cost estimate of the CARES Act, CBO estimated that the $500 billion authorized in Title IV~~
~~would increase the budget deficit by only $1 billion.65 Therefore, reducing authorized funding~~
~~would likely lead to a similar proportional reduction in the deficit.~~
~~Further, not all of the funding pledged to the Federal Reserve may ultimately be needed. Those~~
~~funds are needed only to cover future losses on Fed programs, and they will eventually be~~
~~returned to the Treasury if future losses end up being smaller than pledged funds. To date,~~
~~pledged funds far exceed total activities of the programs. Although some programs started~~
~~operations relatively recently and may still be ramping up activities, if programs continue to be~~
~~small relative to pledged funds, Congress could consider whether currently pledged levels are~~
~~necessary.~~
~~With the pandemic and recession still unfolding, there is the possibility that economic conditions~~
~~could get worse (or better) between now and the end of the year. One drawback to reducing the~~
~~amounts available under Title IV now is that new economic problems could arise that Treasury~~
~~believes require new loan, loan guarantees, or Fed programs to be initiated. Note that the Fed~~
~~would still have authority to initiate new programs without using Title IV funding or authority—it~~
~~apparently already has initiated several programs without it—but these programs might have to~~
~~be structured with higher interest rates or tighter eligibility criteria in that scenario.~~

~~62 It is not known how much funding has been pledged based on Treasury’s letters of intent with the airlines. However,~~
~~even if the entire $25 billion available for airline assistance was pledged, less than half of the $500 billion would be~~
~~pledged overall. In addition, Treasury has received Title IV loan applications that it has not acted on, to date.~~
~~63 Similarly, Congress eventually reduced the size of the Troubled Asset Relief Program from $700 billion to $475~~
~~billion. See the Appendix for more details.~~
~~64 See CRS Insight IN11404, HEROES Act (H.R. 6800): Selected Federal Reserve Provisions, by Marc Labonte.~~
~~65 CBO, H.R. 748, CARES Act, P.L. 116-136 April 16, 2020, at https://www.cbo.gov/publication/56334.~~
~~Congressional Research Service~~
19

~~link to page 26~~ ~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~Appendix. Comparisons to the Troubled Asset~~
~~Relief Program (TARP)66~~
~~Over a decade ago, in the financial crisis and recession of 2007-2009, businesses and individuals~~
~~in the United States and across the globe faced financial uncertainty unparalleled for a generation.~~
~~Although the cause of the financial uncertainty differed greatly between the current circumstances~~
~~as a consequence of Coronavirus Disease 2019 (COVID-19) and the financial crisis of 2007-~~
~~2009, in each instance Congress has chosen to proactively assist in economic recovery.~~
~~As the financial crisis reached near panic proportions in fall 2008, Congress created the $700~~
~~billion Troubled Asset Relief Program (TARP) through the enactment in October 2008 of the~~
~~Emergency Economic Stabilization Act (EESA; P.L. 110-343). Subsequently, Congress passed the~~
~~$787 billion American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), which~~
~~provided relief to certain parts of the economy.67 The CARES Act combines elements of both~~
~~aforementioned acts. Title IV of the CARES Act, with its assistance for firms and support of~~
~~Federal Reserve financial-sector facilities, more closely resembles TARP; a summary of aspects~~
~~of TARP that parallel Title IV is the focus of this appendix.~~
~~For a broader overview of the financial sector and industry assistance during the 2007-2009~~
~~financial crisis, please see CRS Report R43413,~~ ~~Costs of Government Interventions in Response~~
~~to the Financial Crisis: A Retrospective, by Baird Webel and Marc Labonte. For a comparison of~~
~~TARP and Title IV of the CARES Act, see Table A-1.~~
~~Implementation~~
~~The EESA authorized the Treasury Secretary to either purchase or insure up to $700 billion in~~
~~troubled assets owned by financial firms. The general concept was that by removing such assets~~
~~from the financial system, confidence in counterparties would be restored, and the system could~~
~~resume functioning. This authority granted in the EESA was broad. In particular, the definitions~~
~~of both troubled assets and financial institutions allowed the Secretary wide latitude in deciding~~
~~what assets might be purchased or guaranteed and what might qualify as a financial institution.68~~
~~In practice, most TARP funding was not used to purchase troubled assets, instead being dedicated~~
~~to capital injections for financial institutions, loans to the auto industry, and assistance for~~
~~homeowners at risk of foreclosure. In a limited number of cases, TARP and Federal Reserve~~
~~funds were used together. The EESA was later amended to reduce the authorized amount to $475~~
~~billion, when it became clear that the amount used would not exceed this amount.69~~

~~66 This section was authored by Baird Webel and Raj Gnanarajah. For more information, see CRS Report R41427,~~
Troubled Asset Relief Program (TARP): Implementation and Status, by Baird Webel.
~~67 Felix Reichling,~~ ~~Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic~~
~~Output in 2014, CBO, February 2015, at https://www.cbo.gov/publication/49958.~~
~~68 The definition for financial institution gives examples, such as banks and credit unions, but specifically does not~~
~~limit the definition to the types of firms named. The definition of troubled asset includes “any financial instrument”~~
~~determined by the Secretary, in consultation with the Chairman of the Federal Reserve, the purchase of which would~~
~~promote financial stability.~~
~~69 P.L. 111-203, §1302.~~
~~Congressional Research Service~~
20Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act CARES investments to reopen the facilities and provide further assistance at a future date because the facilities had only $41 bil ion in assistance outstanding at the end of 2020.86 Pledged assistance could be reduced from $195 bil ion to $41 bil ion and there would stil be enough CARES Act funds to cover losses if the Fed lost 100% of the value of its loans and investments . Realistical y, the maximum potential loss rate is much smal er than 100%. Original y, the Fed was wil ing to provide assistance of up to $1.95 tril ion through these four programs with the $195 bil ion backing of the CARES Act, implying a maximum overal potential loss rate of 10%. P.L. 116-260, discussed in the next section, sustained the Secretary’s decision to al ow these programs to expire at the end of the year and withdrew the unused funding. How P.L. 116-260 Changed Title IV of the CARES Act87 Because the Treasury’s ability to make new loans, loan guarantees, and investments under Title IV expired at the end of 2020 and much of the funding was not used, several proposals to use that funding for other purposes or change the terms of the funding saw legislative action in the 116th Congress.88 In December 2020, Congress agreed to another coronavirus relief package, which was signed into law as part of P.L. 116-260. This package included two titles that modified Title IV of the CARES Act. Subtitle A of Title IV of Division N of P.L. 116-260 provides $15 bil ion for payroll support to passenger air and $1 bil ion to air-related contractors. As noted above, the funding for payroll support had been virtual y depleted for passenger air and mostly depleted for air-related contractors by October 2020. Recipients must recal and provide back pay to workers who were furloughed after previous payroll assistance had been exhausted, face restrictions on furloughs and pay reductions through the end of March 2021, must meet minimum air service obligations through the end of 2022, and are subject to many of the terms and conditions found in the CARES Act. Section 1003 of Division N of P.L. 116-260 permanently rescinded $429 bil ion of the $500 bil ion, which was provided by Title IV of the CARES Act to cover credit subsidies.89 As of 86 T his amount is expected to modestly increase after the end of the year when loans in process are finalized. 87 T his section was written by Marc Labonte and Andrew Scott. 88 S.Amdt. 2652 to S. 178 would have reduced spending under T itle IV “by an amount equal to the difference between $454,000,000,000 and the aggregate amount of loans, loan guarantees, and other investments that the Secretary has made or committed to make” on January 19, 2021. On September 10, 2020, and October 10, 2020, Senate cloture votes on S.Amdt. 2652 failed. S.Amdt. 2542 to S.Amdt. 2499 to S. 178 stated that “ the Secretary shall prioritize the provision of credit and liquidity to assist eligible businesses, States and municipalities, even if the Secretary estimates that such loans, loan guarantees, or investments may incur losses.” S.Amdt. 2542 to S.Amdt. 2499 to S. 178 would have prohibited the Fed from providing assistance under programs backed by CARES Act funding after January 4, 2021. S.Amdt. 2499 was withdrawn on September 8, 2020. T he House passed the Heroes Act (H.R. 6800) and the second Heroes Act (H.R. 925), both of which included provisions that would have required the Fed to create certain new emergency facilities backed by CARES Act funding. 89 It is unclear why the act rescinds $429 billion when the most recent financial statement showed $480.6 billion remaining in the balance with T reasury (to finance subsidies) as of October. Alternatively, the outstanding amount of T reasury loans and investments was $104.5 billion, so $395.5 billion of $500 billion remained as of October—less than the amount rescinded. However, the Fed and T reasury are negotiating a reduction in T reasury investments, and if they were to be reduced to outstanding Fed assistance, then about $63 billion would be needed to cover Fed assistance and T reasury loans, with about $437 billion remaining, as of the end of 2020. Perhaps coincidentally, $429 billion is equal to the amount that Secretary Mnuchin requested be rescinded from the amount available for Federal Reserve investments but not the total amount requested. T he act does not rescind money allocated for any specific purpose, such Congressional Research Service 22 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act October, Treasury had estimated $19.4 bil ion in credit subsidies.90 The $71 bil ion left after the rescission remains available to cover credit subsidy re-estimates on existing loans and investments, modify and restructure existing loans and investments, exercise warrants, cover administrative expenses, and fund the SIG and COC. Section 1005 prohibits the Federal Reserve from providing any further assistance through its programs backed by the CARES Act after the end of 2020. As discussed in the last section, Secretary Mnuchin’s decision to al ow these programs to expire at the end of 2020 also prevented the Fed from providing future assistance, but since this decision was made at the Secretary’s discretion, the new Treasury Secretary had the option to reverse it. The section also limits the Fed’s ability to modify those programs in the future, including by real ocating CARES funding to new Fed programs. Final y, the section prohibits the Treasury Secretary from using the non-CARES Act assets of the ESF to backstop a re-established MSLP, MLF, and both corporate credit facilities. The Secretary may use those assets to backstop other Fed facilities, however, including the TALF.91 It was never made explicit why some Fed programs were backed by CARES Act funding and others were backed by the preexisting assets of the ESF when al of the programs were announced around the same time. But if Congress removes CARES Act funding from these programs, it follows that the Secretary cannot replace it with funds raised from the ESF’s non-CARES Act assets. Rescinding most of the Title IV funding was not necessary to prevent the Treasury Secretary from making new loans and investments in Fed programs in the future, because the Secretary’s authority to do so expired at the end of 2020 under the CARES Act. Nevertheless, rescinding this funding could have at least two rationales. First, reducing Treasury’s investments in Fed programs below the amount that the Secretary had original y pledged to those programs ($195 bil ion) limits the potential growth of those programs if they were revived in the future for the reasons discussed in the previous section. (However, Section 1005 also prohibited the revival of those programs.) Second, policymakers frequently argued that unused Title IV funding should be real ocated to other uses. It is true that the cost of the CARES Act was lower than expected because most Title IV funds were unused. However, the cost to the government of enacting new spending or revenue measures equal to the unused Title IV funds is the same whether or not the Title IV funds are rescinded. Because of CBO scoring conventions, a rescission of Title IV funds has not been scored as significantly reducing the budget deficit. In its score of S.Amdt. 2652, CBO estimated that the reduction in Title IV funding would have no effect on outlays or the budget deficit.92 In fact, reusing those funds for additional spending or tax reductions would increase the recorded budget deficit because only the subsidy portion of Title IV loans and investments are recorded as spending. In its cost estimate of the CARES Act, CBO estimated that the $500 bil ion authorized in Title IV would increase the budget deficit by $1 bil ion, which was CBO’s estimate of the subsidy amount, since loans and investments are eventual y mostly repaid with interest. It follows that reducing this authority would also have a negligible effect on the deficit. In plain English, as Federal Reserve investments. 90 U.S. T reasury, Exchange Stabilization Fund Statement of Financial Position , October 31, 2020. 91 T he act may have permitted T ALF to be revived in the future because it was the only program backed by CARES Act funding that was initially created in the 2007 -2009 financial crisis. T he act states that it does not modify or limit the Fed’s authority before enactment of the CARES Act. 92 CBO, “Estimate for Senate Amendment 2652 to S. 178, the Delivering Immediate Relief to America’s Families, Schools and Small Businesses Act,” October 21, 2020, https://www.cbo.gov/system/files/2020-10/sa2652.pdf.pdf. Congressional Research Service 23

~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~Equity Compensation for Treasury~~
~~Equity warrants in return for government assistance were specifically provided for in the TARP~~
~~statute.70 The warrants were expected to provide a positive financial upside to the taxpayer if the~~
~~private companies’ fortunes improved as a result of the government assistance. Although resulting~~
~~in positive returns for the government, the amount recouped through warrants ($9.58 billion) was~~
~~less than through interest and dividends ($24.38 billion).71 The act did not specifically call for the~~
~~government to receive large holdings of common stock. In several cases, however, the~~
~~government ended up with large, sometimes controlling, equity positions in private companies.72~~
~~The government generally exercised little of the ownership control inherent in these large stakes.~~
~~Common equity in companies was typically accepted in return for TARP assistance in order to~~
~~strengthen the companies’ capital positions. Such equity also provided a financial upside to the~~
~~taxpayers when firms recovered, but it also had a potential downside when firms did not recover~~
~~strongly.~~
~~Termination Date~~
~~The EESA granted the purchase authority for a maximum of two years from the date of~~
~~enactment, meaning it expired on October 3, 2010. Commitments made under this authorization,~~
~~however, could continue after this date, with no limit on how long assets purchased under TARP~~
~~could be held by the government. At present, there continues to be funding disbursed under the~~
~~housing assistance program73 and a small amount ($0.04 billion) of bank capital assistance~~
~~outstanding.74~~
~~Limits on Compensation and Labor Reduction~~
~~The EESA included limits on executive bonuses and golden parachutes and provided for possible~~
~~compensation clawbacks. The EESA was later amended by ARRA75 to expand these limits and~~
~~add additional corporate governance reforms, thus placing additional restrictions on participating~~
~~banks in existing Capital Purchase Program contracts. The act amending the EESA also allowed~~
~~for early repayment and withdrawal from the program without financial penalty. With the advent~~
~~of more stringent requirements for TARP recipients, many banks began to repay, or attempt to~~
~~repay, TARP funds. There was no employee retention requirement with TARP.~~

~~70 P.L. 110-343, §113.~~
~~71 Treasury, Monthly TARP Update, April 1, 2020, at https://www.treasury.gov/initiatives/financial-stability/reports/~~
~~Documents/2020.03%20March%20Monthly%20Report%20to%20Congress.pdf (hereinafter cited as Treasury,~~ ~~Monthly~~
~~TARP Update, April 2020).~~
~~72 These cases included AIG, Citigroup, Chrysler, General Motors, and Ally Financial. The common equity holdings~~
~~typically resulted from the conversion of loans or preferred equity. See CRS Report R41427,~~ ~~Troubled Asset Relief~~
~~Program (TARP): Implementation and Status, by Baird Webel, Table 5.~~
~~73 See Treasury, Monthly Report to Congress: March 2020, April 10, 2020, pp. 3-4, at https://www.treasury.gov/~~
~~initiatives/financial-stability/reports/Documents/2020.03%20March%20Monthly%20Report%20to%20Congress.pdf.~~
~~74 Treasury, Monthly TARP Update, April 2020.~~
~~75 P.L. 111-5, Title VII.~~
~~Congressional Research Service~~
21

~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~Congressional Oversight~~
~~The EESA included a number of oversight mechanisms and reporting requirements.76 Similar to~~
~~the CARES Act, it created a TARP Congressional Oversight Panel.77 The TARP Oversight Panel~~
~~was a five-member, independent entity established in the legislative branch, appointed by~~
~~congressional leadership, and directed to submit regular reports to Congress. In exercising its~~
~~duties, the TARP Congressional Oversight Panel issued 30 reports and held 26 hearings between~~
~~December 2008 and March 2011, according to its final report. The panel employed a total of 46~~
~~staff, used 3 detailees, and expended approximately $10.7 million through April 3, 2011.78 The~~
~~five-member panel was appointed by the House and Senate leadership.~~
~~The EESA also required the Treasury Secretary to provide periodic updates to Congress, with~~
~~both monthly overall reports and individual reports detailing “all transactions” made under~~
~~TARP.79 The Comptroller General was specifically tasked with oversight responsibilities and~~
~~regular audits, with the Secretary directed to provide appropriate facilities, funding, and access to~~
~~records to facilitate this oversight.80~~
~~Special Inspector General~~
~~The EESA created the Special Inspector General for TARP (SIGTARP) position with an initial~~
~~$50 million in funding, which has been continued in annual appropriations since. The SIGTARP~~
~~was provided similar powers and authorities as other inspectors general to conduct audits and~~
~~investigations of TARP and issue quarterly reports until all assets held or insured by Treasury~~
~~under TARP were disposed of. The SIGTARP issued its first report in 2010, with its latest report~~
~~covering the last quarter of 2019.81 Congress appropriated $22 million in the Consolidated~~
~~Appropriations Act, 2020 (P.L. 116-93) for the SIGTARP position in FY2020.~~
~~Conflicts of Interest~~
~~The EESA required the Secretary to issue regulations or guidelines to “address, manage or~~
~~prohibit”82 conflicts of interest arising in TARP, including the purchase and management of assets~~
~~and the selection of asset managers and post-employment restrictions.~~
~~Minimizing Costs to Taxpayers~~
~~The EESA directed the Secretary to minimize the negative impact on taxpayers, including both~~
~~direct and long-term costs and benefits. Market mechanism and private-sector participation in~~
~~operating the program were encouraged. The terms and conditions of Treasury asset purchases~~

~~76 Treasury continues to publish TARP reports at https://www.treasury.gov/initiatives/financial-stability/reports/Pages/~~
~~default.aspx. Monthly overall reports are required under §105(a) of the EESA (P.L. 110-343).~~
~~77 P.L. 110-343, §125. For more on the Congressional Oversight Panel in the CARES Act and in TARP, see CRS~~
~~Insight IN11304, COVID-19 Congressional Oversight Commission (COC), by Jacob R. Straus and William T. Egar.~~
~~78 See the TARP Congressional Oversight Panel’s final report at https://www.govinfo.gov/content/pkg/CHRG-~~
~~112shrg64832/pdf/CHRG-112shrg64832.pdf.~~
~~79 P.L. 110-343, §125.~~
~~80 P.L. 110-343, §116.~~
~~81 See TARP Special Inspector General reports at https://www.sigtarp.gov/Pages/Reports-Testimony-Home.aspx.~~
~~82 P.L. 110-343, §108.~~
~~Congressional Research Service~~
22

~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~were to be designed to provide recompense to the taxpayer, including participation in the equity~~
~~appreciation of a firm following Treasury asset purchases.~~
~~Table A-1. Comparison of the CARES Act, Title IV, and TARP~~

~~CARES Act, Title IV~~
~~TARP~~
~~Amount Provided~~
~~$500 bil ion to the Exchange Stabilization~~
~~Up to $700 bil ion for the newly created~~
~~Fund.~~
~~Troubled Asset Relief Program (TARP); a~~
~~subsequent act (P.L. 111-203) reduced~~
~~this to $475 bil ion.~~
~~Enacted~~
~~March 27, 2020.~~
~~October 3, 2008.~~
~~Expiration of Authority~~
~~December 31, 2020, and allows~~
~~October 3, 2010. Commitments made~~
~~outstanding loans and guarantees to be~~
~~under TARP authorized to continue after~~
~~modified, restructured, or otherwise~~
~~this date.~~
~~amended after that date. Assistance to the~~
~~air industry is not to extend beyond the~~
~~initial five-year origination date.~~
~~Beneficiaries~~
~~For direct loans or loan guarantees:~~
~~Financial institutions, auto industry, and~~
~~passenger airlines, cargo airlines, and~~
~~homeowners at risk of foreclosure.~~
~~businesses critical to national security. For~~
~~Federal Reserve (Fed) emergency~~
~~facilities: eligible businesses, states, and~~
~~municipalities.~~
~~Methods of Assistance~~
~~Treasury may make loans or loan~~
~~Purchase or insurance of troubled assets.~~
~~guarantees directly to firms or the Fed. In~~
~~addition, it may make “other investments”~~
~~in Fed programs.~~
~~Minimizing Cost to~~
~~Prohibition on loan forgiveness; loans and~~
~~Directs the Treasury Secretary to~~
~~Taxpayers~~
~~loan guarantees to specified industries~~
~~minimize the negative impact on~~
~~must be prudent, sufficiently secured, and~~
~~taxpayers, including both direct and long-~~
~~made at a rate that reflects risk.~~
~~term costs and benefits.~~
~~Equity Compensation~~
~~For specified industries, warrants, equity,~~
~~For asset purchases, warrants, equity, or~~
~~or senior debt required.~~
~~senior debt required.~~
~~Limits on~~
~~Limits on executive compensation for~~
~~The Emergency Economic Stabilization~~
~~Compensation~~
~~specified industries.~~
~~Act (EESA; P.L. 110-343), as amended,~~
~~included limits on executive bonuses and~~
~~golden parachutes and provided for~~
~~possible compensation clawbacks.~~
~~Conflicts of Interest~~
~~Businesses owned by certain members of~~
~~EESA required the Treasury Secretary to~~
~~the Administration or Members of~~
~~issue regulations or guidelines to~~
~~Congress, or their family members,~~
~~“address, manage or prohibit” conflicts of~~
~~cannot be recipients.~~
~~interest.~~
~~Limits on Dividend and~~
~~Stock buyback and dividend restrictions~~
~~EESA did not include limits on company~~
~~Stock Buyback~~
~~apply to specified firms that receive~~
~~dividends and stock buybacks.~~
~~assistance for 12 months after repayment.~~
~~For Fed programs involving direct lending,~~
~~Treasury may restrict.~~
~~Employee Retention~~
~~Specified industries receiving direct loans~~
~~EESA did not include an employee~~
~~and loan guarantees must maintain~~
~~retention requirement.~~
~~minimum employment levels.~~
~~Government Budgeting~~
~~Record outlays as subsidy costs (no~~
~~Record outlays as subsidy costs with~~
~~market risk adjustment).~~
~~market risk adjustment.~~
~~Congressional Research Service~~
23 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act money that was never going to be spent—because it had stil not been spent shortly before the authority to spend had it expired—cannot generate savings by being taken back. Therefore, it would not serve as an offset that would reduce the overal size of a new stimulus package from a scoring perspective and would not help offset a new package’s effect on the federal debt or deficit. Preliminary Lessons Learned Size The amount of assistance Treasury pledged under Title IV (almost $22 bil ion in loans to industry and $195 bil ion to Fed programs) turned out to be significantly less than the $500 bil ion that was authorized. It also turned out to be more than was needed because the Fed provided only $41 bil ion to recipients in programs backed by the $195 bil ion, which wil be used only if those programs experience losses. As a result, only a fraction of the Title IV funds pledged were needed, and P.L. 116-260 rescinded al but $71 bil ion of the 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 these 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 mutual y 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 wil not be known until loans are repaid and securities mature, which wil take years. At this point, it is certain to be much lower than $500 bil ion, because Treasury loans and Fed assistance equaled a combined $62 bil ion at the end of 2020. It wil also be much lower than $62 bil ion, because most if not al of that amount wil be repaid with interest, with the exception of the (separate) $28 bil ion for airline payroll support provided as of the end of 2020. Stil , Treasury currently estimates that the assistance was subsidized, meaning that the $500 bil ion wil not be fully recouped in present discounted value terms.93 Speed One policy goal was to make this assistance available quickly to help stabilize an economy that was rapidly deteriorating. The practical limitations of setting up new and complex programs from 93 T reasury measures a loan to be subsidized when the present discounted value of repayments is projected to be less than the present discounted value of the principal t hat was extended. A subsidy could occur because the full amount of the loan is not repaid, because the interest payments and other compensation received are lower than T reasury’s borrowing costs, or both. Some argue that T reasury’s estimation method understates the true economic subsidy of its loans because it does not take into account any difference in terms from what a company would have been able to secure from a private lender. (Present discounted value reduces the value of future amounts compared to p resent amounts to adjust for the time value of money.) Congressional Research Service 24 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act scratch worked against accomplishing this goal. In addition, because of capacity constraints, Treasury chose to prioritize the implementation of several of the other urgent CARES Act programs. Similarly, the Fed had several other emergency programs not backed by the CARES Act that it rolled out first. In many cases, the overal economy was recovering by the time CARES Act assistance was received. The first direct Treasury loan was not made until July 2020, and the remaining loans were made between September 25, 2020, and November 13, 2020. Likewise, the Fed programs were fully operational between May 12, 2020, and September 4, 2020.94 Loans to Industry Congress chose to make these loans available to only three industries, in contrast to the PPP, for example, which was available to al business affected by the pandemic if criteria such as eligible smal business were met. At the time of enactment early in the pandemic, some viewed these industries as uniquely affected by the pandemic.95 In hindsight, several other industries where social distancing is impractical were also severely affected by the pandemic and were unable to obtain funding through Treasury direct loans or worker assistance grants. For example, hotels and restaurants were not eligible for Title IV funding. For two industries, passenger and cargo air, Congress was specific about which businesses would qualify. For the other industry, businesses critical to national security, Congress left it to the Treasury Secretary’s discretion to determine which businesses qualify. As a result, the businesses that were granted loans (e.g., a trucking company) differed greatly from the businesses that Congress reportedly intended to receive loans (e.g., major airline manufacturers).96 The latter group reportedly chose not to apply for loans because they could get better terms from private creditors once financial conditions had stabilized.97 Terms and Conditions The CARES Act required conditions such as restrictions on executive compensation, warrants, and restrictions on share buybacks and dividends that may have been attractive only to borrowers who had no private sector alternative available to them. Whereas Congress may have envisioned that the program would serve financial y healthy borrowers facing a frozen private credit market, those borrowers could instead borrow in relatively normal y functioning credit markets, particularly if they could borrow in bond markets.98 That potential y left a program that was 94 GAO, Federal Reserve Lending Programs: Use of CARES Act -Supported Programs Has Been Limited and Flow of Credit Has Generally Improved, GAO-21-180, December 10, 2020, https://www.gao.gov/assets/720/711141.pdf. 95 See, for example, David Gelles and Niraj Chokshi, “‘Almost Without Precedent’: Airlines Hit Hard by Coronavirus,” New York Tim es, March 5, 2020, https://www.nytimes.com/2020/03/05/business/coronavirus-airline-industry.html. 96 Reportedly, one intended recipient at the time of enactment was the aerospace manuf acturer Boeing. When asked about the use of this funding, the T reasury Secretary was reportedly quoted as saying, “ Right now, Boeing is saying they don't need it.” Quoted in Andrew T angel and Doug Cameron, “ Bailout Aids Boeing Even If It Doesn’t T ap Funds,” Wall Street Journal, March 28, 2020. Senator Pat T oomey was reportedly quoted as saying the $17 billion “ is not meant to be exclusively for Boeing.” Quoted in Gregory Wallace and Phil Mattingly, “ Boeing Could Receive Billions from Stimulus Package,” CNN, March 26, 2020. Senator Maria Cantwell reportedly said that the $17 billion was likely to be used for aerospace manufacturers, including Boeing, and their supply chain. See Dominic Gates, “Cantwell: Boeing May Reject Strings Attached,” Seattle Times, March 26, 2020. 97 Leslie Jones, “Boeing Raises Monster $25 Billion in Bond Offering, Rules Out Federal Aid,” CNBC, April 30, 2020, https://www.cnbc.com/2020/04/30/boeing-raises-monster-25-billion-in-bond-offering-rules-out -federal-aid.html. 98 See, for example, Joe Rennison, “U.S. Corporate Bond Issuance Hits $1.919tn in 2020, Beating Full-Year Record,” Congressional Research Service 25 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act primarily attractive to financial y unhealthy borrowers that could not secure private credit even in normal y functioning markets, which increases the risk that the program wil experience future losses or wil have kept inefficient producers in the marketplace. Preserving Jobs Preserving jobs was one major goal of Title IV, but only the direct loans and one Fed program had employee retention conditions. In the case of the Fed program, the condition was not binding—borrowers needed only to “make commercial y reasonable efforts to maintain its payroll and retain its employees during the time the Eligible Loan is outstanding,”99 and according to the COC, the Fed is not monitoring whether borrowers retain payroll.100 Further, several of the loans had, at most, a minimal impact on overal industry employment. For example, eight of the borrowers employed fewer than 100 employees overal . Role of Federal Reserve The Fed’s CARES Act programs assisted municipalities, nonfinancial businesses, and corporate bond markets, expanding the Fed’s traditional role beyond lender of last resort to the banking system and even beyond the more expansive role it took in the 2007-2009 financial crisis. The economic disruptions caused by the public health crisis were unique and arguably cal ed for an unprecedented policy response. But once financial conditions stabilized, policymakers faced two questions: First, how could Congress ensure that the Fed’s new role did not become permanent or routine? Second, how quickly should the Fed’s new role be removed—once financial conditions had stabilized or once the pandemic had ended? And what if a new bout of financial instability emerged? In the CARES Act, Congress limited the availability of Title IV loans and investments to the end of 2020. (Notably, the expiration in Title IV funding did not require the Fed programs backed by that assistance to expire at the same time.) When this decision was made in March, few policymakers arguably expected that the pandemic would be worse when the assistance expired than it had been when it was enacted. On the other hand, financial conditions stabilized shortly after enactment of the CARES Act and have remained stable since. In the December coronavirus package (P.L. 116-260), Congress decided to maintain the year-end expiration date and permanently close down al 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 Fed and Treasury Secretary’s discretion. The changes in P.L. 116-260 may help avoid the potential for an inappropriate expansion of the Fed’s role after the pandemic is over at the expense of limiting the Fed’s ability to respond to any new crisis before or after the pandemic has ended. Financial Tim es, September 2, 2020, https://www.ft.com/content/a59c2a9d-5e0b-4cbc-b69e-a138de76a776. 99 See, for example, Federal Reserve, Main Street New Loan Facility Term Sheet, December 29, 2020, https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20201229a1.pdf. 100 As reported in Congressional Oversight Commission, The Third Report of the Congressional Oversight Com m ission, July 20, 2020, p. 14, https://www.toomey.senate.gov/files/documents/Oversight%20Commission%20-%203rd%20Report%20(FINAL)_7.20.20.pdf. Congressional Research Service 26 Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act Author Information Andrew P. Scott, Coordinator Rachel Y. Tang Analyst in Financial Economics Analyst in Transportation and Industry Marc Labonte Ben Wilhelm Specialist in Macroeconomic Policy Analyst in Government Organization and Management Acknowledgments William Egar, formerly of CRS, was originally a co-author of this report.

~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

~~CARES Act, Title IV~~
~~TARP~~
~~Special Inspector~~
~~Special Inspector General for Pandemic~~
~~Special Inspector General for TARP~~
~~General~~
~~Recovery (SIGPR) within Treasury. From~~
~~(SIGTARP) within Treasury until all assets~~
~~the $500 bil ion, the Coronavirus Aid,~~
~~held by Treasury are disposed of. Funded~~
~~Relief, and Economic Security Act~~
~~through congressional appropriations;~~
~~(CARES Act; P.L. 116-136) directs $25~~
~~most recently, $22 mil ion in FY2020.~~
~~mil ion to SIGPR. The SIGPR terminates~~
~~five years after the enactment of the~~
~~CARES Act (i.e., March 27, 2025).~~
~~Congressional~~
~~Five-member Congressional Oversight~~
~~Five-member TARP Congressional~~
~~Oversight~~
~~Commission established in the legislative~~
~~Oversight Panel established in the~~
~~branch to be appointed by House and~~
~~legislative branch, appointed by House~~
~~Senate leadership.~~
~~and Senate leadership.~~
~~GAO~~
~~Annual report required.~~
~~Periodic investigation and reporting~~
~~required.~~
~~Reports, Disclosures,~~
~~The CARES Act requires the Treasury~~
~~EESA required the Treasury Secretary to~~
~~and Testimony~~
~~Secretary and Federal Reserve Chair to~~
~~provide periodic updates to Congress~~
~~issue reports, make disclosures, and~~
~~with monthly overall reports and~~
~~provide testimony before congressional~~
~~individual reports that detailed all~~
~~committees.~~
~~transactions made under TARP. Periodic~~
~~reports were also required from the~~
~~Office of Management and Budget and the~~
~~Congressional Budget Office.~~
Source: CRS.
Note: “Specified industries” refer to firms that are related to commercial airlines, cargo airlines, or those
~~“critical to maintaining national security.”~~

~~Author Information~~

~~Andrew P. Scott, Coordinator~~
~~Rachel Y. Tang~~
~~Analyst in Financial Economics~~
~~Analyst in Transportation and Industry~~

~~William T. Egar~~
~~Baird Webel~~
~~Analyst in American National Government~~
~~Acting Section Research Manager~~

~~Raj Gnanarajah~~
~~Ben Wilhelm~~
~~Analyst in Financial Economics~~
~~Analyst in Government Organization and~~

~~Management~~

~~Marc Labonte~~

~~Specialist in Macroeconomic Policy~~

~~Congressional Research Service~~
24

~~Treasury and Federal Reserve Financial Assistance in Title IV of the CARES Act~~

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