Enabling Bad Behavior: The Federal Reserve’s Municipal Liquidity Facility in Retrospect

Enabling Bad Behavior: The Federal Reserve’s Municipal Liquidity Facility in Retrospect

Executive SummaryIn response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act greatly expanded government intervention in the economy. Among many hasty creations of March 2020 were the Federal Reserve Emergency Lending Facilities. One of these lending facilities, the Municipal Liquidity Facility (MLF), provided aid to fiscally distressed state and local governments. For the first time in its history, the F…