Brian Chappatta, Columnist

Fed Should Act Like HEROES With Municipal Bonds

The central bank is sitting idly by while state and local government finances deteriorate.

July 13, 2020 at 9:30 AM UTC

Corrected

July 13, 2020 at 12:46 PM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Powell and Mnuchin are being stingy.
Photographer: Tasos Katopodis/Getty Images

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Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin could be heroes for state and local governments. If they wanted to be, that is.

More than three months after the central bank unveiled its Municipal Liquidity Facility, Illinois remains the only borrower to tap the Fed for funding. As Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth, noted on Twitter last week in exasperation, that means the Fed is using just $1.2 billion of its $500 billion in potential firepower — which rounds down to 0%.