WASHINGTON — The Federal Reserve tiptoed into the market for municipal debt on Friday, a small move that economists, lawmakers and state treasurers say should be expanded as the coronavirus places huge financial pressure on local governments. The Fed will now let banks tap cheap loans by pledging short-term, highly rated municipal debt as collateral. That gives banks an incentive to buy local debt from money market mutual funds, creating demand for securities that had become hard to trade amid broader financial turmoil. The move could keep the mutual funds, popular investments among ordinary workers and companies, from crashing as investors cash out. Democratic lawmakers, a group of state treasurers, and interest groups have all urged the Fed to help municipalities more directly.

Source: New York Times March 20, 2020 21:33 UTC