The facility will support rollovers of commercial paper, a commonly used form of unsecured, short-term debt issued to raise funds.
With businesses forced to close and with consumer activity capped by quarantines around the country, concern has built up over previous weeks that companies will not be able to find funding to survive the public health crisis.
The commercial paper funding facility will establish a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper from eligible companies as long as the paper is rated A1/P1 as of March 17. The facility would be available to companies of various industries, not just banks.
“An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak,” the Fed said in a statement.
The facility was opened in coordination with the U.S. Treasury, which will provide $10 billion of credit production via its Exchange Stabilization Fund.
The Fed has taken a number of uncommon actions recently amid the coronavirus outbreak.
An emergency 50 basis point cut from the Federal Reserve on March 3 was not enough to stop market turmoil, and on Sunday night, the central bank made another abrupt announcement by slashing rates to zero.
Fed Chairman Jerome Powell said the central bank’s actions over the past two weeks did not calm financial conditions as policymakers hoped, spurring the second emergency meeting.
In addition to pushing rates down to zero, the Fed also restarted the crisis-era policy of asset purchases, announced U.S. dollar swap lines, and eased bank rules to encourage lending.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.