Thread by @RealBankReform

OVERSIGHT HEARING ON STATE MUNICIPAL LENDING: Why is the Fed offering so little support for state and municipal governments? Let's find out in this THREAD:

@federalreserve's Kent Hiteshew continuing to evade arguments in favor of greater support for state and municipal lending ... The Fed has used 0.3% of its $500 billion facility while pumping money into corporate markets

@BharatRamamurti points out, the Fed is giving “no strings attached support to some of America’s biggest corporations” while the municipal and state governments face tough conditions, ones that hurt first responders crucial to #COVID19 response

A reminder: @federalreserve is buying bonds ABOVE PAR for corporations prospect.org/coronavirus/un…

However, @SenToomey wants to wind down the Municipal Lending Facility, thinks it has served its purpose.

Hiteshew says muni bond rates are very low, easing refinancing of existing debt, which indicates the Fed is doing its job of supporting liquidity

Hiteshew adds that munibond markets are different than corporate bonds, and creating a secondary market facility for muni market would have been too complicated

@BharatRamamurti points out that @federalreserve is demanding a lower interest rate from Philip Morris and the state of Kentucky. Both facilities set up under same authority. Why the double standards? Hiteshew can't answer.

Ramamurti adds another example: Chevron gets a better deal than Wisconsin.

Ramamurti cites repayment terms: longer for corporates than municipalities. Why the difference? "There is no legal limitation." So, Hiteshew admits the Fed could make the terms much more generous IF IT WANTS.

@RepFrenchHill quizzes Hiteshew on whether MLF should be extended but he dodges. A question for Fed board. He does cite "warning signs" of budget cuts and state actions could affect market conditions.

Hill asks Hiteshew whether they are doing too much, cites MTA issuance that had private-sector bidders

@RepShalala questions whether Fed should have its mandate on full employment in mind when designing municipal facility? Hiteshew punts, but still wags his finger at state/local govs: "While they can't cut their way out of this crisis, neither can they borrow their way."

@SenToomey says the munibond facility should be part of the "fiscal debate" about additional stimulus, but steers comments into question about whether there's a shortage of credit. Which is not the issue.

"The Fed is using public money to purchase a bond from Chevron at a rate of ~0.9% over more than 4.5 years. A state like WI, with the exact same rating as Chevron has to pay 1.28% over 3 years" --@BharatRamamurti, on how the Fed is offering worse rates to states than corporations

@BharatRamamurti also cites new Fed stance on employment, and Powell comments on racial injustice to argue for better MLF conditions: “If the Fed wants its statements to be more than window dressing, does the Fed need to do more.”