Full text
The Fourteenth Report of the Congressional Oversight
Commission
June 30, 2021
Commission Members
U.S. Representative French Hill
U.S. Senator Pat Toomey
2
TABLE OF CONTENTS
Introduction
Treasury and Federal Reserve Recent Developments
1
INTRODUCTION
This is the fourteenth report of the Congressional Oversight Commission
(“Commission”) created by the Coronavirus Aid, Relief, and Economic Security Act
(“CARES Act”).1 The Commission’s role is to conduct oversight of the implementation of
Division A, Title IV, Subtitle A of the CARES Act (“Subtitle A”) by the U.S. Department of
the Treasury (“Treasury”) and the Board of Governors of the Federal Reserve System
(“Federal Reserve”). Subtitle A provided $500 billion to the Treasury for lending and other
investments “to provide liquidity to eligible businesses, States, and municipalities related to
losses incurred as a result of coronavirus.”2
Of this amount, $46 billion was set aside for the Treasury to provide loans or loan
guarantees to certain types of companies. Up to $25 billion was available for passenger air
carriers, eligible businesses certified to inspect, repair, replace, or overhaul services, and ticket
agents. Up to $4 billion was available for cargo air carriers and $17 billion was available for
businesses “critical to maintaining national security.”3
The CARES Act charges the Commission with submitting regular reports to Congress on:
• The Federal Reserve’s use of its authority under Subtitle A, including the use
of contracting authority and administration of the provisions of Subtitle A.
• The impact of loans, loan guarantees, and investments made under Subtitle A on
the financial well-being of the U.S. economy.
• The extent to which the information made available on transactions under Subtitle A
has contributed to market transparency.
• The effectiveness of loans, loan guarantees, and investments made under Subtitle A
in minimizing long-term costs to the taxpayers and maximizing the benefits for
taxpayers.4
In its first report to Congress on May 18, 2020, the Commission stated that it
is responsible for answering two basic questions:
• What are the Treasury and the Federal Reserve doing with $500 billion of
taxpayer money?
1 CARES Act, Pub. L. No. 116-136, § 4020, 134 Stat. 281 (2020).
2 Id. § 4003(a).
3 Id. § 4003(b). In addition, Division A, Title IV, Subtitle B of the CARES Act (“Subtitle B”) authorized the
Treasury to provide up to $32 billion in financial assistance to passenger air carriers, cargo air carriers, and certain
airline industry contractors that must be exclusively used for the continuation of payment of employee wages,
salaries, and benefits. Subtitle B is not within the jurisdiction of the Commission.
4 Id. § 4020.
2
• Who is that money helping?5
The emergency lending facilities established by the Federal Reserve that received
CARES Act funds are:
Primary Market Corporate Credit Facility (“PMCCF”) and Secondary Market
Corporate Credit Facility (“SMCCF”): Through a special purpose vehicle (“SPV”), the
PMCCF enabled the Federal Reserve to purchase newly issued corporate bonds and
portions of syndicated loans, and the SMCCF enabled the Federal Reserve to purchase
previously issued corporate bonds and exchange-traded funds (“ETFs”) that invest in
corporate bonds.6 The PMCCF never made any purchases during the period it was
operational.7 As of June 23, 2021, the SMCCF had an outstanding amount of bond ETF
and individual corporate bond purchases of $11.6 billion.8
Main Street Lending Program (“MSLP”): The MSLP is comprised of five
facilities—three dedicated to for-profit businesses and two dedicated to non-profit
organizations. The Federal Reserve, through an SPV, acquired loans issued by
lenders to small and medium-sized businesses and non-profit organizations with up
to 15,000 employees or 2019 revenues of $5 billion or less. As of June 23, 2021, the
Federal Reserve held $16.2 billion in loan participations purchased under the
MSLP.9
Municipal Liquidity Facility (“MLF”): The MLF enabled the Federal Reserve, through
an SPV, to purchase short-term notes issued by state and local governments. As of June
23, 2021, the MLF had $5.0 billion in outstanding purchases of municipal notes.10
5 Congressional Oversight Commission, Questions About the CARES Act’s $500 Billion Emergency Economic
Stabilization Funds, May 18, 2020, at 5, https://coc.senate.gov/sites/default/files/2020-
08/20200518_Congressional_Oversight_Committee_1st_Report.pdf.
6 Board of Governors of the Federal Reserve System, Primary Market Corporate Credit Facility Term Sheet, July
28, 2020, https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200728a9.pdf; Board of
Governors of the Federal Reserve System, Secondary Market Corporate Credit Facility Term Sheet, July 28, 2020,
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200728a1.pdf.
7 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
8 Board of Governors of the Federal Reserve System, Statistical Release H.4.1: Factors Affecting Reserve Balances
of the Depository Institutions and Condition Statement of Federal Reserve Banks, Jun. 24, 2021, at n.4,
https://www.federalreserve.gov/releases/h41/. The SPV for the SMCCF is the Corporate Credit Facilities LLC. The
SPV for the MSLP is MS Facilities LLC. The SPV for the MLF is Municipal Liquidity Facility LLC.
9 Id.
10 Id.
3
Term Asset-Backed Securities Loan Facility (“TALF”): The Federal Reserve
established TALF to support the flow of credit to consumers and businesses, and to
generally improve the market conditions for asset-backed securities (“ABS”).11
TALF’s purpose was to enable the issuance of ABS backed by student loans, auto
loans, credit card loans, loans guaranteed by the Small Business Administration,
leveraged loans, commercial mortgages, and certain other assets.12 TALF had a total
outstanding amount of $1.6 billion in loans as of June 23, 2021.13
The direct lending programs managed by the Treasury that received CARES Act funds
are:
Treasury Loans for National Security Businesses: The Treasury had $17 billion available
to make loans to businesses critical to maintaining national security under Subtitle A. The
Treasury provided national security loans to eleven businesses, totaling $735.9 million.14
One business, Yellow Corporation (“Yellow”), which was formerly known as YRC
Worldwide, Inc. (“YRC”), accounted for 95% of the total outstanding loans.15
Treasury Loans for the Airline Industry: In addition, the Treasury had $29 billion
available to make loans to the airline industry under Subtitle A, with $25 billion available
for passenger air carriers, including related businesses, and $4 billion available for cargo
air carriers.16 The Treasury lent $21.2 billion across twenty-four such loans to companies
the Treasury characterized as airlines, ticket agents, a repair station, and a cargo air
carrier.17
In this report, we provide updates regarding recent key actions taken by the Treasury
and the Federal Reserve regarding each of the above lending programs and facilities under
Subtitle A, as well as updates regarding the Commission’s oversight activities.
11 Federal Reserve, Term Asset-Backed Securities Loan Facility Term Sheet, Jul. 28, 2020,
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200728a6.pdf.
12 Id.
13 Board of Governors of the Federal Reserve System, Statistical Release H.4.1: Factors Affecting Reserve Balances
of the Depository Institutions and Condition Statement of Federal Reserve Banks, Jun. 24, 2021, at n.4,
https://www.federalreserve.gov/releases/h41/.
14 U.S. Department of the Treasury, Loans to Air Carriers, Eligible Businesses, and National Security Businesses,
last visited Jun. 28, 2021, https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-
industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses.
15 Yellow Corporation, YRC Worldwide Inc. is Renamed Yellow Corporation, Feb. 4, 2021,
https://investors.myyellow.com/news-releases/news-release-details/yrc-worldwide-inc-renamed-yellow-corporation.
16 CARES Act § 4003. Related businesses are eligible businesses that are certified under part 145 of title 14, Code of
Federal Regulations, and approved to perform inspection, repair, replace, or overhaul services, and ticket agents (as
defined in Section 40102 of Title 49 of the United States Code).
17 U.S. Department of the Treasury, Loans to Air Carriers, Eligible Businesses, and National Security Businesses,
last visited Jun. 28, 2021, https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-
industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses.
4
TREASURY AND FEDERAL RESERVE RECENT DEVELOPMENTS
As of January 8, 2021, all emergency lending programs created by the Treasury and the
Federal Reserve under Section 4003 of the CARES Act have ceased operations. On December
21, 2020, Congress passed new COVID-relief legislation in the Consolidated Appropriations
Act, 2021, Pub. L. No. 115-260. In that legislation, Congress prohibited these Federal
Reserve’s CARES Act lending facilities from being restarted or replicated without
congressional approval, and rescinded the remaining unobligated balance of the $500 billion
previously made available under Section 4003 of the CARES Act for emergency lending
programs.18
We summarize below the outstanding amounts of credit extended by each facility and
other key developments.
Primary Market Corporate Credit Facility (“PMCCF”)
The PMCCF ceased operations on December 31, 2020. The PMCCF did not engage
in any transactions during the period in which it was operational.19
Secondary Market Corporate Credit Facility (“SMCCF”)
The SMCCF ceased operations on December 31, 2020. As of its closure, the SMCCF
invested in 16 bond ETFs with a market value of $8.8 billion, including seven high-yield bond
ETFs with a market value of $1.2 billion.20 As of May 31, 2021, these securities were worth $8.6
billion.21
As of its closure, the SMCCF also had purchased individual corporate bonds from 557
different issuers, with the amortized cost of outstanding individual bond holdings totaling $5.5
18 Consolidated Appropriations Act, 2021, Pub. L. No. 115-260, Division N, Title X, § 1003, 134 Stat. 1182.
19 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
20 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jan. 11
2021, https://www.federalreserve.gov/publications/files/smccf-transaction-specific-disclosures-01-11-21.xlsx.
21 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jun. 10
2021, https://www.federalreserve.gov/publications/files/smccf-transaction-specific-disclosures-06-10-21.xlsx.
5
billion.22 As of May 31, 2021, the SMCCF held $5.0 billion in individual bond purchases.23 The
chart below summarizes the SMCCF’s ten largest individual bond holdings, which make up
15.2% of SMCCF’s holdings.24
Issuer
Sector
Amortized
Cost
($ Millions)
Percentage of
SMCCF’s
Individual
Bond Holdings
AT&T Inc.
Communications
97.5
1.93%
Volkswagen Group of America
Finance LLC
Consumer Cyclical
89.0
1.76%
Toyota Motor Credit Corp.
Consumer Cyclical
87.4
1.73%
Comcast Corp.
Communications
83.8
1.66%
Daimler Finance North America LLC Consumer Cyclical
82.4
1.63%
Apple Inc.
Technology
73.1
1.45%
Microsoft Corp.
Technology
66.9
1.32%
General Electric Co.
Capital Goods
65.6
1.30%
BMW US Capital LLC
Consumer Cyclical
63.1
1.25%
Ford Motor Credit Co LLC
Consumer Cyclical
60.2
1.19%
The Federal Reserve had indicated to the Commission that the Federal Reserve would
unwind positions in the SMCCF based on the prevailing facts and circumstances, as economic
and financial conditions evolve. On June 17, 2020, Federal Reserve Chair Jerome Powell
testified that “[w]e are generally a hold to maturity [investor]. It may be that we sell some back
into the secondary market down the road, but ultimately we’re [a] buy-and-hold type buyer.”25
22 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jan. 11
2021, https://www.federalreserve.gov/publications/files/smccf-transaction-specific-disclosures-01-11-21.xlsx.
23 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jun. 10
2021, https://www.federalreserve.gov/publications/files/smccf-transaction-specific-disclosures-06-10-21.xlsx.
24 Id.
25 House Financial Services Committee Hearing on Economic with Federal Reserve Chair Jerome Powell, 116th
Cong. (June 17, 2020) (Testimony of Chair Jerome Powell), https://www.rev.com/blog/transcripts/house-financial-
committee-hearing-transcript-on-economy-with-jerome-powell.
6
As of May 31, 2021, 53 bonds held by the SMCCF had matured, 128 bonds had been redeemed
early, and 1,180 bonds remained in the facility.26
On June 2, 2021, the Federal Reserve announced plans to begin winding down the
SMCCF’s portfolio of bond ETFs and individual corporate bonds.27 On June 10, 2021, the
Federal Reserve briefed the Commission on its plan to sell the SMCCF’s holdings. It intends
sales to be gradual and orderly. The Federal Reserve also intends to take into account daily
liquidity and trading conditions for ETFs and corporate bonds to minimize the potential for any
adverse impact on market functioning. Its goal is to complete the sale of the SMCCF’s assets by
December 31, 2021. For context, approximately $30 billion of corporate bonds have been traded
each day, on average, since the beginning of 2020.28 As of May 31, 2021, the SMCCF held $5.0
billion in individual bond purchases.29
All of the individual corporate bonds held by the SMCCF mature by the end of 2025.
Almost half of the bonds in the SMCCF mature by the end of 2023.30 As seen in the graph
below, the largest number of these bonds mature in 2025, but bond maturities are spread out
fairly evenly among the five years that bonds are due to mature. This reduces risk to the taxpayer
as the SMCCF will not be dependent on market conditions in any given year.
26 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jun. 10
2021, https://www.federalreserve.gov/publications/files/smccf-transaction-specific-disclosures-06-10-21.xlsx.
27 Board of Governors of the Federal Reserve System, Federal Reserve Board announces plans to begin winding
down the portfolio of the Secondary Market Corporate Credit Facility, Jun. 2, 2021,
https://www.federalreserve.gov/newsevents/pressreleases/monetary20210602a.htm.
28 SIFMA, U.S. Corporate Bond Statistics, Jun. 10, 2021, https://www.sifma.org/resources/research/us-corporate-
bonds-statistics/us-corporate-bonds-statistics-sifma/.
29 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jun. 10
2021, https://www.federalreserve.gov/publications/files/smccf-transaction-specific-disclosures-06-10-21.xlsx.
30 Id.
301
926
1,048
1,047
1,478
-
500
1,000
1,500
2,000
2021
2022
2023
2024
2025
Maturities for SMCCF by year
7
The Federal Reserve has indicated to the Commission that the SMCCF’s corporate bond
investments are subject to review each quarterly reporting period to identify and evaluate
investments that have indications of possible credit impairment. In addition, the Federal
Reserve’s analysis related to portfolio performance includes an evaluation of dividend and
interest income, prepayments, and losses under a range of possible future conditions. As of May
31, 2021, the Federal Reserve does not expect any losses in the SMCCF portfolio.31
Main Street Lending Program (“MSLP”)
The MSLP ceased operations on January 8, 2021. The MSLP purchased 1,830 loan
participations while it was operational, totaling $16.6 billion,32 representing 2.8% of its original
$600 billion lending capacity.33 As of May 31, 2021, the MSLP had a balance of $16.3 billion in
loan participations, with an estimated loan loss allowance that increased to $2.7 billion, up from
previous estimate of $2.4 billion.34 For context, the Small Business Administration’s 7(a) Loan
Program that targets small businesses has experienced cumulative defaults of 10% to 28%
throughout the life of the loans, with loans that were originated in the lead-up to the 2007
financial crisis experiencing 30% to 40% of defaults.35
Every MSLP loan matures in 2025.36 This introduces risk to the taxpayer, as the MSLP
will be dependent on market conditions in 2025. To mitigate the above risk, the Federal Reserve
monitors credit quality based on borrower information provided to it. The terms of the MSLP
participation agreement require the borrower to provide the MSLP with certain financial
information quarterly and annually, as well as any material developments. The Federal Reserve,
31 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
32 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Feb. 8
2021, https://www.federalreserve.gov/publications/files/mslp-transaction-specific-disclosures-02-09-21.xlsx.
33 Board of Governors of the Federal Reserve, Federal Reserve takes additional actions to provide up to $2.3 trillion
in loans to support the economy, Apr. 9, 2020,
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm.
34 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
35 S&P Global, Small Business ABS Credit Quality Hinges on Pandemic Duration and Stimulus Efficacy, Apr. 28,
2020, https://www.spglobal.com/ratings/en/research/articles/200428-small-business-abs-credit-quality-hinges-on-
pandemic-duration-and-stimulus-efficacy-11467182.
36 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
8
with the assistance of a third-party vendor, reviews and analyzes this information and uses it to
develop an internal credit score for MSLP loans. As seen in the table below, the evaluation of
loan participations purchased by the MSLP resulted in a loan loss allowance in the amount of
$2.7 billion as of May 31, 2021, equivalent to 16.5% of the $16.3 billion loan participations’
balance.37 This balance increased from an estimate of loan losses of $2.4 billion on March 31,
2021.38 As of May 31, 2021, MSLP has recognized approximately $4 million in loan losses.39
Date as of
Loan Loss
Reserve
Portfolio
Balance
Loan Loss
% of Total
Portfolio
Actual
Losses
May 31, 2021
$2.7 billion
$16.3 billion
16.5%
$4 million
March 31, 2021
$2.4 billion
$16.5 billion
14.5%
$0
Municipal Liquidity Facility (“MLF”)
The MLF ceased operations on December 31, 2020. During its period of operation, the
MLF purchased a total of four notes from just two borrowers—the State of Illinois and New
York City’s Metropolitan Transportation Authority (“MTA”). These notes totaled $6.6 billion,
representing 1% of the MLF’s original $500 billion lending capacity.40 As of May 31, 2021, the
Federal Reserve held $5.5 billion of outstanding asset purchases.41
Most of the MLF’s municipal notes mature in 2023.42 The concentration of notes due in
2023 exposes the taxpayer to the risk of market conditions in 2023. To mitigate this risk, the
Federal Reserve reviews the MLF municipal note investments on a quarterly basis to identify
investments that have indications of possible credit impairment. In addition, the Federal
Reserve’s modeling of portfolio performance includes an evaluation of the municipal note
portfolio performance under stress conditions. As of May 31, 2021, the Federal Reserve does not
37 Id.
38 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Apr. 9, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-04-12-21.pdf.
39 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
40 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jun. 10
2021, https://www.federalreserve.gov/publications/files/mlf-transaction-specific-disclosures-06-10-21.xlsx.
41 Id.
42 Id.
9
expect any losses in the MLF portfolio.43
Term Asset-Backed Securities Loan Facility (“TALF”)
TALF ceased operations on December 31, 2020. During its period of operation, the
TALF made 224 loans totaling $4.4 billion to 20 investment funds, representing 4% of TALF’s
of original $100 billion lending capacity.44 While TALF only issued $4.4 billion in loans,
improvements in the funding markets allowed $304.3 billion in capital to flow to borrowers in
the ABS markets in 2020.45 Many TALF borrowers have elected to prepay their TALF loans,
causing the size of the TALF loan program to contract by 60%, to a total outstanding amount of
$1.7 billion in loans, as of May 31, 2021.46
In regards to when TALF loans are scheduled to be repaid, every TALF loan matures in
2023.47 This introduces risk to the taxpayer as the TALF will be dependent on market conditions
in 2023. That said, as noted above, many TALF borrowers elected to prepay TALF loans totaling
$2.7 billion, which were due in 2023, and further prepayments would reduce risk to the
taxpayer.48
To further mitigate taxpayer risk, TALF has recourse to the ABS collateral securing the
loan. TALF annual financial statements note that the fair value of the ABS collateral for each
TALF loan is subject to both market and credit risk, arising from movements in variables such as
interest rates, credit spreads, and the credit quality of the collateral. Lending haircuts applied to
each ABS at the time of the loan was originated provide a further layer of protection against loss,
as the loan amount advanced against each ABS was less than the ABS’ value.49
The Federal Reserve has indicated that TALF loans are evaluated on a quarterly basis for
impairment to determine if the fair value of the collateral is sufficient to repay each loan. Based
43 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
44 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act (Transaction-specific Disclosures), Jan. 11
2021, https://www.federalreserve.gov/publications/files/talf-transaction-specific-disclosures-01-11-21.xlsx.
45 SIFMA, U.S. Asset-Backed Securities Statistics, Jun. 10, 2021, https://www.sifma.org/resources/research/us-asset-
backed-securities-statistics/.
46 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
47 Id.
48 Id.
49 Federal Reserve, Financial Statements: TALF II LLC, for the period from April 13, 2020 to December 31, 2020,
Mar. 17, 2021, https://www.federalreserve.gov/aboutthefed/files/talfllcfinstmt2020.pdf.
10
on evaluations performed as of December 31, 2020, there were no credit impairments in TALF’s
holdings.50 The fair value of the collateral is publicly disclosed by the Federal Reserve in its
periodic reports to Congress on TALF. Relative to the $1.7 billion in loans outstanding, the total
value of the collateral pledged to secure the TALF loans to eligible borrowers was $2.0 billion as
of May 31, 2021.51
Treasury Loans for National Security Businesses
The national security loan program made 11 loans totaling $735.9 million.52 The $700
million loan to Yellow made up a substantial portion of the program. The Treasury’s loan to
Yellow contains two parts (i.e., tranches) that mature on September 30, 2024. The first tranche of
$300 million (“tranche A”) has an interest rate of London Inter-bank Offered Rate (“LIBOR”)
+3.50%. Yellow will use these funds to cover, among other things, healthcare and pension
liabilities, real estate and equipment leases, and interest payments on debt. The second tranche of
$400 million (“tranche B”) also has an interest rate of LIBOR +3.50%. Yellow will use these
funds to finance the purchase of tractors and trailers in accordance with the company’s capital
expenditures plan that must be submitted to, and approved by, the Treasury.
The full $300 million of tranche A of the loan was disbursed during 2020 and $251
million of the $400 million tranche B has been disbursed as of January 2021.53 Yellow used
$274 million of the tranche A loan proceeds in 2020 and was expected to use the remaining $26
million in the first quarter of 2021. Yellow used $72 million of the tranche B proceeds to
purchase 300 tractors and 1,200 trailers, and the rest of tranche B loan proceeds are expected to
go towards Yellow’s $450 million to $550 million capital expenditures budget for 2021. Yellow
anticipates the rest of tranche B of the loan being disbursed during the first half of 2021.54
As additional security for the Treasury’s loan to Yellow, the Treasury received 15.9
million shares of Yellow’s common stock as consideration.55 Based on Yellow’s stock price on
50 Id.
51 Board of Governors of the Federal Reserve System, Periodic Report: Update on Outstanding Lending Facilities
Authorized by the Board under Section 13(3) of the Federal Reserve Act, Jun. 10, 2021,
https://www.federalreserve.gov/publications/files/pdcf-mmlf-cpff-pmccf-smccf-talf-mlf-ppplf-msnlf-mself-msplf-
nonlf-noelf-06-10-21.pdf.
52 U.S. Department of the Treasury, Loans to Air Carriers, Eligible Businesses, and National Security Businesses,
last visited Jun. 28, 2021, https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-
industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses.
53 Yellow Corporation, Fourth Quarter 2020 Earnings Call, Feb. 4, 2021,
https://investors.myyellow.com/events/event-details/yrc-worldwide-4th-quarter-2020-earnings-call.
54 Id.
55 Yellow Corporation, 2020 Annual Report, Feb. 11, 2021, https://investors.myyellow.com/static-files/c7b4a86d-
ddd4-444b-80e6-0603b6b5876b (see “U.S. Treasury Loan”).
11
June 28, 2021, the value of Treasury’s common stock position is approximately $104.6 million.
On May 10, 2021, the Commission sent letters to the Secretary of Defense and the
Secretary of the Treasury, requesting additional documents regarding the loan made to Yellow.
The Commission has not yet received a response.
Treasury Loans for the Airline Industry
The Treasury’s airline industry loan program made 24 loans totaling $21.2 billion.56 The
Commission’s eleventh report featured an in-depth analysis on the program and offered
recommendations related to the program.
56 U.S. Department of the Treasury, Loans to Air Carriers, Eligible Businesses, and National Security Businesses,
last visited Jun. 28, 2021, https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-
industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses.