Businesses and Employees Let’s start with some context and recall why unprecedented action was necessary in March. Amid a synchronized global demand shock of uncertain length and severity, access to credit takes on outsized importance. Companies that issue public bonds and commercial paper depend on financing to make investments and meet their obligations, including payrolls, and together likely account for nearly one-fourth of all U.S. private sector employment and just under 50 percent of U.S. output.2 Even companies that do not themselves have public bonds are closely linked through the supply chain, as they receive trade credit from or sell to large corporate bond issuers. Research suggests that shocks impacting large businesses spill over to smaller firms, perhaps accounting for 10 percent of the reduction in employment at small firms during the last recession.3 The unusually high level of uncertainty about the pandemic shock was reflected in the functioning of markets that finance large U.S. employers. Market liquidity—the conditions under which companies’ debt is issued and traded—rapidly deteriorated to levels experienced during the Global Financial Crisis. Even for investment-grade companies, the cost of debt skyrocketed to five times pre-pandemic levels. At the height of the strain, many companies lost access even to short-term financing, and issuance of longerterm corporate bonds declined precipitously. From late February through early March, overall corporate issuance dropped 60 percent year-over-year, with virtually no new issues pricing on several consecutive days. Firms that could not access capital markets were at risk of being weakened irreparably.

20/10/2020  The Federal Reserve’s Corporate Credit Facilities: Why, How, and For Whom - FEDERAL RESERVE BANK of NEW YORK  SPEECH  The Federal Reserve’s Corporate Credit Facilities: Why, How, and For Whom October 20, 2020 Daleep Singh, Executive Vice President Remarks at The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (delivered via videoconference) As prepared for delivery  Thank you, Tom, for the invitation to join this event. As all of you know, in March the Federal Reserve—with backing from the U.S. Treasury—created a set of facilities to purchase corporate credit for the first time in its history. Many observers have credited the facilities with repairing market functioning in the corporate bond market and restoring the ability of many businesses to finance themselves through the pandemic. But my focus today is not the corporate bond market, credit spreads, or Wall Street. Rather, I’d like to connect the dots by explaining why these facilities were necessary to support jobs and the economic recovery on Main Street, and why transparency, access, and accountability were so critical to their implementation. Before I review the initial success of these programs, I want to acknowledge the painful realities that many firms, employees, and households continue to face. For millions of Americans, it’s a long road back to normal. I should also make it clear that these remarks are my personal views and not necessarily those of the New York Fed or the Federal Reserve System.1 The Shock to U.S.