securities loan facility ( talf ). the talf will lend against abs backed by newly issued auto loans, credit card loans, and other consumer and small business loans. in turn, these loans will support consumers seeking to obtain these important types of credit. the federal reserve also took action with the treasury department under section 13 ( 3 ) to support the credit needs of large employers through the primary market corporate credit facility and the secondary market corporate credit facility. these facilities primarily purchase bonds issued by u. s. companies that were investment grade on march 22, 2020. by purchasing these bonds, the federal reserve is able to lower the borrowing costs for investment - grade companies and thus facilitate economic activity. the federal reserve is also preparing to launch the main street lending program, which is designed to provide loans to small and medium - sized businesses that were in good financial standing before the pandemic. importantly, with these and other facilities that the federal reserve has not employed before, public input has been crucial in their development. for example, in response to comments received, we lowered the minimum loan size and raised the maximum loan size across the three lending facilities within the program ; in addition, we expanded the size of firms allowed to borrow under the program to companies with up to 15, 000 employees. these changes should help the program meet the needs of a wider range of employers that may need bridge financing to support their operations and the economic recovery. we will continue to adjust facilities as we learn more. to bolster the effectiveness of the small business administration ’ s paycheck protection program ( ppp ), the federal reserve is supplying liquidity to lenders backed by their ppp loans to small businesses. and to help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities, the federal reserve, together with the treasury department, established the municipal liquidity facility under section 13 ( 3 ) authority to purchase short - term debt directly from u. s. states, counties, cities, and certain multistate entities. the two corporate credit facilities, the main street lending program, and the municipal liquidity facility all have equity provided by the treasury department to protect the federal reserve from losses. the passage of the cares act by congress was critical in enabling the federal reserve and the treasury department to establish these real economy emergency lending programs that have the capacity to make more than $ 2. 6 trillion in loans. the tools that the federal reserve is using under its 13

, more generally, other tools that can influence risk and pricing practices through the supervisory review process or, perhaps, disclosure standards. on what basis would those tools be adjusted? issues such as the relevant aspects of the financial cycle to focus upon, the role of stress testing and the balance between rules and discretion come to mind here. more generally, any specific proposal would need to be assessed on its own merits, including an evaluation of any unintended side effects, such as its impact on regulatory arbitrage and competitive conditions. these issues, however, are no different from those that pertain to any modification in regulatory and supervisory arrangements. in fact, in some supervisory jurisdictions changes in provisioning practices more in line with the logic outlined here either have been implemented or are being given serious consideration. likewise, the increasing use of stress testing and current efforts devoted to the development of macro - prudential indicators are conceptually consistent with the same approach. a greater awareness of the significance of the questions raised here is gradually emerging. iv. policy co - ordination a strengthening of the macro - prudential orientation of the regulatory and supervisory framework would also highlight a number of policy co - ordination issues. as the previous analysis makes clear, and supervisors are well aware, addressing financial stability is a multifaceted task. it involves a number of authorities with different perspectives and responsibilities. indeed, some of the policy levers lie in the hands of authorities whose main task is not to address financial stability at all, even though their tools and decisions can have a significant impact on the process. the risk is that, in the absence of a consensus on diagnosis, remedies and allocation of responsibilities, certain potential weaknesses in our defences might remain unaddressed. let me elaborate on these points with two illustrations : safety nets and the financial cycle. i mentioned earlier that one potential source of distorted incentives for market participants are illdesigned safety nets, defined here to encompass those mechanisms aimed at containing the disruptive consequences of financial distress once it arises, thereby also instilling confidence in the financial system. typical building blocks of safety nets include emergency liquidity assistance, deposit protection schemes and exit policies. as highlighted by experience over the last twenty years or so, illdesigned safety nets can be a significant cause of financial instability if they fail adequately to counteract the loss of market discipline that they induce ( the “ moral hazard ” problem ). a macro - prudential orientation in financial stability policies requires safety nets