Agencies Issue Two Final Rules

News Release 2020-129 | September 29, 2020

Joint Release

Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency

The federal bank regulatory agencies finalized two rules, which are either identical or substantially similar to interim final rules currently in effect and issued earlier this year. They include:

  • A final rule that temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions; and
  • A final rule that neutralizes—due to the lack of credit and market risk—the regulatory capital and liquidity effects for banks that participate in certain Federal Reserve liquidity facilities.

The final rule temporarily deferring appraisal and evaluation requirements is substantially similar to the interim final rule issued in April. It will allow individuals and businesses to more quickly access real estate equity to help address needs for liquidity as a result of the coronavirus. In response to comments, the final rule clarifies which loans are subject to the deferral. The final rule is effective upon publication in the Federal Register and will expire on December 31, 2020.

The final rule pertaining to Federal Reserve liquidity facilities adopts without change three interim final rules issued in March, April, and May, 2020. Earlier this year, the Federal Reserve launched several lending facilities to support the economy in light of the coronavirus response. The final rule neutralizes the regulatory capital and liquidity coverage ratio effects of participating in the Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility because there is no credit or market risk in association with exposures pledged to these facilities. As a result, the final rule will support the flow of credit to households and businesses affected by the coronavirus. The effective date of this final rule is 60 days after the date of publication in the Federal Register.

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Media Contacts

Federal Reserve Board
Eric Kollig
(202) 452-2955

Julianne Fisher Breitbeil
(202) 898-6895

Stephanie Collins
(202) 649-6870

Remarks of Deputy Secretary Justin Muzinich at the 2020 U.S. Treasury Market Conference

Thank you for the opportunity to address the Treasury Market Conference again this year, a year in which we’ve faced so many unexpected and challenging developments.   If we could meet in person, we would again be at the NY Fed, which would have been especially appropriate this year because the NY Fed, and the rest of the Federal Reserve System, have been invaluable partners during this unique period.


In addition to thanking the Fed, I want to emphasize what an honor it is to serve the country in this moment of national reckoning.  The COVID-19 outbreak has been a traumatic experience for so many Americans, and has severely disrupted our economy and our way of life.  While I have always regarded public service as a privilege, it has been a particular honor to serve in this time of need, and to contribute, alongside many at this conference, to our collective national response.


My remarks today will cover three areas. First, I will discuss the unprecedented demand for liquidity at the start of the crisis that disrupted the Treasury market. Next, I will move beyond the Treasury market to discuss broader policy responses undertaken by the Administration and the Federal Reserve. Finally, I will pose some questions that I believe are important to study in order to inform future policy.



Treasury Market Conditions


Beginning with the Treasury market itself, March and April saw a sudden, drastic flight to safety in the face of a rapidly changing economic outlook.  Treasury yields declined by more than 100 basis points in a matter of days.  As is well established, these events disrupted Treasury market liquidity, sending bid-offer spreads to many multiples of their usual levels, with greater stress in longer maturities and “off-the-run” securities, as Figure 1 shows.


But this period was not an ordinary blip in liquidity conditions, it was a nearly unparalleled disruption that required significant purchases by the Federal Reserve to restore market functioning.  What made this event unique?  While many observers have focused on dynamics in a particular market segment or a specific trading strategy, the behavior of the Treasury market was really a combination of two broad developments: first, a rush for liquidity and safety by nearly all categories of investors and, second, a significant reduction in liquidity provision by both dealers and principal trading firms (PTF). 


On the investor side, as risks from COVID began to build in the last week in February and first week of March, flows exhibited typical “flight-to-safety” behavior, primarily into shorter maturity, on-the-run coupons as Figure 2 shows. 


While short-dated coupons often see greater demand during volatile periods, by the second week of March concerns had sufficiently escalated that investors were showing a strong preference for bills, the most liquid and shortest maturity of all Treasury securities. This can be seen in the reversal of net flows into coupons and customer net purchases of bills, which sent bill rates briefly negative, and in the massive growth of government money market fund assets (Figure 3).


The $13 trillion off-the-run Treasury market (vs. $250 billion on-the-run market) was subject to the same net selling pressure as on-the-run coupons.


The net selling was broad-based, and was sustained over several days as seen in Figure 4.  Asset managers sold longer-dated off-the-run Treasuries to position ahead of outflows.  End-investors such as pension funds rebalanced portfolios after initial large price gains in their Treasury holdings and sizable losses in equities.  Levered investors unwound futures basis trades, as Figure 5 suggests, in part because of margin increases and unexpected deviations between cash and future markets.


Meanwhile, foreign institutions sold nearly $300 billion of Treasuries in March.  Central banks in particular sought dollar liquidity by selling shorter-dated coupon securities in order to raise cash for currency defense and to help meet the liquidity needs of their domestic financial institutions, as Figure 6 shows.[1]


Simultaneous with this widespread demand for liquidity across many segments of investors, liquidity providers also pulled back.  As volatility increased, there was a corresponding decline in interdealer Treasury market depth, as market makers decreased the size of trades they were willing to make because of the additional price uncertainty, as seen in Figure 7.


While increased volatility typically drives some reduction in market depth, this was exacerbated by other factors affecting both traditional dealers and PTFs.  On the traditional dealer side, heavy one-sided volumes and balance sheet pressures quickly strained the ability of dealers to intermediate customer flows.  For example, banks faced demands from other business segments, such as customers drawing down credit lines. 


Yet, despite these challenges for traditional dealers, their share of trading on electronic inter-dealer platforms actually increased. This was primarily because PTFs reduced their trading activity and liquidity provision even more.  As seen on Figure 8, the PTF share of volume fell to well below 50 percent across tenors.  PTF trading algorithms often utilize cross-market data from cash and futures markets, and the extreme volatility caused many correlations to break down, while circuit breakers in the futures market also made liquidity provision more challenging.


In summary, there was a perfect storm of overwhelming liquidity seeking flows by a wide range of investors, and reduction in liquidity provision from both traditional dealers and PTFs. While the Federal Reserve eventually had to conduct large purchases to promote stability, it is worth remembering that the Treasury market, unlike some other markets, was still able to facilitate unprecedented trading volumes throughout this incredibly difficult period.  In fact, Treasury market volumes reached a record high of $1.3 trillion in a single day, and were sustained for many weeks, as Figure 9 shows.


We will continue to study this critical period, to better understand the factors affecting liquidity supply and demand and the fundamental strengths of the deepest and most liquid market in the world.


Broader Policy Responses


While the Treasury market is always a focus for the Treasury Department, the COVID-19 crisis has also necessitated much broader policy responses. 


In the interest of time, I will focus my remarks on the week of March 16th, one of the most dramatic weeks for financial markets since the Great Depression.  On Monday, the stock market opened to severe volatility, tripping the market-wide circuit breaker for the third time in several days and halting trading for 15 minutes.  The S&P 500 ended the day down 12%, its worst single-day performance since 1987.  As equity markets experienced sharp declines, funding markets began to seize up because of the uncertainty in the business environment.  The understandable concern was that if Americans stayed home and business revenue fell dramatically, capital providers would be less willing to extend financing, compounding difficulties for business in an already fragile position.


This risk became starkly visible on Monday, March 16 in the commercial paper (CP) market, which was largely “open” only for the highest quality, very short duration paper. That day the total value of commercial paper issued with a duration of 80 or more days fell to $1.9 billion from $9.4 billion one week before, and rates on 90-day AA non-financial paper moved up to 1.34% from 0.88% one week before. Therefore, on the morning of Tuesday, March 17, the Federal Reserve announced that it would establish the Commercial Paper Funding Facility (CPFF) to buy 90-day commercial paper from a broad range of companies.  This backstop created comfort for businesses that the Federal Reserve would be a buyer of new CP issuance, but it did not resolve liquidity and pricing pressure in the market for already outstanding CP. Money market mutual funds are among the largest holders of CP, so the liquidity crisis in the outstanding CP market began affecting money market mutual funds. This risked devolving into a downward cycle, where CP market pressure created concerns for money markets, and outflows from money markets would cause more selling of CP, feeding a reinforcing negative loop.


In response, after market hours on Tuesday, the Federal Reserve announced that it would establish a second facility, the Primary Dealer Credit Facility (PDCF), opening on Friday March 20.  The PDCF sought to provide liquidity to primary dealers, who in turn could smooth market functioning.  However, the PDCF alone was insufficient to resolve the disruption to money market mutual funds, partially due to primary dealer balance sheet constraints.


So late in the evening on Wednesday, March 18, the Federal Reserve announced the establishment of a third facility, the Money Market Mutual Fund Liquidity Facility (MMLF), providing a strong incentive for banks to support money markets. Critically, MMLF  terms made eligible any transactions executed starting that same day, March 18, until the opening of the facility on March 23, so that the facility would have an effect even before opening. The MMLF achieved its intended goal as market participants again started providing much needed liquidity to money market mutual funds and CP markets.[2]


Reflecting on these events, we went from volatile, though functioning markets the week before to watching a liquidity crisis evolve with remarkable speed before our eyes. Liquidity concerns transferred from one market segment to another – from new CP funding, to existing CP markets, to money markets – and liquidity concerns soon became market functioning concerns. The 2008 crisis had moved from Wall Street to Main Street. This crisis, on the other hand, started with Main Street businesses shutting down as required by the pandemic, and the concern the week of March 16 became that a financial market crisis would also develop, creating further instability for so many Main Street businesses that rely on financing. The situation was especially urgent because financing would be more important than ever for American businesses in the challenging period of reduced activity that lay ahead. The Treasury and Federal Reserve teams, including Secretary Mnuchin and Chairman Powell, were in constant contact to address the situation. While much more work needs to be done to analyze that week and our response, looking back on it six months later does provide two initial lessons.


The first lesson is how important design choices are in establishing 13(3) emergency lending facilities. For instance, one might have imagined that the CPFF, in which the Fed committed to buy new issue CP, would have calmed the secondary CP market, since corporates could have refinanced existing paper by issuing into the Fed facility. Or one might have assumed the PDCF would have solved the related money market concerns by giving Primary Dealers access to cheap financing to profitably purchase money fund assets. But while these two facilities played important roles, it was the MMLF that saw the most volume ($50 billion in two weeks) and made the biggest difference.


This was because of some important design choices. One was the choice of participants. The Fed could have set up the MMLF, like the CPFF, to interact directly with those who needed liquidity. This would have required the Fed to buy money market mutual fund assets directly. But instead, the facility channeled support through the banks, and the banks in turn engaged with the markets.  This was an important decision because it allowed speed. The Fed was able to use its existing bank relationships to get the facility launched within days. By comparison, had the facility needed to purchase directly from money market mutual funds, it could have taken weeks to get off the ground, like the CPFF did, because of the need to register new counterparties less accustomed to dealing directly with the Fed.


Another key design choice was making the MMLF non-recourse. The PDCF allowed the 24 primary dealers to buy assets from money market mutual funds and use those assets as collateral when borrowing from the Fed. But this borrowing was on a recourse basis. Making the MMLF non-recourse (combined with exempting MMLF assets from risk-based and leveraged capital ratios) significantly reduced the risks for banks. This created sufficient incentives for banks to robustly participate, restoring market functioning.


From choice of counterparties to recourse decisions, design nuances made a big picture difference.


In addition to the importance of facility design, a second lesson from that week concerns the tools available to policymakers in a crisis. After 2008, the Dodd-Frank Act reshaped financial regulation, creating new tools (such as Orderly Liquidation Authority and the Financial Stability Oversight Council). But Dodd-Frank also curtailed or eliminated other tools, in part to ensure political accountability. In particular, Dodd-Frank eliminated the FDIC’s authority to issue blanket guarantees of bank debt, ended Treasury’s authority to guarantee money market mutual funds, and required that the Federal Reserve obtain Treasury’s approval for emergency lending programs under section 13(3) of the Federal Reserve Act.


These changes meant political leaders had to act this year. In the CARES Act, Congress temporarily lifted the restrictions on FDIC guarantees of bank debt and on Treasury guarantees of money market mutual funds, though these powers have not been invoked. Similarly, Treasury and the Federal Reserve have worked closely together on the emergency lending facilities to provide crucial support to the economy.  To be sure, a future crisis may require different policy tools, and strong collaboration between Treasury and the Federal Reserve is not guaranteed.  But it is reassuring to know that faced with the first significant shock since the Dodd-Frank reforms, policy makers were able to act swiftly and forcefully to produce a bipartisan and successful result.


Looking Forward


I would like to devote the remainder of my time to three forward-looking next steps and broader questions. 


First, the Treasury market TRACE data[3], which we announced the release of at last year’s conference, was a critically important resource in helping us understand Treasury market developments during the crisis. Since last year’s conference, we have continued to work with official sector partners and FINRA to consider ways to analyze and enhance the data and have identified areas where further upgrades would significantly improve our assessment of market conditions.  For example, identification of trading strategies beyond basis trades, further granularity on trading venues and methods of execution, and greater precision of timestamp reporting would ensure the data is an accurate representation of participant activity. We look forward to working with our official sector partners and to sharing our insights at future conferences.


Second, turning towards broader financial markets, another critical topic for future consideration is the role of market intermediaries during times of stress.  Periods of high volatility and uncertainty often increase demand for liquidity.  However, such conditions may also reduce the supply of liquidity, as financial intermediaries focus on their own liquidity position.  Banks and broker-dealers entered the crisis in very strong financial position, partially as a result of reforms after 2008. Yet while this strength was vital to preventing the crisis from being magnified, it was not enough on its own to ensure proper market functioning. During March and April, there were substantial disruptions to market functioning, including some reports of dealers ceasing to make markets at times.  In the end, intervention by Treasury and the Federal Reserve became necessary.


This episode raises important questions for policymakers. Did regulatory constraints or internally-driven risk management decisions limit dealers? Should we explore ways to enhance the resilience of liquidity provision in periods of stress?  Under what circumstances should we expect the Federal Reserve to need to step in as the lender of last resort?  If a sudden global pandemic requires intervention to support markets, is that necessarily a systemic problem, or is it a logical response to an unlikely event?


Finally, going forward policymakers should also reflect on the outflows from certain types of money market mutual funds. There are three categories of money market mutual funds: government, prime, and tax exempt. All offer daily liquidity and investors view them as cash-like instruments, but prime and tax-exempt funds often invest in assets that do not have cash-like liquidity.  In normal times, money funds can easily manage the flow of redemptions by keeping some assets in liquid investments.  However, large-scale redemptions, perhaps sparked by concerns in other markets like commercial paper, can cause investors to perceive a “first-mover advantage” and race to redeem before a fund’s liquidity resources are overwhelmed.  This can quickly spread instability from troubled funds to the rest of the money fund industry and the broader financial system.


To be sure, developments since the 2008 financial crisis reflect important progress. When the Reserve Primary Fund “broke the buck” in 2008, a stampede of prime fund investors sought to withdraw funds quickly while their funds still priced at $1, starting a run that only abated when Treasury established a money fund guarantee program. The SEC’s 2010 and 2014 reforms made critical progress on several fronts, including floating NAVs of institutional prime and tax-exempt funds (out to four decimal place) and requiring all money market mutual funds to hold at least 30% of their assets in instruments that are liquid within a week. When a fund drops below the 30% threshold, its board may decide whether to gate or impose fees on redemptions. 


However, the events of this past March show that those reforms may not be enough.  For example, one might ask whether we have exchanged one psychological bright line for another.  While the 2008 episode centered on “breaking the buck”, in 2020 market participants worried that a fund dipping below the 30% weekly liquid assets threshold could similarly accelerate fund redemptions.


Whether the bright line is stable NAV or a 30% liquidity test, we need to remember that bright lines have the potential to cause investors to redeem before the line is crossed, creating run dynamics. While policymakers were able to avert a run, it is worth asking whether there are ways to enhance the liquidity resources available to funds without using a bright line test or whether there are ways to draw a line without creating a first-mover advantage.


To conclude, let me once again say how proud I am of the work of the cross-government economic team, including members of both parties on Capitol Hill, for acting decisively in response to the extreme disruption of COVID-19. While all countries have faced economic challenges from the pandemic, the U.S. was in a unique position because of the size and importance of our financial markets to the global economy. We remain extremely focused on creating the conditions to allow for a full economic recovery. As has been true since the nation’s founding, much has been done, but much remains to do. I am confident the American spirit of inquiry and action will see us through to a bright future.



[1] Eventually this was addressed when the Federal Reserve provided expanded swap lines, so that foreign governments could source dollar liquidity by posting Treasury securities as repo collateral instead of selling Treasuries.

[2] Within a few days, the Federal Reserve announced adjustments to the terms of the CPFF and the MMLF to expand the scope of eligible securities, and in the case of the CPFF, lower the pricing.  The Federal Reserve’s willingness to adjust the terms of these facilities so quickly demonstrated responsiveness to market feedback.

 [3] The Trade Reporting and Compliance Engine (TRACE) data is provided to the official sector by the Financial Industry Regulatory Authority (FINRA).

View Appendix Images Here.

Statement by Assistant Secretary Monica Crowley on the Sixth Month Anniversary of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

WASHINGTON – Today, Assistant Secretary of the Treasury for Public Affairs Monica Crowley released the following statement on the sixth month anniversary of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act):

“Six months ago, President Trump signed into law the bipartisan CARES Act, the largest economic relief package in American history. In record time, Treasury helped to launch the Paycheck Protection Program by the Small Business Administration, which supported over 5.2 million small businesses and an estimated 51 million jobs with more than $525 billion in critical funds; issued 160 million Economic Impact Payments to the American people; and disbursed $150 billion to state, local and tribal governments to assist with COVID-19-related expenses.

“The CARES Act has prepared America’s small businesses to reopen, employees to return to work, and the economy to grow once again. Since April, a record 10.6 million jobs have been added to the economy in just four months, making this recovery the fastest in American history.  Retail sales have exceeded pre-pandemic levels, industrial production has increased for the fourth consecutive month, and the September Blue Chip Survey revised its 2020 third quarter GDP growth forecast up 5.3 percentage points to a record-shattering 24 percent. While there is still more work to be done, the CARES Act continues to support the robust economic comeback.

“Today I am pleased to announce the Department of the Treasury’s Economic Response Timeline.  Please visit to see a detailed, interactive, and continually updated chronology of the Trump Administration’s important work during this unprecedented time, and how that work is contributing to the economic recovery.”

To view the Treasury Economic Response Timeline or go to


IRS provides final regulations on income tax withholding on certain periodic retirement and annuity payments

IR-2020-223, September 28, 2020

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today issued final regulations PDF updating the federal income tax withholding rules for certain periodic retirement and annuity payments made after Dec. 31, 2020.

Prior to the Tax Cuts and Jobs Act (TCJA), if no withholding certificate was in effect for a taxpayer’s periodic payments, the amount to be withheld from the payments was determined by treating the taxpayer as a married individual claiming three withholding exemptions.

The TCJA amended this rule to provide that the rate of withholding on periodic payments when no withholding certificate is in effect (the default rate of withholding) would instead be determined under rules prescribed by the Secretary of the Treasury.

The final regulation issued today provides guidance for 2021 and future calendar years. This guidance specifies that the Treasury Department and the IRS will provide the rules and procedures for determining the default rate of withholding on periodic payments in applicable forms, instructions, publications and other guidance.

In July 2020, the IRS released a draft of a redesigned 2021 Form W-4P and instructions intended to align with the redesigned Form W-4, Employee’s Withholding Certificate.

The draft 2021 Form W-4P also proposed a new default rate of withholding on periodic payments that begin after Dec. 31, 2020. Based on comments received on the draft Form W-4P, regarding the time required by payors to implement the new form and a new default rate of withholding, the IRS will postpone issuance of the redesigned form. Instead, the 2021 Form W-4P will be similar to the 2020 Form W-4P.

The IRS also intends to provide in the instructions to the 2021 Form W-4P and related publications that the default rate of withholding on periodic payments will continue to be determined by treating the taxpayer as a married individual claiming three withholding allowances.

The Treasury and IRS will continue working closely with the tax community on the redesign of Form W‑4P, with the intention of making the withholding system more accurate and transparent for taxpayers.

For more information about this and other TCJA provisions, visit

Statement by the Acting Comptroller of the Currency Regarding FSOC’s Consideration of Secondary Mortgage Market Activities

News Release 2020-128 | September 25, 2020

WASHINGTON, D.C. – Acting Comptroller of the Currency Brian P. Brooks made the following statement today at the meeting of the Financial Stability Oversight Council (FSOC) with respect to the FSOC’s activities-based review of secondary mortgage market activities and issuance of a public statement on the subject:

I support the FSOC’s activities-based review of the secondary mortgage market and the thoughtful analysis of the Government Sponsored Enterprises’ contribution to financial stability risks as well as of the efforts to address them, including the FSOC’s review of the Federal Housing Finance Agency’s (FHFA) capital rule re-proposal. I thank the FSOC staff and staff of the other agencies for their hard work on this review. I also support FHFA Director Calabria’s efforts and believe that the FSOC’s recommendations strengthen the efforts already underway to enhance risk management and prudential controls in the housing finance system.

Of course, the OCC is also focused on the role of national banks and federal savings associations in that system. Consistent with the FSOC’s statement issued today, we look to avoid market distortions and different approaches to regulation of similar risks across the system and seek thereby to ensure that banks can continue playing a meaningful role in the provision of housing finance. I note that competition is itself an excellent form of risk management. One area in particular that we are looking at closely is the provision of capital relief for credit risk transfer transactions, an area also addressed in the FHFA’s re-proposal. I look forward to working with my counterparts on this council as we move forward.

Media Contact

Bryan Hubbard
(202) 649-6870

Financial Stability Oversight Council Issues Statement on Activities-Based Review of Secondary Mortgage Market Activities

WASHINGTON – The Financial Stability Oversight Council (Council) today voted unanimously to approve a statement summarizing its review of the secondary mortgage market.  The Council’s review focused in particular on the activities of Fannie Mae and Freddie Mac (the Enterprises).  In conducting the review, the Council applied the framework for an activities-based approach described in the interpretive guidance on nonbank financial company determinations issued by the Council in December 2019.

The Council’s review noted the central role the Enterprises continue to play in the national housing finance markets, and found any distress at the Enterprises that affected their secondary mortgage market activities, including their ability to perform their guarantee and other obligations on their mortgage-backed securities (MBS) and other liabilities, could pose a risk to financial stability, if risks are not properly mitigated.  The Council’s review also considered whether the regulatory framework of the Federal Housing Finance Agency (FHFA) would adequately mitigate this potential risk posed by the Enterprises. 

The FHFA’s recent capital proposal was central to the Council’s analysis; the Council considered whether the proposed capital rule is appropriately sized and structured, given the Enterprises’ risks and their key role in the housing finance system, and also whether the proposed capital rule promotes stability in the broader housing finance system.  The Council presents the following key findings:

The Council encourages FHFA and other regulatory agencies to coordinate and take other appropriate action to avoid market distortions that could increase risks to financial stability by generally taking consistent approaches to the capital requirements and other regulation of similar risks across market participants, consistent with the business models and missions of their regulated entities.  

The Council also encourages FHFA to consider the relative merits of alternative approaches for more dynamically calibrating the capital buffers.  The capital buffers should be tailored to mitigate the potential risks to financial stability and otherwise ensure that the Enterprises have sufficient capital to absorb losses during periods of severe stress and remain viable going concerns, while balancing other policy objectives.

Finally, the Council encourages FHFA to ensure high-quality capital by implementing regulatory capital definitions that are similar to those in the U.S. banking framework.  The Council also encourages FHFA to require the Enterprises to be sufficiently capitalized to remain viable as going concerns during and after a severe economic downturn. 

Read the Council’s full statement


G7 Finance Ministers’ Statement on the Debt Service Suspension Initiative and Debt Relief for Vulnerable Countries

Washington – We remain committed to working together to support the poorest and most vulnerable countries as they address health and economic challenges associated with COVID-19.  The pandemic has significantly disrupted global growth and necessitated extraordinary fiscal policy efforts, exacerbating existing debt vulnerabilities in many low-income countries.  We commend the efforts of the international financial institutions (IFIs) to rapidly scale up financial and technical assistance to these countries.  We ask the IMF and World Bank to update regularly assessments of the financing needs of low-income countries in response to evolving circumstances with the impact of the pandemic and propose ways for countries to cover expected financing gaps, including through instruments to leverage access to private finance.

To support our efforts to help the most vulnerable countries, we are implementing the G20-Paris Club Debt Service Suspension Initiative (DSSI) to suspend official bilateral debt payments for the poorest countries through end-2020.  The DSSI has been fundamental in supporting the 43 countries that have requested the benefits of the initiative by freeing up $5 billion in fiscal space to fund social, health, and economic measures to respond to the pandemic.

G20 and Paris Club official bilateral creditors are continuing to coordinate closely to provide full and transparent relief under the DSSI.  Nonetheless, DSSI implementation has faced shortcomings that have prevented the initiative from delivering its full potential. In particular, we strongly regret the decision by some countries to classify large state-owned, government-controlled financial institutions as commercial lenders and not as official bilateral creditors, without providing comparable treatment nor transparency, thus significantly reducing the magnitude of the initiative and the benefits of the DSSI for developing countries. Claims considered as commercial for the purpose of the DSSI will be treated as commercial claims as well in future debt treatments, and for the implementation of IMF policies. We call on non-Paris Club lenders to commit to full and transparent implementation of the DSSI through all government entities going forward.  Additionally, voluntary private sector participation has been absent, which has limited the potential benefits for several countries. We reiterate our call for private creditors to implement the DSSI on a voluntary basis when requested by eligible borrowers.

Recognizing the ongoing financial needs of low-income countries, we support extending the DSSI in the context of a request for IMF financing.  The modalities of the extension should reflect the G20’s commitment to transparency and creditor coordination, including an understanding on key features for debt treatment beyond the DSSI, as well as reflecting the need for fair burden sharing among all creditors.  To this end, we strongly urge full and transparent participation by official bilateral creditors, including all state-owned lending institutions, based on an enhanced term sheet and, ideally, a common Memorandum of Understanding that clarifies DSSI implementation.    

Going forward, we recognize that some countries will need further debt treatment in addition to the DSSI’s liquidity relief to restore debt sustainability.  In this context, we support the development of a Common Framework for future debt treatments beyond the DSSI, to be agreed by the G20 and Paris Club by the time of the October G20 Finance Ministers and Central Bank Governors’ meeting.  The Framework should set out provisions for the scope of creditor participation and transparency, and call for coordinated debt relief on a case-by-case basis in the context of a full-fledged IMF program.  The Framework should ensure fair burden sharing among all official bilateral creditors, and debt relief by private creditors at least as favorable as that provided by official bilateral creditors.  It should also lay the foundation for sound and robust financing practices in the future, including on transparency and governance.  We strongly urge all official bilateral creditors to support and adhere to such a G20-Paris Club Framework to set clear expectations for all.  Additionally, G20 and Paris Club creditors should jointly agree on specific terms for country-by-country debt restructurings.

Addressing debt vulnerabilities also requires full transparency by both creditor and borrower countries.  We commend the World Bank Group’s efforts to compile and publicly disclose creditor-by-creditor information.  All creditors should provide complete information to maximize the benefits of the DSSI.  We call on the G20 to endorse the full and timely publication of the World Bank and IMF updates on the implementation of the DSSI.  We also call on G20 members to endorse the World Bank and IMF’s debt data reconciliation and the publication of the results.  This exercise is crucial to inform any future debt treatments.  More broadly, we strongly support efforts of the IFIs to help their member countries strengthen debt sustainability and transparency practices, including through technical assistance, lending policies, and enhanced public reporting of debt data.  We welcome ongoing work by the Institute of International Finance to finalize rapidly a data host for their Voluntary Principles on Debt Transparency.

Statement of Secretary Steven T. Mnuchin Department of the Treasury Before the Banking, Housing, and Urban Affairs Committee U.S. Senate

Chairman Crapo, Ranking Member Brown, and members of the Committee, I am pleased to join you today to discuss the critical steps the Department of the Treasury and the Federal Reserve have taken over the last six months to provide economic relief for the American people, as well as to provide liquidity to credit markets, businesses, and households. We are fully committed to getting every American back to work as quickly as possible.  

Economic Recovery

America is in the midst of the fastest economic recovery from any crisis in U.S. history. The August jobs report showed that the economy has gained back 10.6 million jobs since April—nearly 50% of all jobs lost due to the pandemic. The unemployment rate has also decreased to 8.4%, a notable achievement considering some people were expecting up to 25% unemployment at the height of the pandemic. Thanks to the programs provided through the CARES Act, we never got close to that figure.

I believe we will see tremendous third-quarter growth, fueled by strong retail sales, housing starts and existing home sales, manufacturing growth, and increased business activity. The September Blue Chip survey increased its projection for third-quarter GDP growth by 5.3 percentage points to 24%.

The recovery has been strong because the Administration and Congress worked together on a bipartisan basis to deliver the largest economic relief package in American history. The Federal Reserve has also been instrumental to the recovery by implementing 13 unique 13(3) lending facilities. 

Economic reopenings, combined with the CARES Act, have enabled a remarkable economic rebound, but some industries particularly hard hit by the pandemic require additional relief.

Phase IV Relief

The President and I remain committed to providing support for American workers and businesses. We continue to try to work with Congress on a bipartisan basis to pass a Phase IV relief package. I believe a targeted package is still needed, and the Administration is ready to reach a bipartisan agreement.


Treasury has been working hard to implement the CARES Act with transparency and accountability. We have released a significant amount of information to the public on our website,, and on In many instances, we have released more information than what is required by the statute. The Federal Reserve has also posted information on its website regarding its lending facilities.

We have provided regular updates to Congress, with this marking my seventh appearance before Congress for a CARES Act hearing. Additionally, we are cooperating with various oversight bodies, including the new Special Inspector General for Pandemic Relief, the Treasury Inspector General, the Treasury Inspector General for Tax Administration, the new Congressional Oversight Commission, and the Government Accountability Office (GAO).

We appreciate Congress’s interest in these issues and have devoted significant resources to responding to inquiries from numerous congressional committees and individual Members of Congress on both sides of the aisle.  We remain committed to working with you to accommodate Congress’s legislative needs and to further our whole-of-government approach to defeating COVID-19.


I would like to thank the members of the Committee for working with us to provide critical economic support to the American people. I am pleased to answer any questions you may have.


IRS highlights employer credits for businesses during Small Business Week

IR-2020-221, September 24, 2020

WASHINGTON — During Small Business Week, the Internal Revenue Service reminds business owners and self-employed individuals of the employer credits available to them during COVID-19. 

These credits were specially created to help small business owners during this unprecedented time. During Small Business Week, the IRS wants to ensure all eligible people know about the relief these credits provide.

Employee Retention Credit

The Employee Retention Credit is designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.

Qualifying employers must fall into one of two categories

  1. The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  2. The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

Employers will calculate these measures each calendar quarter.

Paid Sick Leave Credit and Family Leave Credit

The Paid Sick Leave Credit is designed to allow business to get a credit for an employee who is unable to work (including telework) because of Coronavirus quarantine, self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.

The employer can also receive the credit for employees who are unable to work due to caring for someone with Coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable due to the Coronavirus. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay or, up to $200 per day and $2,000 in total.

Employees are also entitled to paid family and medical leave equal to 2/3 of the employee’s regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through December 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees.

How will employers receive the credit?

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

The IRS has also posted Employee Retention Credit FAQs and Paid Family Leave and Sick Leave FAQs that will help answer questions.

Updates on the implementation of the Employee Retention Credit and other information can be found on the Coronavirus page of

Statement on the Passing of the 23rd Comptroller of the Currency James E. Smith

News Release 2020-127 | September 23, 2020

WASHINGTON, D.C. – Acting Comptroller of the Currency Brian P. Brooks issued the following statement upon learning of the passing of James E. Smith, the 23rd Comptroller of the Currency.

Today, the OCC family and banking industry lost a giant with the passing of the 23rd Comptroller of the Currency James E. Smith.

Comptroller Smith had a distinguished career that included serving as Deputy Under Secretary of the Treasury before being named Comptroller by President Richard Nixon.

Comptroller Smith led the agency during a period of great change, adjusting to the explosive growth of the banking industry during the 1960s and 1970s. He worked to transform and modernize the agency’s approach to supervision. The new approach he pioneered continues in our existing practices that emphasize the assessment of a bank’s policies, procedures, decision making, risk management, and management information system. Even more importantly, he was a champion of the agency’s employees and their training and career development.

Comptroller Smith remained an active part of the OCC alumni community for decades following his tenure.

He will be missed but not forgotten.

Media Contact

Bryan Hubbard
(202) 649-6870