To: Governor Andrew Cuomo
NYS Comptroller Thomas DiNapoli
NYS Budget Director Robert Mejica
NYC Mayor Bill de Blasio
NYC Comptroller Scott Stringer
All New York State and Local Financing Authorities
Re: New Federal Reserve Funding Facilities for Community QE
Dear Colleagues,
A new era of what can be called Fed ‘Quantitative Easing for Communities,’ or ‘Community QE,’ is upon us. I wish for this memorandum to emphasize the significant new opportunities for effective — and immediate — pandemic response this now opens for us.
The U.S. Federal Reserve (‘Fed’) is adopting extraordinary measures to open its Federal Reserve Act Section 13(3) lending facilities to municipal and other bond acquisitions for the duration of the present COVID-related public health and economic crisis. The Fed’s Federal Open Market Committee (FOMC) yesterday reaffirmed this expression of intention first made by Fed Chairman Powell last month, and hinted strongly that it will stand ready to interpret remaining restrictions — of which there are some — on state and municipal use of this facility flexibly until the present crisis is contained.
What this effectively means is that New York and its municipalities will at least begin to resemble dollar issuers if and as the current crisis continues. Like other states and their localities, New York and its localities — including New York City, now the epicenter of the nation’s COVID crisis — are effectively both federally deputized and federally funded as if they were federal agencies empowered to conduct our nation’s pandemic response. This is a pioneering new opportunity for New York and its municipalities where addressing the present crisis is of immediate concern.
It is also more than a mere opportunity, however: When combined with the presently minimal role being assigned existing federal instrumentalities such as the Centers for Disease Control (CDC) and the Federal Emergency Management Agency (FEMA), it amounts to a responsibility and an imperative as well. It is incumbent on us to begin issuing Fed-monetizable financial instruments in such quantities as are necessary to fund all emergency measures that our state and its cities are now left to their own devices to take. It is also imperative in this connection, owing to size and number restrictions that come with the new Section 13(3) facility for now, that each State and its Municipalities coordinate in their tapping the facility.
I accordingly urge all State and Local officials to begin developing crisis containment and reversal measures with the ‘mindsets’ of federal agencies unconstrained by tight budgets of the kind that we State and Local officials are more accustomed to working with. Austerity thinking is now, in light of the new Section 13(3) Fed facility, as unnecessary as it is inappropriate. The Fed stands ready to ‘dollarize’ our bond instruments and other issuances, and this means, to reiterate, that we are now in effect being ‘deputized’ as de facto federal agencies with all the authority and financing we need to do what federal agencies have done in past crises.
In view of the importance of this new Federal Reserve assistance, state and local budgetary officials should immediately convene a dialogue to generate substantive comments to the Federal Reserve concerning what exact parameters, terms, and conditions of assistance would be most useful.
I will shortly be announcing additional proposals in the spirit of what I am here urging, particularly as Congress is expected soon to supplement what the Fed is now doing by authorizing both (a) the disbursal of more federal funding and (b), quite possibly, digitized mechanisms of disbursal as well. In the event that this happens, I shall be proposing immediate measures to ensure that all residents and businesses in the State of New York receive digital wallets or similar modalities of payment-receipt and, ultimately, expenditure as well. Optimizing our new money-issuance authority during this crisis will best occur by optimizing our payment architecture as well.
Again, however, more of that in due course. For the time being, it will be enough for us to begin to draw up plans, with all deliberate speed, for the use of our new federal funding in manners well calculated to end and reverse the present crisis at once.
In solidarity,
Ron Kim
Member of Assembly