Fed to add $15 billion of mortgage purchases on top of $32 billion already planned

CNBC's Steve Liesman reports on the latest move from the U.S. Federal Reserve to shore up the economy as businesses reel from the fallout of the coronavirus pandemic.

The Federal Reserve took another page out of its 2008 crisis-era playbook late Wednesday evening, invoking its emergency authority to create a backstop for prime money market mutual funds.

The new Money Market Mutual Liquidity Fund will provide loans to financial institutions to buy assets from prime money market funds.

Concern had risen in recent days about the prime funds, which purchase non-Treasury debt, such as corporate debt, commercial paper and government agency debt. They had seen outflows as large corporate and institutional depositors sought to raise cash amid the financial turmoil stemming from the coronavirus.

This in turn put pressure on corporate funding markets, as prime money market funds withdrew.

It was the second program in two days to use a $10 billion backstop from the Treasury Department’s Exchange Stabilization Fund. And it was the second time in two days that the Fed invoked its emergency authority under section 13.3 of the Federal Reserve Act.

The move was another sign of turmoil inside the financial system created by the coronavirus, and it remained unclear if the constant barrage of programs from the Fed and the Treasury would be enough to restore order.

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