Appendix
Federal Reserve Disclosure Requirements and Other Provisions of the Dodd-Frank Act of 2010 and the CARES Act of 2020
The Dodd-Frank Act included legislative changes designed to promote transparency while protecting monetary policy independence and the efficacy of the Federal Reserve's liquidity programs and OMOs.14 In addition, the Dodd-Frank Act modified the Federal Reserve's authority to provide emergency liquidity to nondepository institutions under section 13(3) of the Federal Reserve Act and also specifically prohibited (with certain exceptions) lending through the discount window to institutions that are registered as swap dealers or major swap participants.
Disclosure Requirements
The Dodd-Frank Act established a framework for disclosure of information regarding facilities established pursuant to section 13(3). The disclosure framework requires that the Board provide Congress with
1. a report not later than seven days after the Board authorizes a facility that includes information regarding the justification for the exercise of the authority and information on the transactions and expected cost to taxpayers; and
2. a report once every 30 days regarding the value of collateral, the amount of fees and other items of value received; and the expected or final cost to the taxpayer.15
The CARES Act, enacted on March 27, 2020, established an additional requirement that the Board post on its website the reports described above no later than seven days after they are submitted to Congress.
In 2020, in response to the severe economic dislocations that occurred as a result of COVID-19, the Federal Reserve, with the consent of the Secretary of the Treasury, established several facilities under section 13(3). Pursuant to the reporting requirements in section 13(3) and the CARES Act, the Board has filed the required reports and posted the reports on its website on the next business day following their submission to Congress.
The initial, seven-day reports generally do not include transaction information as they are required to be filed before the facilities are operational. To enhance transparency, the monthly, 30-day reports will contain substantial amounts of information for the liquidity and lending facilities using CARES Act funding as well as for the PPPLF, including the names and details of participants in each facility; amounts borrowed and interest rates charged; and overall costs, revenues, and fees for each facility.
For the few programs that are targeted at financial market functioning, the Federal Reserve will provide a full accounting of transactions in these facilities but on a delayed schedule. Real-time disclosure would risk stigmatizing participation in these facilities and undermining the Federal Reserve's ability to assure that these systemically important markets continue their critical function in times of severe market stress. The delay in disclosure will be no longer than it needs to be to be to ensure that participants do not hesitate to participate. While the facility is operating, the Board will disclose extensive and regular aggregate information on total borrowing, collateral, and fees and interest income
As required by the Dodd-Frank Act, the Federal Reserve also posted an audit webpage, available at https://www.federalreserve.gov/newsevents/reform_audit.htm. This page is updated as reports and other information become available.
The Dodd-Frank Act also established a framework for the delayed disclosure of information on entities that, after July 21, 2010, received a loan from the discount window under section 10B of the Federal Reserve Act or from a section 13(3) facility, or participated in OMO transactions. Generally, this framework requires the Federal Reserve to publicly disclose certain information about these discount window borrowers and OMO counterparties approximately two years after the relevant loan or transaction; information about borrowers under future section 13(3) facilities will be disclosed one year after the authorization for the facility is terminated. Information to be disclosed will include the names and identifying details of each borrower or counterparty, the amount borrowed, the interest rate paid, and information identifying the types and amounts of collateral pledged or assets transferred in connection with the borrowing or transaction. The disclosures of discount window borrowers and OMO counterparties commenced in September 2012; the information is available at https://www.federalreserve.gov/newsevents/reform_quarterly_transaction.htm and https://www.newyorkfed.org/markets/OMO_transaction_data.html.
"We are deeply committed to transparency, and recognize that the need for transparency is heightened when we are called upon to use our emergency powers. This is particularly the case when Congress appropriates taxpayer funds to back lending programs that the Fed administers. In connection with the CARES Act facilities—including the two corporate credit facilities, the Main Street Lending Program, the Municipal Liquidity Facility, and the TALF—we will be disclosing, on a monthly basis, names and details of participants in each facility; amounts borrowed and interest rate charged; and overall costs, revenues, and fees for each facility."
—Chair Jerome H. Powell
May 19, 2020 (https://www.federalreserve.gov/newsevents/testimony/powell20200519a.htm)
Other Provisions
The Dodd-Frank Act modified the Federal Reserve's authority to provide emergency liquidity to nondepository institutions under section 13(3) of the Federal Reserve Act in light of other amendments that provide the U.S. government with new authority to resolve failing, systemically important nonbank financial institutions in an orderly manner. As a result, after July 2010, any emergency lending programs and facilities authorized by the Federal Reserve under section 13(3) of the Federal Reserve Act must have broad-based eligibility and must be approved by the Secretary of the Treasury, among several other limitations.
Section 716 of the Dodd-Frank Act prohibits the Federal Reserve from extending discount window credit to "swaps entities," subject to certain exceptions. A swaps entity includes a person that is registered as a swap dealer, security-based swap dealer, major swap participant, or major security-based swap participant under the Commodity Exchange Act or Securities Exchange Act of 1934, other than an insured depository institution that is registered as a major swap participant or major security-based swap participant.16 The provisions of section 716 became effective on July 16, 2013. Accordingly, in early July 2013 the Federal Reserve amended its Operating Circular No. 10, the standard lending agreement under which institutions borrow from the discount window, in order to comply with the requirements of section 716. Under the amended Operating Circular No. 10, each time that a borrower requests an advance, it must be, and is deemed to represent, that it is not a swaps entity (as defined above), or it is a swaps entity that is eligible to receive the advance pursuant to one or more subsections of section 716 of the Dodd-Frank Act.
Footnotes
14. The full text of the Dodd-Frank Act is available at https://www.gpo.gov/fdsys/pkg/BILLS-111hr4173enr/pdf/BILLS-111hr4173enr.pdf. Return to text
15. With regard to facilities established during the 2008 financial crisis, the Federal Reserve posted to its public website detailed information about entities that received loans or other financial assistance under a section 13(3) credit facility between December 1, 2007, and July 21, 2010, and about persons or entities that participated in the agency MBS purchase program, used foreign currency liquidity swap lines, or borrowed through the Term Auction Facility during that time frame. Return to text
16. In June 2013, the Board issued an interim final rule to clarify that uninsured U.S. branches and agencies of foreign banks are treated as insured depository institutions for purposes of section 716. The interim final rule also set out the process for state member banks and uninsured state branches and agencies of foreign banks to apply to the Board for the compliance transition period provided for in section 716. See 78 Fed. Reg. 34,545 (June 10, 2013). Return to text