The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to polo.rocha@spglobal.com and jasir.jawaid@spglobal.com.

At the regulators

Congress plowed ahead this week with a fiscal package aimed at rescuing the U.S. economy from the coronavirus pandemic, a bill that has several implications for the financial industry.

The relief bill, which boosts unemployment insurance benefits and will send checks to many Americans, includes $454 billion in funding for the Treasury Department's efforts to provide credit protection for the Federal Reserve's emergency lending facilities. That funding is aimed at helping the Fed provide some $4 trillion in lending to eligible businesses, states and municipalities.

At a Financial Stability Oversight Council meeting on March 26, Fed Chairman Jerome Powell said the funds will help the central bank increase the size of the emergency lending facilities it has launched this month. Those programs have not yet fully solved liquidity issues but already appear to be easing pressures on the corporate and municipal bond market, where borrowing rates had spiked late last week.

"The tsunami of liquidity has lessened market stress," Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, wrote in a research note.

Powell also said the Fed is working to establish a Main Street Business Lending Program, which he said will supplement the fiscal package's $350 billion in funding for small business loans.

The bill is headed to President Donald Trump's desk after getting a 96-0 vote in the Senate and approval by voice vote on March 27 in the House of Representatives.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Other provisions in the bill include a temporary easing of the Community Bank Leverage Ratio, a capital standard for some smaller banks, and another that would let the Federal Deposit Insurance Corp. launch a temporary program that would guarantee the debt of solvent banks and cover noninterest-bearing transaction accounts.

The bill would also temporarily delay the measure of credit losses on financial instruments under the new current expected credit loss accounting methodology, called CECL. The Fed, FDIC and Office of the Comptroller of the Currency took a major step on that front March 27, saying they will allow banks that were required to adopt CECL in 2020 to delay its effects on regulatory capital for two years, at which point banks would have a three-year transition period.

Banking regulators have taken other steps to ease regulatory requirements on the industry this month, encouraging banks to dip into their liquidity and capital buffers if they need to keep lending to affected customers, making borrowing at the Fed's discount window more attractive and letting banks with $5 billion or less in assets file some regulatory reports late if they need to.

The Fed also said March 24 it will temporarily cut back on its bank examinations, generally stopping them entirely for banks with less than $100 billion in assets unless there is a critical need for bank examiners to evaluate an issue at a bank. Larger banks will see a deferment of a significant chunk of their planned examination work.

Regulators have expressed confidence in recent days in the financial system's ability to manage through the pandemic, with FDIC Chair Jelena McWilliams saying at the March 26 Financial Stability Oversight Council meeting that the current crisis did not originate in banks and that "our banks are safe," as are their FDIC-insured deposits.

"This is not like a financial crisis," said Treasury Secretary Steven Mnuchin, who chairs the interagency FSOC group. "Once we kill this disease, we can open up the economy" again, Mnuchin said at the FSOC meeting.

The economic disruptions from the coronavirus were clear in a data release earlier that morning, which showed a record 3.28 million Americans filed for weekly unemployment benefits in the week ended March 21.

Powell, who gave a rare national TV interview to NBC's Today show, said ahead of that release that the U.S. "may well be in a recession" already and that the Fed's actions this month should help make the "recovery as strong as possible." But he noted it is "very hard to say" when the pandemic will ease and allow the economy to get back on track.

He also said the Fed will continue to "aggressively" lend in capital markets to ensure there is ample liquidity available.

"When it comes to this lending, we're not going to run out of ammunition. That doesn't happen," Powell said.

Other news

Federal bank and credit union regulators said March 26 they want to encourage institutions to issue small-dollar loans to those affected by the coronavirus pandemic.

Many banks had pulled back on offering those products following 2013 guidance from the OCC and Fed discouraging small-dollar loans, with Obama administration appointees at the time likening some of those products to high-fee loans that payday lenders offer. But the OCC rescinded that guidance in 2017, and FDIC Chair Jelena McWilliams said in 2019 that regulatory agencies should try to get "on the same page" on the issue and publish a new framework for regulating small-dollar loans, which she said could help unbanked and underbanked consumers.