Federal Reserve launches $10 billion special fund to keep credit flowing in U.S. economy during coronavirus scare

The Federal Reserve is launching a $10 billion special fund to keep credit flowing in the U.S. economy, yet another emergency measure as the world spirals toward a recession.

Starting Tuesday, the central bank will buy various short-term commercial loans from banks in an effort to ensure American banks have enough cash to keep lending to businesses and households in need of a financial lifeline during the crisis.

"By ensuring the smooth functioning of this market, particularly in times of strain, the Federal Reserve is providing credit that will support families, businesses, and jobs across the economy," the central bank said in a statement announcing the action.

The action is known as a "Commercial Paper Funding Facility." It helps prevent a situation where financial institutions can't repay investors for loans because of short term cash crunches.

The U.S. Treasury authorized $10 billion for the Fed to begin this program.