"This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic", the Fed said in a statement.
Treasury Secretary Steven Mnuchin said that this Main Street business lending program will "make a significant difference" for 40,000 small to medium-sized businesses that employ 35 million people.
"The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible", he added.
The Fed has tried to identify "the priority areas where we thought help was needed", said Chairman Powell during an online forum Thursday.
The Fed's moves have included slashing interest rates to near zero, pulling pages from the 2008 financial crisis playbook, and innovating new measures to keep the United States economy on track. But in practice this is created to help firms that are too big for a Small Business Administration program open to businesses with up to 500 workers, and too small to raise money on public capital markets.
Businesses: The Fed's previously teased Main Street Lending Program will provide $600 billion in loans - provided through banks - for companies that have as many as 10,000 workers, but less than $2.5 billion in revenue a year ago.
He said there was "every reason to believe that the economic rebound, when it comes, can be robust" because the economy was doing well before the virus hit.
The government's pay protection plan for small businesses is off to a rocky start. This enables the Fed to lend money to investors in order to purchase securities backed by consumer debt like credit card loans, and $100 billion will be available for the program.
States, counties and cities can sell new municipal notes directly to the MLF to get the money they need. At the same time, governments are facing rising social safety net costs, as the ranks of unemployment insurance and Medicaid recipients swell. That should help government agencies avoid more layoffs.
In its Thursday announcement the Fed said it would expand a credit backstop for new debt issued by highly rated firms to include so-called "fallen angels" - companies that were investment grade in mid-March but have subsequently been downgraded from triple-B to double-B.
Numerous support programs the Fed is deploying against the virus shutdown are similar to programs it utilized to support the economy following the 2008 financial crisis.
Powell, speaking Thursday on a Brookings Institution webcast, said lenders now have strong capital buffers to absorb financial shocks.