By Paul Berger

New York's Metropolitan Transportation Authority is considering turning for a second time to the Federal Reserve to borrow billions of dollars from a short-term lending program, as it faces an unprecedented financial crisis.

Lawrence Schwartz, chairman of the MTA's finance committee, told board members at a meeting Wednesday that the authority is on track to run out of money before the end of this year. He said that in the absence of a new federal coronavirus bailout, which has stalled in Congress, the MTA should seek the maximum amount possible from the Fed of $2.9 billion.

An MTA spokesman later said that the authority has enough liquidity to carry it into 2021.

MTA officials have said they might have to slash subway and bus service in New York City by up to 40% and lay off thousands of workers if they don't receive federal aid soon. The state-controlled authority projects a deficit of about $12 billion through the end of 2021.

The MTA and the state of Illinois are the only two borrowers to have tapped the Fed's municipal-lending program so far. In August, the MTA sold $450 million in bonds to the Fed at a yield of 1.9%, rejecting offers from the private market at yields of about 2.8%.

Based on the Fed program criteria, the MTA could be eligible to borrow an additional almost $3 billion. But budget watchdogs and even some MTA board members have raised concerns that the authority, which already owes more than $45 billion, shouldn't take on more debt.

Mr. Schwartz told board members that he believes the MTA could borrow the $2.9 billion at a rate of about 1.8%. "That is the cheapest money the MTA will ever be able to get as a loan," he said.

The Fed program is scheduled to close at the end of the year. Patrick McCoy, the MTA's director of finance, said at a congressional hearing last week that the Fed should extend the borrowing deadline beyond the end of 2020 and increase the maximum maturity for facility debt beyond three years.

Write to Paul Berger at Paul.Berger@wsj.com