It was billed as a lifeline for America’s middle-market companies seeking cash to get through the pandemic. Yet more than two months since its launch, the Federal Reserve’s Main Street Lending Program isn’t living up to expectations as few banks are willing to provide the loans
Fed’s Lifeline to Main Street Flops With 99.8% of Cash Untapped
September 15, 2020 2:00 AM
. . . Some of the nation’s biggest lenders have demanded such crushing terms that discussions have stalled from the get-go, while other banks have decided not to participate at all. That’s meant the take-up for the $600 billion program is just 0.2%, threatening to undercut the economic recovery and efforts to protect jobs. . .
Companies impacted by Covid and even those resilient to the outbreak have struggled to find banks willing to lend through the program . . .
Anemic Use
The Fed and Treasury Department started the program on July 6 with the aim of providing loans to companies either too small to access capital markets, or too big to get aid through the government’s Paycheck Protection Program.
Just $1.4 billion of Main Street loans were issued as of Sept. 10, with about $300 million more submitted or being processed, according to the Boston Fed which administers the program. In contrast, blue-chip companies have sold more than $1.2 trillion of corporate bonds since March to help weather the pandemic’s economic impact, and smaller outfits have benefited from hundreds of billions of dollars in potentially forgivable loans. . .
Read more : Much of America is shut out of the greatest borrowing binge ever
What’s worrisome is that midsize companies employ about 48 million people and account for about a third of the gross domestic product in the private sector. A credit crunch for such firms could cause many to limp along or outright fail, undermining a post-pandemic recovery . . .
Treasury Secretary Steven Mnuchin said at a Sept. 1 Congressional hearing that loan issuance could grow to $25 billion to $50 billion, predicting a lot of volume in the next two months. That increase, even if it does happen, would still only represent 4% to 8% of the program’s maximum size. The Fed is likely to be asked about the program at its next meeting on Wednesday.
