Treasury to End Fed’s Lending ProgramsNovember 24, 2020
Last week, Treasury Secretary Steven Mnuchin announced his plan to let a handful of pandemic-related lending programs expire, specifically the Federal Reserve’s Main Street Lending Program. According to a letter notifying the Fed about his decision, Mnuchin stated that the programs “have clearly achieved their objectives.” The Fed disagreed with the move, however.
The Main Street Lending Program was initiated by the Fed in early-April to bolster lending to businesses hurt by the COVID-19 pandemic by providing lending institutions liquidity and backing for loans to small businesses over $250,000. The program was slow to get started with many small-businesses instead seeking Paycheck Protection Program (PPP) loans and/or loans under the Main Street Lending Program’s threshold.
In late-October, the Fed announced an expansion to the program by lowering the minimum loan amount to $100,000 from $250,000, and allowing PPP funds to be excluded from the required debt calculations under the Fed’s program. Even with the expansion, take-up rates among small businesses for the Main Street Lending Program appears to be relatively low.
NSBA was supportive of the overall program and particularly of the expansion with NSBA President and CEO Todd McCracken stating, “As COVID-19 cases are increasing significantly, whatever tenuous economic recovery we experienced late-summer is slowing, and as is always the case, small business will be the first to feel that financial pain. I applaud the Fed for stepping up and doing what they can to provide additional lending to America’s hardest-hit businesses.”
According to data from the Fed, as of October, the Main Street program had made around 400 loans totaling $3.7 billion. Back in March, as part of the CARES Act, Congress approved $454 billion for Fed lending programs, including the Main Street Lending Program. As of Dec. 31, 2020, Treasury plans to pull in the remainder of the unused money.