Lawmakers on a top banking panel largely agree that the Federal Reserve’s Main Street lending program has fallen short. But they’re debating whether or how to change the rules and allow the Fed to make more, albeit riskier, loans to struggling businesses, The Washington Post reports.
At a Senate Banking Committee hearing on Wednesday, policymakers differed over whether the Main Street program can be strengthened with a new structure and relaxed loan terms, or if more direct aid from Congress is needed to help companies fighting for survival during the pandemic.
As of last Thursday, the Main Street lending program had completed $1.2 billion in loans, just a fraction of the $600 billion pot.
The program could have wider reach if the Fed bought 100% of all Main Street loans from banks, instead of 95%, according to Jeffrey D. DeBoer, president of the Real Estate Roundtable, and Hal S. Scott, president of the Committee on Capital Markets Regulation, who testified at the hearing. Since the current structure leaves banks with some skin in the game, many lenders have shied away from making riskier deals. DeBoer and Scott also recommended that companies should be given a longer timeline before having to pay back the loans.
A core issue is how much risk the Fed and Treasury Department can take under the Cares Act, since any losses are ultimately covered by taxpayers. Read the full story.