By Paul Kiernan 

WASHINGTON -- The Federal Reserve's $600 billion lending program for medium-size businesses hasn't attracted much interest yet, but that is likely to change if the U.S. economy takes a turn for the worse amid rising coronavirus cases, said the official who runs the program.

"The likelihood that we continue to have serious problems with the infections means that businesses are likely to be disrupted for a longer period of time," Eric Rosengren, president of the Federal Reserve Bank of Boston, said in an interview Wednesday. "So there's an insurance element against the pandemic, as well as meeting an immediate need of some borrowers."

The Main Street Lending Program aims to lend to companies contending with the economic fallout from the pandemic, but it has struggled to get off the ground since it was announced in April. Its rollout was held up by negotiations over terms, while bankers have expressed skepticism that many borrowers that need help will be eligible to access the loans.

Of the five largest U.S. banks by assets, only Bank of America Corp. has indicated that it plans to make Main Street loans available to new customers. Three others -- Wells Fargo & Co., Citigroup Inc. and U.S. Bancorp. -- said they plan only to serve existing customers. JPMorgan Chase & Co. didn't say whether it planned to lend to new customers through the program.

Almost 11,000 federally insured banks and credit unions could be eligible. Mr. Rosengren said that 260 lenders have completed the registration process, while another 174 are still signing up. He acknowledged that it is "going to take some time for banks and borrowers to become familiar with the program" but that he fully expects demand to pick up.

The recent surge in coronavirus cases to record levels "augurs poorly for what's going to happen in the fall when students are back in school, colleges are back in session and people can't be outside as much and are inside more often," he said.

Under the program, banks will lend between $250,000 and $300 million to businesses that were creditworthy before the economic crisis began. A Fed facility will then buy a 95% stake in those loans, leaving originating banks with 5% of the credit risk.

Banks have said they'd be more likely to tap the Main Street program to shore up existing credits, rather than to lend to new customers.

In an effort to attract more interest--and help match borrowers to lenders--the Boston Fed on Wednesday published a list of lenders in each state that are planning to originate Main Street loans for new customers. Nationwide, it named more than 80 banks and credit unions, though the list didn't include lenders that either didn't want to be publicly identified or aren't planning to offer Main Street loans to new customers.

Mr. Rosengren said the Boston Fed has already seen a number of businesses, including movie theaters, software companies, beverage companies and oil-service companies, express interest in the program.

"So I fully expect that over time, we're going to see more loans starting to come," Mr. Rosengren said.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

July 08, 2020 18:40 ET (22:40 GMT)