Fed's $600 Billion Lending Program Will See More Interest If Economy Slumps, Official Says
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
"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
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
"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 email@example.com
(END) Dow Jones Newswires
July 08, 2020 18:40 ET (22:40 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.