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Fed’s aid program for midsize businesses spent only 3% of its total

Federal Reserve chief Jerome Powell
Federal Reserve chief Jerome Powell initially disagreed with the Trump administration’s argument that the Main Street Lending Program had to end Jan. 8, but the central bank ultimately acquiesced.
(Tasos Katopodis / Pool via AP)

The Federal Reserve’s Main Street Lending Program, which was designed to provide emergency support to midsize U.S. companies during the pandemic, lent a total of $17.5 billion — just 3% of its potential capacity — according to data released Tuesday by the central bank.

The program was slow to get off the ground; it didn’t open to borrowers until July. In the six months through December, when the Fed bent to a Treasury Department mandate to close it, it showed the challenges in setting up a program to aid this sector of the economy — companies larger than the typical small businesses that qualify for Paycheck Protection Program loans but not large enough to access capital markets.

The program didn’t come close to the $600 billion that it could have lent out, in part because the banks that acted as intermediaries didn’t feel adequately compensated to take on the riskiest borrowers. For healthier companies, the banks often just made regular loans so that they could reap the full benefits of the transaction.

In the Main Street program, the Fed bought 95% of the banks’ loans, for a total of $16.59 billion. It was backstopped by $75 billion appropriated by Congress in the CARES Act. The program closed Jan. 8 after then-Treasury Secretary Steven T. Mnuchin instructed the Fed to wind it down. Fed Chairman Jerome H. Powell had initially disagreed with Mnuchin’s interpretation of the expiration date in the law, but the Fed ultimately acquiesced to the Treasury Department’s request.

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Janet L. Yellen, who took over as Treasury secretary last month at the start of the Biden administration, has said that the program wasn’t successful at getting credit to small and midsize companies and that the administration will try to help that sector more effectively.


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