Demand for Fed's Main Street loan program is growing, Rosengren says
WASHINGTON — Despite a slow start, the Federal Reserve’s Main Street Lending Program is gaining steam, said Federal Reserve Bank of Boston President Eric Rosengren.
In a speech Wednesday, Rosengren said the $600 billion middle-market business rescue program as of Aug. 10 had purchased participations in 32 loans totaling about $250 million. That is four times the amount of loans processed through the program as of July 27.
The central bank has caught flak for the coronavirus relief program's lackluster peformance out of the gate and because the Fed needed three months to set it up. Members of a congressionally appointed panel overseeing pandemic assistance efforts have even questioned the value of the Fed program.
But Rosengren said the recent growth in loan participations shows the program is proving its worth as the persistence of the pandemic is forcing more businesses to seek credit. He noted that an additional 55 loans worth $574 million are under review for possible Fed purchases.
“Much of the increase [in loans] has occurred recently, and I expect we will continue to see more activity as more firms are impacted by the pandemic,” Rosengren said in remarks to the South Shore Chamber of Commerce in Massachusetts. “Unfortunately, should the fall bring a resurgence of the virus as many epidemiological models predict, this program may become even more essential.”
The program, which is being funded by the Fed and the Treasury Department through congressional appropriations in the Coronavirus Aid, Relief and Economic Security Act, is available to businesses with up to either 15,000 employees or $5 billion in annual revenue. Eligible companies can receive a loan of at least $250,000 and up to $300 million through the program.
The pace of lending is consistent with “a gradual pace of initial activity that is more recently expanding as participants become familiar with the program’s parameters,” Rosengren said.
“When the program was launched in early July, there were relatively few Main Street program loans submitted for participation purchase,” he said. “As borrowers and banks have become more familiar with the program, we have seen a steady increase in banks submitting loans to our portal.”
So far, 522 lenders have registered with th e Main Street program; of those, more than 200 have assets of $1 billion to $10 billion. Of the loan-specific data that the Fed has disclosed, the largest lender that has originated a Main Street loan is by far the $16 billion-asset City National Bank of Florida in Miami.
“Financial institutions have a vested interest in the continued viability of local businesses and organizations and the vibrancy of their local economy,” Rosengren said. “The Fed is eager to work with lenders and help them as they provide credit to their borrowers.”