The Federal Reserve yesterday moved to bolster a new small-business lending program by allowing banks to turn those loans over to the U.S. central bank for cash, easing concerns among banks about getting stuck holding the low interest loans, Reuters reported. The Fed said that it would announce details later this week of a new term financing arrangement for loans made under what is known as the Payroll Protection Program, part of the federal response to the economic effects of the coronavirus pandemic. The program is similar to the arrangement the U.S. government has with mortgage agencies like Fannie Mae and Freddie Mac, whose stamp of approval on a loan makes banks more willing to lend. In this case the very existence of the Fed program — assuring banks that they could unload the Small Business Administration loans when they want — could make the program more attractive to lenders, given the fees of up to 5 percent banks can earn for what now amounts to processing the paperwork. The Payroll Protection Program is one of the key measures adopted as part of a more than $2 trillion effort to offset the economic impact of the coronavirus crisis, which has forced large portions of the U.S. economy to shutter. It dedicates $350 billion for loans so small businesses can keep paying workers and meet basic expenses like rent.
