Lawmakers on a top banking panel largely agree that the Federal Reserve’s Main Street lending program has fallen short. But they’re debating whether or how to change the rules and allow the Fed to make more, albeit riskier, loans to struggling businesses, the Washington Post reported. At a Senate Banking Committee hearing yesterday, policymakers differed over whether the Main Street program can be strengthened with a new structure and relaxed loan terms, or if more direct aid from Congress is needed to help companies fighting for survival during the pandemic. As of last Thursday, the Main Street lending program had completed $1.2 billion in loans, just a fraction of the $600 billion pot. “I am still concerned that incorporating widespread restrictions in these facilities could render the facilities ineffective and leave businesses and their employees without critical resources they desperately need,” said Sen. Mike Crapo (R-Idaho), chairman of the Banking Committee. The program could have wider reach if the Fed bought 100 percent of all Main Street loans from banks, instead of 95 percent, according to Jeffrey D. DeBoer, president of the Real Estate Roundtable, and Hal S. Scott, president of the Committee on Capital Markets Regulation, who testified at the hearing. Since the current structure leaves banks with some skin in the game, many lenders have shied away from making riskier deals. DeBoer and Scott also recommended that companies should be given a longer timeline before having to pay back the loans. Lawmakers also highlighted trouble in the commercial real estate industry, which has taken a beating from lockdown measures and rent deferrals. The Main Street program’s restrictive terms have made it hard for commercial real estate companies to get help, DeBoer said, which has rippling consequences for the broader economy, from jobs to housing to state and local taxes. A core issue is how much risk the Fed and Treasury Department can take under the Cares Act, since any losses are ultimately covered by taxpayers. In an interview last week, Eric Rosengren, president of the Federal Reserve Bank of Boston, said that is “completely appropriate” to want to limit the amount of risk to protect taxpayer dollars. But any number of rules on the terms sheet could be relaxed to expand the program’s reach, Rosengren said.
