Fed launches emergency business lending program

The Federal Reserve on Monday opened its direct lending program for businesses derailed by the coronavirus pandemic that are too large to qualify for other federal relief programs.

The Fed launched registration for its Main Street Lending Program (MSLP) on Monday through the Federal Reserve Bank of Boston, allowing banks and other lenders to sign up and begin disbursing a crucial tool in the central bank’s emergency lending efforts.

The MSLP is designed to prop up businesses that were strong and stable before the pandemic shut down wide swaths of the U.S. economy by providing emergency loans issued through banks that are held by the Fed. 

Under the MSLP, a business with up to 15,000 employees or 2019 revenue no greater than $5 billion can apply for a loan to be repaid in five years. The loans will be originated through banks, but the Fed will purchase 95 percent of the total loan amount to drastically reduce the risks for and constraints on lenders. 

The MSLP is one of nearly a dozen special emergency lending facilities deployed by the Fed and backed up by the Treasury Department to protect businesses from collapsing and laying off employees during the pandemic.

The Fed announced in April it would purchase up to $600 billion in loans issued through the MSLP with $75 billion in credit protection from the Treasury approved through the Coronavirus Aid, Relief and Economic Security Act signed by President Trump in March.

The Main Street program will likely be one of the most heavily scrutinized Fed lending efforts given its size, scope and importance to the recovery of the U.S. economy. Both Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin have pledged to be bold and said they’ll be willing to take losses on MSLP loans rather than cut out businesses in need of aid at the risk of hampering the recovery.

Even so, lawmakers and some experts have already grown concerned that the two months in between the Fed’s announcement of the MSLP and its opening on Monday could have cost the bank crucial time to salvage businesses.

Powell has also repeatedly warned that emergency Fed loans may not be helpful for certain businesses and urged Congress to boost fiscal support to reach a broader range of firms and their employees.

“It’s possible that we will need to do more, and it’s possible that Congress will need to do more,” Powell said Wednesday.