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Budget 2021

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Moneycontrol

Budget 2021

Associate Partners:

  • SMCSamsungVolvo
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Federal Reserve to expand reach of 'Main Street' lending program

The central bank said it would expand its "Main Street Lending Facility" into three separate programs to support businesses with up to 15,000 employees and $5 billion in revenue compared to an initial program limited to 10,000 workers and $2 billion when it was announced on April 9.

April 30, 2020 / 09:19 PM IST

The US Federal Reserve on Thursday widened a key program to nurse the "Main Street" economy through the coronavirus pandemic, agreeing to lend to even larger firms, taking on more risk in participation with banks, and hinting at some form of dedicated help for non-profits.

The central bank said it would expand its "Main Street Lending Facility" into three separate programs to support businesses with up to 15,000 employees and $5 billion in revenue compared to an initial program limited to 10,000 workers and $2 billion when it was announced on April 9.

Some 2,200 business, individuals and non-profits had written in with suggestions about how to tailor the Fed's unprecedented efforts to meet the needs of the "real economy."

The result is a program that will now be open to more firms, and allow more risk-taking. The initial program required banks to hold 5 percent of any loan they made, with the rest coming from the Fed. For companies with more leverage, and thus more risk, the Fed will allow them to participate if banks agree to take on 15 percent.

In addition, the Fed said firms now had to offer a reasonable assurance they could pay their bills for at least 90 days and would not go bankrupt in that period - a measure of protection that the lending will have an impact.

Close

Firms also have to promise they will make "commercially reasonable efforts" to maintain employees - a change from just the "reasonable efforts" demanded previously.

 
Reuters
first published: Apr 30, 2020 09:18 pm

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