- The Federal Reserve fell for the third time on Friday – to $ 100,000 – the minimum threshold of loans available under the Main Street Lending Program.
- The central bank is waiving the 1% fee it collects from borrowers on loans under $ 250,000, but it will allow banks to double – to 2% – the origination fees they can charge borrowers from. loans of this size, according to The Wall Street Journal.
- Borrowers who calculate their eligibility to apply to the Main Street program can exclude from their debt paycheck protection program (PPP) loans under $ 2 million, as long as they should be forgiven, the Fed said. Friday.
Friday’s adjustments to Main Street eligibility come as the likelihood of a Congressional consensus on a new pandemic stimulus bill – and therefore a PPP stimulus – diminishes.
Since its launch in june, the Main Street program has experienced relatively low demand. About 400 loans totaling $ 3.7 billion have been granted through the $ 600 billion facility, the Fed said on Friday. The program is due to expire on December 31, unless the Fed and the Treasury Department extend it.
Lawmakers and advocacy groups, in a Hearing at the September Congress, suggested that the Fed either lower the lending threshold or increase the share of each Main Street loan that the central bank would buy from 95% to 100%. The Fed did not change that figure on Friday, leaving lenders at the mercy of 5% of every loan they manage under the program.
In September, Fed Chairman Jerome Powell resisted calls to lower the loan threshold, which originally stood at $ 1 million, but was lowered at $ 500,000, then at $ 250,000. “The current facility wouldn’t work for much smaller loans,” Powell said at the time. “We would have to start a new facility that would have much less protection for the taxpayer. “
About 14% of Main Street loans, as of September 30, were less than $ 1 million, Bloomberg reported – give credit to the argument that playing with the lower loan threshold might not stimulate demand for the program. Critics said qualifying businesses – those with 15,000 or fewer employees or less than $ 5 billion in annual revenue – have simply found other loan vehicles to meet their needs.
“Trying to secure the credit of hundreds of thousands of small businesses would be very difficult,” Powell told lawmakers in September. “I think PPP is a better way to approach this space in the market.”
With the PPP stalled, the Fed played with Main Street margins. The Fed, through its ad hoc vehicle, has agreed to pay lenders 50 basis points per year for servicing loans below $ 250,000.
Other concessions made by the architects of the program since the launch have not been successful. The vehicle has expanded to non-profit associations in July, but as of September 30, no nonprofit borrower had taken advantage of it, Reuters reported, citing documents from the Fed.
“This is a major victory in our effort to give small businesses the tools they need to weather the pandemic,” said Representative Donna Shalala, D-FL, said in a statement on Friday. “It’s a great first step, but there is definitely more work to be done. We will continue to push for more oversight and accountability.”