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Federal Reserve Chairman Jerome Powell is close to throwing Main Street small and midsized companies another lifeline in the form of low-interest loans.
“It’s a challenging space because it is many different kinds of borrowers, they have different needs, different sizes of companies and as I mentioned we are very close to announcing a different term sheet which will then become operative fairly quickly," Powell explained during Wednesday’s press briefing following the Fed’s decision to keep interest rates near zero for the foreseeable future. "My guess is though we will keep looking to add products and add different kinds of borrowers as we go and we are well aware of the importance of doing it as quickly as possible.”
The Main Street $600 billion lending facility, announced as part of a $2.3 trillion dollar stimulus package, is aimed at helping small and midsized companies of less than 10,000 employees or under $2.5 billion in revenue for 2019.
Because the minimum size of the loan will be $1 million, some small businesses may not be attracted to the program, which may prevent the pot from running dry like the Payroll Protection Program did in the first run-through before being refunded.
Unlike the PPP, the Main Street lending facility is a pure low-interest loan that will not be forgivable. Still, moves are being made to expand it if necessary because the program would be another avenue for businesses to stay afloat during this shutdown.
Separately, Treasury Secretary Steven Mnuchin told FOX Business he would be willing to add more money to backstop the facility if the Fed wanted to expand it. The Treasury Department is providing $75 billion to cover potential losses for the loans. The Fed uses that money to decide what credit risk to take and loan off of it.
Powell added today that programs aimed at keeping employees on the payroll will be critical going forward. The Main Street lending facility and PPP go to the heart in loaning money to companies to avoid layoffs. The Fed chairman believes these programs need to be expanded or supplemented so companies will have employees on the job or could rehire quickly when the economy opens up.
Powell believes the bounce-back will be directly related to how many people keep their jobs in this time period.
Since the coronavirus ravaged the U.S. economy, 26 million Americans have filed for unemployment with another few million expected to enter the pool.
On Tuesday, the American economy shrank by 4.8 percent in the first quarter of the year, the sharpest decline since the financial crisis more than a decade ago as the coronavirus pandemic forced a near shutdown of the country, ending the longest expansion on record.