Powell: Fed to open small-business lending program within days

Federal Reserve Chairman Jerome Powell said Friday that the central bank is days away from opening its program to finance emergency loans for businesses derailed by the coronavirus pandemic.

In an interview that aired online Friday, the Fed chairman said that the bank would soon begin purchasing loans made to businesses through its Main Street Lending Program (MSLP) after months of building out the new emergency facility.

Through the MSLP, the Fed will buy nearly all of a loan offered from a bank to a business with no more than 15,000 employees or $5 billion in annual revenue. The program is backed up with credit protection from the Treasury Department allocated through the $2.2 trillion coronavirus economic relief bill signed by President Trump in March.

“We’re looking back at companies that were in good, solid financial shape before the pandemic. We’re trying to find those companies, and we’re trying to create credit products that work for them. That’s the nature of the exercise, Powell said, noting the challenges presented by the wide range of companies eligible for the program.

While the Fed has received broad praise for its swift response to the economic crisis, experts have voiced concerns about the potential impact of trillions in emergency loans and credit facilities on income inequality.

The Fed’s unprecedented efforts to flood financial markets with support to keep credit flowing through the economy have helped the stock market stage a steady recovery, boosting investors as jobless claims and layoffs continue to rise. Some economists and analysts also fear that the Fed’s ample support for large companies and financial markets will outrun further fiscal support from Congress that can directly aid the most vulnerable Americans.

Powell rejected concerns that the central bank’s response to pandemic-driven economic downturn would increase the gulf between the wealthiest and poorest Americans, warning instead of deep damage done to the U.S. labor market. He did say that the coronavirus pandemic is deepening economic inequality within the U.S. and has taken a “tremendous” toll on those “least able to bear its burdens.”

Powell noted that low-wage service industry workers, including a disproportionate number of people of color and women, have been hit hardest by the business restrictions imposed to slow the spread of COVID-19. 

“Everything we do is focused on creating an environment in which those people will have their best chance to keep their job, or get a new job, or maybe go back to their old job if they’ve been furloughed,” he said.

He continued by saying the Fed was seeking to make sure that companies who employ those workers that were in good standing before the pandemic derailed their business could access enough credit to stay afloat and keep workers on the payroll.

“If a company like that doesn’t have market access and can’t roll over its debt and can’t have enough cash on hand to deal with its obligations, what they’re going to do is they’re going to lay people off, they’re going to cut costs. They won’t have any choice,” he continued.