Federal Reserve to Provide Additional $2.3 Trillion in Loans

Published by Matt Fishman on

The Federal Reserve will “provide up to $2.3 trillion in loans to support the economy.”

This funding will aim to support the Small Business Administration’s Paycheck Protection Program, “supplying liquidity to participating financial institutions” who will then provide loans to small businesses.

Small and mid-sized businesses “that were in good financial standing before the crisis” will also be eligible for loans through the Main Street Lending Program. This lending will in part, be backed by the Department of the Treasury, “using funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)” providing for $75 billion in 4-year loans to “companies employing up to 10,000 workers or with revenues of less than $2.5 billion.” Interest payments on these loans will also be deferred for one year.

Financial institutions and business receiving loans “must commit to make reasonable efforts to maintain payroll and retain workers”, and “also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act.”

Federal Reserve Chairman Jerome Powell commented how these loans are made “with the expectation that the loans will be fully repaid.” However, he acknowledged some businesses “would struggle to repay” such loans, and would instead benefit from “direct fiscal support”, hinting at “additional legislation in the works.”