Fed chair expects Main Street Lending facility to ‘be up soon,’ will start registering lenders

The lending facility designed to provide support to small and mid-sized businesses should be “up soon,” the chair of the Federal Reserve said Wednesday, adding that recent changes to the program has put it in “a better place.”

In a press conference following the public notice of actions by the Fed’s interest-rate setting group (the Federal Open Market Committee), Fed Chair Jerome H. (“Jay”) Powell said the Fed’s Main Street Lending Program (MSLP) will soon begin registering lenders. “At that time, loans can begin to be made,” Powell said.

“What we’ve done is listen to feedback,” Powell said. He added that the Fed was listening to try and create what he admitted was a “much more difficult product than the other facilities” the Fed has launched in the wake of the coronavirus crisis.

Powell said changes announced to the program earlier this week “were very positive” and would make the facility much more able to achieve its goals.

The program, announced April 9, is aimed at providing support for the small- and mid-sized businesses that “were in good financial standing” before the coronavirus crisis began by offering loans. When first announced, the program was intended to provide four-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments on the loans, the Fed said then, would be deferred for one year.

On Monday, however, the Fed made some changes to the program – which Powell said came about through the variety of feedback the agency said it received.

(In the short clip, FRB Chair Powell outlines the immediate future of the Main Street Lending facility.)

Those changes include lowering the minimum loan amount, raising the maximum loan limit, adjusting the principal repayment schedule to begin after two years, and extending the term to five years. The Fed said Monday it expects the MSLP to be open for lender registration soon and to be actively buying loans shortly afterwards.

Powell said that the time between the program’s introduction two months ago and now was time the Fed used well. “We have been hearing from both borrowers and lenders that (these (changes) would be very helpful,” he said.

“The next step will be to register lenders,” Powell said. “At that time, loans can begin to be made. Shortly after that, the facility will be up (and running), and those loans can be sold – 95% of the loans (across the board) can be sold.

“All of that should happen quickly now,” he said.

Powell called the MSL program a “challenging project.” “We’ve come to a better place” with the recent changes announced, he said.

“By the way, we’re going to be prepared to adapt further if we need to,” Powell said. “These facilities are unique; there’s no playbook here. You have to draw this up, try it out; we’ve been very willing to adopt and will continue to be.”