“Unfortunately, I have not been able to borrow from the program yet to find anyone who has gotten a loan through it,” he added.
The lack of interest in lenders is one of several criticisms leveled at the program, which is aimed at companies that are too large to be eligible for the Paycheck Protection Program for smaller companies that are not yet large are sufficient to apply the capital markets. The negative reviews are noteworthy because the Fed has been seen as the main source of stability for the financial markets throughout the crisis.
Vince Foster, executive chairman of Main Street Capital Corp., which invests in smaller companies, suggested the commission should collect data on how many companies applied for and were denied loans.
“I’m probably a hundred conscious,” he said. “And it’s not the banks’ fault.”
“We have a restaurant group in Florida, and the bank that signed up for the program said, ‘I can no longer take an exhibit in my portfolio,'” Foster said. “Because they approach it like a bank. … “They relax their standards for underwriting. If you are a restaurant group, you do not get a bank loan.”
Boston Fed President Eric Rosengren also set up the commission, arguing that the program works as intended and that more debt will not necessarily help the needy companies than the small businesses. He said the program could see much more interest as the economy shrinks as banks see more demand for loans.
“This program is designed for a company that had a short-term credit crunch, that was in good shape before the crisis and that, after the pandemic, would also be a viable business,” Rosengren said. “There are companies that fit [those] characteristics. We see some of those companies coming to the facility. ”
Under the program, which opened its doors earlier this month, the Fed will buy 95 percent of a loan to a company with fewer than 15,000 employees or less than $ 5 billion in annual turnover. The minimum loan amount is $ 250,000 for new credit, while extensions to existing loans can run as high as $ 300 million.
Gwen Mills, secretary-treasurer of Unite Here, which represents employees in the hard-hit hearsay, warned that the program leaves workers behind – noting that 85 percent of its union members are unemployed. They criticize the fact that lenders do not formally have to invest to use the money for lending, despite congressional cuts in the CARES law that they do.
They suggested that the loan restrictions in other areas should be loosened but strengthened because it relates to workers continuing to work.
“It’s no longer acceptable for the Fed to just stand by and watch us fall off that cliff,” Mills said. ‘Read the room. Millions of American workers lie directly behind us and on the sidewalk. ”
Members of the Congressional Oversight Committee Bharat Ramamurti and sen. Pat Toomey (R-Pa.) Had several takeaways about the perspective of the program. Ramamurti, a former employee of sen. Elizabeth Warren (D-Mass.), Claimed that the program failed small and medium-sized businesses because “the Fed can only offer loans,” providing no subsidies.
“If the Main Street program can only offer loans, and it’s clear that most small and medium – sized businesses are not currently looking for loans, even though they are already having difficulty, how will the program stop extensive business closures and job losses? ” he said.
Toomey, for his part, said it was too early to declare it a lost cause, saying there was some use made of the program. He also pointed to the Association for Corporate Growth survey which showed that 22 per cent of members were unaware of the program.
“It’s too early to conclude that this has all been a failure,” said Toomey, a member of the Senate Banking Committee. “There are definitely some improvements we need to look at.”
Rep. French Hill (R-Ark.), Another member of the commission, agreed.
“I would not describe the program as a failure as one of my colleagues did; instead I stand by the previous complaints [that] it took too long to stand up, ”said Hill, a member of the House Financial Services Commission, in an interview. ‘But clearly there are obstacles’ for banks that want to participate.
