Main Street loan program to start in late May, Fed officials say
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The Federal Reserve’s loan program for businesses, state and local governments will start in late May, two senior Fed officials announced on Tuesday.
Boston Fed Chairman Eric Rosengren, whose regional bank runs the program for the central bank, said Tuesday in a speech that the program would start later this month.
Earlier Fed President Jerome Powell had said he expected the program to be ready to start no later than the first week of June.
The program is aimed at medium-sized businesses that are too large for the Paycheck Protection program but too small to access the credit markets.
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Rosengren said these companies represent a significant portion of the American workforce. The loans are intended for institutions which had a solid financial base at the end of last year and which were only damaged by the pandemic.
The programs are 4-year loans to help businesses overcome the pandemic caused by the new strain of coronavirus. Payments are deferred for one year.
Banks must take out the loan and are required to participate in it, up to 15% for subprime borrowers.
Some economists believe that companies will avoid the loan program. Some are urging the Fed to lower the loan minimum by $ 500,000.
Powell said the Federal Reserve would be flexible and adjust the program in the event of lack of demand. The central bank is already studying how to extend the program to non-profit organizations.
Shares combined Tuesday with the Dow Jones Industrial Average
DJIA
directed down.