It sounded like a great idea back in April. With the economy getting hammered by Covid-19, the Federal Reserve hatched a bold plan to rescue thousands of midsize companies that were falling into a gap between government aid programs.
Using its magic printing press, the U.S. central bank would take $75 billion appropriated by Congress and turn it into as much as $600 billion in loans to companies damaged by the pandemic.
The effort now appears to have been doomed from the start, squeezed between legal restrictions on the Fed’s emergency powers and the risk aversion of the banks that the program relied on to make loans. Eight months in, the Main Street Lending Program has pushed less than $6 billion out the door.
“There’s been bipartisan acknowledgment that Main Street isn’t working,” says Bharat Ramamurti, who sits on the congressional commission charged with supervising the spending authorized by the Coronavirus Aid, Relief, and Economic Security Act. “I don’t think anybody is under the illusion this program is solving the problems that exist.”
Treasury Secretary Steven Mnuchin announced on Nov. 19 that he wouldn’t approve an extension of the program, along with four other emergency lending facilities, past Dec. 31, but Democrats might be able to revive it. Some, including Virginia Senator Mark Warner, clearly want to. “As we’re looking at the virus actually accelerating at this point, and the potential for businesses even going into more duress, the idea that we’d end the program arbitrarily on Dec. 31—I just think makes no sense,” Warner says. “We think we need to make adjustments on both program eligibility, loans terms, and weight, so this works for more firms.”
It’s difficult to see how a few tweaks would suddenly resolve the real issues that afflict the program. Those start with the limits on the Fed’s emergency powers. The central bank can lend almost infinite amounts of money, but it can’t give it away. That means the Fed must reasonably expect repayment on loans and must charge rates that won’t end up undercutting private lenders.
Continue reading your story on the app
Continue reading your story in the magazine
Test All of Minnesota? You Betcha
Minnesota is setting an example for other states and the federal government. If anyone is interested
The Cult of Positivity
WHY BLIND OPTIMISM IS DRIVING US NUTS
SPOTIFY'S PODCAST POWER PLAY
The company is staking its future on converting music listeners to podcast fans and has become the favorite to own the industry—for better or worse
Why the U.S. Senate Is Broken
Adam Jentleson argues that toxic partisanship rose when the filibuster became a cudgel
America's Missing Workers
Near-record levels of absenteeism could be hampering the recovery
The Electric Truck That Couldn't
In the past six months, Nikola has faced an SEC probe, lost partners, and seen its shares tank
WALL STREET SOUTH
Florida braces for a gold-plated makeover as finance rethinks its attachment to New York
Yet Another Winning Year For Hindsight Capital
With the miserable year of 2020 over, it’s time to return to the offices of Hindsight Capital LLC.
Social Media Hits Mute After the Capitol Riot
Facebook and Twitter can block the president, but his supporters will move on
Where to Go in 2021
THE GLOBAL ECONOMY NEEDS A TRAVEL REBOUND. YOU COULD USE ONE, TOO. AS SOON AS IT’S SAFE, MAKE YOUR PLANS COUNT WITH 24 IDEAS TO HELP HEAL THE WORLD ONE SMALL STEP AT A TIME
ITALIAN ‘PINOCCHIO' TAKES THE PUPPET TO ITS ROOTS
The latest cinematic rendering of “ Pinocchio, ” from Italian director Matteo Garrone, is informed not by the friendly 1940 Walt Disney retelling, but the original source material.
A Stove Called Yerofeyich
Auntie Nina even pinched herself in the side, but no – it wasn’t a dream.
Sitting Bull
THE SIOUX LEADER’S FINAL FLIGHT TO FREEDOM
Turner growing into role
Scott Turner is no longer known just as Norv’s son and the kid who grew up at the Washington team facility and FedEx Field. He’s now a key cog in the rebranding and resurgence of the burgundy-and-gold offense.
FCC AWARDS $25M TO EXPAND INTERNET IN RURAL NEW HAMPSHIRE
Internet providers in New Hampshire will receive more than $25 million in federal funding over 10 years to expand broadband access across in rural parts of the state, the Federal Communications Commission announced this week.
The Loudest Voice
Corporate America needs to get on the right side of history. Civil rights nonprofit color of change gets it there – ready or not.
MACHO MAKEOVER!
Lori’s fashion-designer hubby taking ‘prison lessons’ to look tough!
An Unexpected Visitor
I couldn’t even sort through the first box of our dog Bama’s toys without bursting into tears. My husband, Alan, found me sitting on the floor in our utility room, clutching our late boxer’s favorite squeaky. He gently pulled me to my feet. “It’s okay, Lisa,” he said.
LOCKED LORI'S LONELY HEARTS CLUB!
Isolated depressed: 'It's crushing her!'
PROPERLY INSURE YOUR DRONE BUSINESS
Efficient ways to mitigate and transfer risk