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Senate Banking Committee Chairman Mike Crapo doesn't expect the Treasury Department to alter its opposition to losses on the signature Main Street lending program, even as such restrictions have limited its use to USD95 million.
"I would like that, but I don't know that I would expect to see that," Crapo told MNI Thursday on Capitol Hill.
The Republican leader of the committee with jurisdiction over the Main Street program run jointly by the Treasury and Fed has circulated proposals for a coronavirus relief package including an amendment allowing loans even if they "may incur losses."
"There's a bit of concern being expressed about whether the uptake in the Main Street facility's program is because the terms are too restrictive. I am not sure that that is correct but in order to allow Treasury to address that kind of concern we want to make sure they know that they have the authority," Crapo said.
Under the program, the Fed can purchase 95% of a loan from banks if the loans go to businesses with fewer than 15,000 employees or less than USD5 billion in annual revenue. Loans can range from USD250,000 to USD300 million. If a borrower defaults on the loan, the Treasury Department will help cover any losses with funding from the CARES Act passed in March.
On Friday morning, the bipartisan Congressional Oversight Commission will hold a hearing on the Main Street program, where Boston Fed leader Eric Rosengren is slated to testify. No witness from Treasury is scheduled.
The central bank and the Treasury set up the USD600 billion loan program with USD75 billion in Treasury equity to cover any loans that go bad and spent months devising the program, negotiating over credit risk and vetting terms.
Richmond Fed President Tom Barkin Thursday told CNBC that he was open to changing "terms as appropriate" as the economy evolves.
SIX FLORIDA LOANS
Steven Mnuchin, the Treasury secretary, has resisted taking on too much risk, saying at one point that he did not want to lose money on the programs as a base case.
The Fed's latest balance sheet data released Thursday showed USD95 million in Main Street loans, up USD13 million from the previous week.
A separate report released Thursday from the Fed broke down each outstanding loan, including the lending bank, borrower and loan amount as of July 27. Of the eight companies, six are in Florida and received loans issued by the City National Bank of Florida.
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