Key Highlights

  • Fed dusting off a 2008 lending program directed to consumers and small businesses
  • Program to complement SBA Economic Injury Disaster Loan Program

Jerome Powell, chairman of the Federal Reserve, today announced a two-pronged, open-ceiling lending approach to 1) help financial markets return to more normal functioning and 2) help the cash flow crisis affecting millions of businesses and people due to the coronavirus pandemic.

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This post is focused exclusively on the second prong of the Fed’s approach – helping small and medium sized businesses and households mitigate this previously unfathomable cash flow crisis.

The Fed is dusting off a 2008 lending package that, at that time, increased the size of the Fed’s balance sheet by some $1.3T. This time, because the scale of this crisis is so much larger than the crisis endured in 2008, Evercore ISI analysts estimate the Fed’s balance sheet could be a ballpark figure of some $5T.

Called the Main Street Business Lending Program, this lending program would be tailored to consumers and small businesses. The premise of Market Street is to lend money to households and small/medium sized business to help meet payroll, rent and other expenses during this pandemic crisis with NO interest or principal payments for 6 months and repayment over the next 4 years.

Underlying this premise is the hope that the Fed can help to ensure otherwise sound, solid small business do not succumb to bankruptcy due to plummeting revenue AND that soaring joblessness is not extended once the pandemic is contained. Even if these businesses must close temporarily (as during these “stay at home/shelter in place” orders), businesses can reopen when the situation enables these businesses to return to their normally productive role in the economy.

Once specifics are added to this iteration of the Market Street Business Lending Program, we’ll most definitely keep you posted.

 

Thanks to the New York Times’Neil Irwin.

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