Домой United States USA — Financial Skittish Treasury Hobbles Small-Business Loan Plan

Skittish Treasury Hobbles Small-Business Loan Plan


Main Street and the economy won’t get the help they need unless Mnuchin is willing to take more risks.
The Trump administration is hampering a Federal Reserve lending program that could help keep small and mid-sized businesses afloat during the coronavirus recession. To correct that mistake, the U. S. Treasury Department needs to allow the program to take more risks.
There are troubling signs that Treasury Secretary Steven Mnuchin doesn’t see it this way. His testimony before a key Senate committee Tuesday morning reinforced this.
The Fed’s “Main Street” lending program is intended to help businesses that were productive before the pandemic survive until the economy recovers. Business with up to 15,000 employees or 2019 annual revenues of less than $5 billion would get a loan from a bank, which would sell part of the loan — 85% to 95% — to the Fed. This would free the banks to make more loans.
The challenge for Treasury is to determine how much risk to take in these loans. This is Treasury’s decision, not the Fed’s, because the law requires it to provide the capital to cover losses and approve the terms of the program.
It’s admittedly a tough call. The Fed can’t make grants, and so it has to have a reasonable expectation that loans could be repaid. But lending always involves the risk of default. If the Main Street program is too conservative, money won’t go to the firms that need it the most, undermining the recovery.
There are troubling signs that Mnuchin is being more cautious than Congress intended and than the economy needs. He recently declared, “If Congress wanted me to lose all the money, that money would have been designed as subsidies and grants as opposed to credit support.”
This is misguided. Of course Congress did not intend for all the money to be lost. But there’s a lot of distance between that and putting some of the money at risk.

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