Washington D.C. — Today, BPI Senior Vice President and Associate General Counsel Lauren Anderson will testify before the Congressional Oversight Commission regarding the progress of the Main Street Lending Program (MSLP) since the program became operational on July 6. In her submitted written remarks, Anderson praised COVID-19 relief efforts enacted to date by Congress, Treasury and the Federal Reserve but indicated that despite participation by over 300 lenders, including many BPI member banks, the MSLP has only issued a limited number of loans due to several reasons, mainly:
- Many mid-market companies that otherwise would be potential borrowers under the Main Street program already drew down on credit lines during March and April, which has led to reduced demand for credit; and
- The program requires borrowers to not only meet eligibility criteria but also bank underwriting standards, and creditworthy borrowers can typically avail themselves of private market credit solutions by working directly with their bank.
The current architecture of the MSLP is not designed for borrowers who are less creditworthy. As indicated in Anderson’s remarks:
Given the fact that the MSLP requires borrowers to not only meet certain eligibility criteria, but also to satisfy bank underwriting standards….[w]here the MSLP may be more useful is where a bank is balance sheet constrained and cannot lend the full amount needed by a creditworthy borrower.
As of August 06, the Federal Reserve had purchased $95 million in participations of Main Street Loans, though Anderson indicated that demand for the program may increase if the economic downtown worsens. The program was originally set to expire on September 30, however, the Federal Reserve announced in late July that the program would be extended until December 31.
About the Bank Policy Institute. The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.