Fed’s lending program drawing few takers

Only fraction of $600B pot used so far; oversight panel sees other funding as rival

The Federal Reserve has used only a fraction of the $600 billion in an emergency lending program for small and medium businesses struggling with the viral pandemic, according to a congressional watchdog report.

Eligible lenders participating in the Main Street program have issued $496.8 million in loans, of which $472 million is Federal Reserve money, or about 0.07% of the central bank’s lending capacity as of Wednesday, according to the report issued Friday.

“The Main Street Lending Program has seen modest initial activity thus far,” according to a monthly report from the Congressional Oversight Commission, the panel in charge of overseeing the Treasury Department and Federal Reserve responses to the coronavirus pandemic.

“Some of the Main Street Lending Program’s modest activity may be because some businesses accessed the Small Business Administration’s Paycheck Protection Program, while others are able to rely on existing credit lines or other sources of liquidity,” the report said.

The watchdog panel noted several other reasons why businesses may not be seeking the funding: only 160 of the 522 lenders registered with the program have publicized that they are accepting loan applications with new customers; businesses are unfamiliar with the program; and that the eligibility rules are complex and may exclude some businesses that wish to participate.

The Fed has defended the lending levels for the Main Street program, saying that there isn’t huge demand for loans currently but that it could consider reevaluating the eligibility requirements as conditions change.

The oversight panel has four members: Rep. Donna Shalala, D-Fla.; Sen. Pat Toomey, R-Pa.; Bharat Ramamurti, a former aide to Sen. Elizabeth Warren, D-Mass.; and Rep. French Hill, R-Ark.

Members have said the lack of a chairman has hampered the panel’s ability to establish a strategy for policing the bailout money. Joseph Dunford, a former chairman of the Joint Chiefs of Staff, withdrew from consideration for the post.