Delay of Fed’s Main Street program hasn't hurt businesses, Powell says
WASHINGTON — Federal Reserve Board Chairman Jerome Powell said he doubts the delay in rolling out the Main Street Lending Program has put businesses at a disadvantage.
The central bank announced the MSLP in April to facilitate credit for small and medium-sized businesses struggling economically during the coronavirus pandemic, but the Fed only now is nearing the launch of the program.
At a press conference Wednesday, Powell said despite the delay, credit has been widely available for companies needing cash. The Fed has established roughly a dozen liquidity facility since the virus outbreak in March, many of which are already operational.
“Remember, lots and lots of companies are getting financed, the banks are lending, the markets are open [and] you have a much easier lending climate certainly than we had in February and March,” he said speaking at his monthly press conference after the meeting of the Federal Open Market Committee. “We don't think it's too late.”
Powell added that the latest set of changes the Fed made to the terms of the Main Street Lending Program earlier in the week were “very positive,” and were developed after the Fed received extensive feedback.
The $600 billion Main Street Lending Program will make loans of at least $250,000 available to businesses with up to 15,000 employees or $5 billion in annual revenue. The Fed will use funding appropriated to the Treasury Department through the Coronavirus Aid, Relief and Economic Security Act.
The central bank has made a number of tweaks to the program’s three lending facilities in advance of the rollout.
Most recently, on Monday, the Fed said it would decrease the minimum loan size offered through the program, increase the maximum loan size and extend the loan terms and prepayment periods. The central bank also said it would now take a 95% stake in loans made through the program.
“We had been hearing from both borrowers and lenders that these would be very helpful,” Powell said. “We made the changes, we're putting them through the facility. The next step will be to register lenders. At that time, loans can begin to be made.”
He emphasized that the Fed is committed to making further adjustments to the program as necessary after it launches.
“We're going to be prepared to adapt further if we need to, and that's true of all of our facilities,” he said. “These are unique. There's no playbook here.”
Powell touched on the nationwide protests over the death of George Floyd while in police custody.
“Everyone deserves the opportunity to participate fully in our society and in our economy,” he said. “These principles guide us in all we do from monetary policy to our focus on diversity and inclusion in our workplace, and to our work to ensure fair access to credit across the country. We will take this opportunity to renew our steadfast commitment to these principles.”
He specifically pointed to the racial disparity in unemployment. In May, the white unemployment rate was 12.4%, while the black unemployment rate was 16.8%.
“That's really, really, really unfortunate, because you just go back two months where we had effectively the first tight labor market in a quarter century, and for the last couple of years before the pandemic hit, you were seeing wages go up the most for people at the lower end of the wage spectrum, and that was great,” he said.
The percentage of black Americans out of work reached a record low in September, but that rate was still significantly higher than the white unemployment rate.
Powell denied that the Fed’s policies are responsible for the disparities.
“Inequality is something that's been with us increasingly for more than four decades, and it's not really related to monetary policy,” he said. “We call it out as an important factor in the economy, and we will use our tools to support maximum employment and take that definition to heart. But obviously that's something that's going to require an all-of-society, all-of-government response.”