UPDATE: On Oct. 21, the Senate’s stimulus bill failed to meet the 60-vote threshold needed for it to pass in the chamber. It contained provisions to expand support to small and midsize companies. The only chance for a new federal relief bill to pass before the elections on Nov. 3 is if the White House and lawmakers in the House can come to an agreement. As yet, negotiations over an additional aid package—which is said to be larger than the Senate’s—are still active.
In this week’s roundup, we look at the Federal Reserve, which was found to have spent only a fraction of the total amount of funding the Treasury provided in May to support small and midsize companies impacted by the coronavirus pandemic. We also summarize the current stimulus talks, where the Trump administration and House Democrats have made progress. However, Senate Majority Leader Mitch McConnell has warned the White House not to strike an agreement, despite the president’s urging to get a fresh stimulus package passed before the election, which is less than two weeks away.
Report: Less than 1% of Fed Aid for Small Businesses Used Since May
- The Main Street Lending Program was created by the Federal Reserve to support small and midsize businesses impacted by the coronavirus with hundreds of billions in loans. But its reach remains limited.
- Despite receiving $600 billion in backing from the Treasury to distribute loans to businesses, the MSLP—which launched in May—has only dispersed about $2.5 billion in loans, or about .04% of the original amount, as of Oct. 8, according to a report released by the Congressional Oversight Commission last week.
- All of the MSLP’s five lending facilities—the financial vehicles through which the loans are dispersed—are operational and are able to purchase loans submitted by lenders registered with the program.
- Still, only a fraction of registered lenders—mostly banks—were accepting loan applications from new customers by September, the report found. Companies without a preexisting bank relationship typically face steeper barriers to getting MSLP aid.
- The Fed and Treasury also devoted billions to purchasing equity in small and midsize companies. While half of the funding for that program has been used, $37.5 billion remains.
- The Fed’s frugality has become a point of contention among companies trying to get federal aid to help them weather the pandemic.
- The Association for Corporate Growth’s CEO, Tom Bohn, testified before the Congressional Oversight Commission in August to raise lawmakers’ awareness of the difficulty companies were facing to get support through the MSLP.
- According to an ACG survey published ahead of the hearing, 81% of its members—mainly middle-market business leaders and investors—said they were unable to access loans through the MSLP. [Middle Market Growth, Benjamin Glick]
McConnell Warns White House Not to Take Competing Stimulus Deal
- A week after announcing the Senate will vote on the next stimulus package, Majority Leader Mitch McConnell, R-Ky., is advising the White House not to strike a deal on a competing federal aid proposal.
- A member of McConnell’s staff and other lawmakers confirmed remarks the Senate leader made to the Trump administration on Tuesday, urging the president to abandon talks with House Speaker Nancy Pelosi, D-Calif., despite Trump’s urgent push to enact a fresh round of pandemic aid before the November election.
- Earlier in the day, Pelosi gave an upbeat assessment of the talks with Treasury Secretary Steven Mnuchin, saying they had found common ground. [The New York Times, Nicholas Fandos and Emily Cochrane]
- In a statement, McConnell said the Senate is still planning to get its plan on the floor this week, but the proposal could still fail to advance in the chamber. [Middle Market Growth, Benjamin Glick]
Benjamin Glick is an associate editor of Middle Market Growth.