NAICU Washington Update

Senate Hearing Focuses on Federal Lending Programs

June 05, 2020

The Senate Committee on Banking, Housing, and Urban Affairs this week held a hearing to discuss the implementation status of the Federal Reserve lending programs. These programs are of particular interest to private colleges and advocacy efforts are underway by NAICU and others that would allow colleges and universities to be eligible to participate. While lending programs were the initial focus of the hearing, attention later shifted to the next stimulus bill that might emerge in the Senate, and the additional needs of state and local governments.

Thomas Quaadman of the U.S. Chamber of Congress and Douglas Holtz-Eakin formerly at the Congressional Budget Office and now with the American Action Forum, testified that the current lending terms are too strict to help many mid-sized businesses and too small to turn to corporate bond markets for financing.  The Main Street Lending Program, which has yet to be launched, will be open to companies between 500 and 15,000 employees, allowing them to get new loans between $500,000 and $25 million.  The loans would be issued through banks, which could sell 95 percent of the loan to the Federal Reserve’s facility.

Holtz-Eakin stated that the program’s minimum loan size should be cut in half to $250,000 and the term should be extended to 10 years, allowing borrowers to repay in smaller amounts over a longer period of time.  Quaadman feels that enthusiasm in the business community for the Main Street program has been muted by the lack of clarity over the details, but expects there to be high demand for the loans when they’re made available. Both witnesses agreed that the $75 billion earmarked for the Main Street program should be increased to $100 billion. Unfortunately, expanding the program to nonprofits was not discussed during the hearing.

There was also extensive debate over businesses having liability protections for reopening, which Majority Leader Mitch McConnell (R-KY) has said must be included in any additional stimulus legislation considered by the Senate.  Most Democrats, however, rejected the idea of liability protection saying it gives companies a pass on worker safety.


MORE News from NAICU