US Fed weeks away from rolling out loan facilities for mid-sized businesses, municipalities, Quarles says

The US Federal Reserve is weeks away from getting loan facilities for mid-sized businesses, as well as states and localities, up and running, Vice Chairman for Supervision Randal Quarles said, as senators voiced concerns about the central bank’s handling of the programs.

“It is our highest priority,” Quarles told a Senate Banking Committee hearing today, referring to the $600 billion Main Street Lending Program and the $500 billion Municipal Liquidity Facility. “Because these are innovations, that is taking time. It’s important we do the technical work.”

Pressed on the Fed’s time frame for rolling out these programs, Quarles said: “I don’t think we’re looking at months, but it would be premature for me to say how many weeks before they would be operational.”

— Senators’ concerns —

Senators from both parties expressed dissatisfaction with the pace and details of the programs that have been announced in advance.

Committee Chairman Mike Crapo raised questions about the exclusion of small localities from the municipal aid program.

“I remain concerned that the inclusion of population thresholds for cities and states that were not a part of the CARES Act will still impede access to smaller and rural communities,” the Idaho Republican said.

He also questioned whether the program would be overly bureaucratic by requiring towns to get their loans from states rather than directly from the Fed.

This administrative structure, Crapo said, would likely result in “unnecessary friction” between states and localities.

Senator Mark Warner, a Virginia Democrat, criticized the pace at which the Fed is moving to introduce the loan program for small and mid-sized businesses.

He cited a meeting with Treasury Secretary Steven Mnuchin, attended by at least a half-dozen senators from both parties, at which he said they expressed the urgent need to set up this program quickly.

“If you take so much time in setting up this Main Street facility, you’re not meeting Congress’s intent to recognize that these are unprecedented times,” Warner said. “That middle market has been extraordinarily left out.”

The two programs, announced by the Fed on April 9, were established under the Cares Act.

The Main Street lending facility is aimed at small and mid-sized businesses in good standing before the pandemic. Eligible businesses can have up to 15,000 employees or as much as $5 billion in annual revenue.

The municipal facility was intended to help states and localities manage cash-flow problems.