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The Federal Reserve’s “Main Street” business lending program will be designed for companies in the middle — too big for small-business loans and too small to tap capital markets, said San Francisco Fed president Mary Daly on Tuesday,
“There is a whole swath of institutions that don’t access capital markets very easily and don’t qualify for small-business lending. That’s a part of Main Street that still needs to be treated that directly employs literally millions of workers,” Daly said, in an interview on Yahoo Finance.
Congress has appropriated $454 billion for Fed programs in an unprecedented attempt to get the central bank’s lending powers to help dampen the blow to the everyday economy from the coronavirus outbreak.
Read: Here’s how Fed is funneling $4 trillion of funds into the real economy
Treasury Secretary Steven Mnuchin has touted the Fed’s ability to make $4 trillion in loans given a 1-to-10 leveraged ratio with the Fed and the government working together.
The Fed announced it was working on a Main Street lending program on March 23 but has yet to provide any specifics.
Staffers at the Fed are still working on details of the unprecedented plan, Daly said.
An analysis by the Brookings Institution said there are 6 million businesses with fewer than 500 employees and another 18,000 businesses with between 500 and 5,000 employees.
Asked about economic conditions in her district, which covers nine states, Daly said the “hard stop” in economic activity has already cost millions of workers their jobs.
“I expect it to get a little bit worse as we do the right thing and shelter-in-place, before it gets better,” Daly said.
Asked for her forecast for the U.S. economy, Daly said the evolution of the pandemic will determine both the magnitude and duration of the economic downturn.
The U.S. economy is likely already in a recession, she noted.
For now, the best strategy is to shelter-in-place and curb the spread of the virus and then the economy will be in a good position to bounce back, Daly said.
In a separate interview later Tuesday on CNBC, Cleveland Fed President Loretta Mester said she’s seen some improvement in financial markets since the Fed started its aggressive campaign to alleviate market strains.
“They have improved in certain respects. We’re still monitoring to make sure there aren’t pockets that we will need to keep our eye on,” Mester said.
U.S. equity benchmarks closed lower on Tuesday, ending a horrendous first quarter for stocks. The Dow Jones Industrial Average DJIA, -1.84% closed down 410 points to close at 21,917.16 on Tuesday, That means a decline of more than 23% in the first quarter, the worst quarter for the benchmark index since the market collapse in 1987.
