Washington, D.C. - Today, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, sent a letter to Chairman of the Federal Reserve (Fed) Jerome Powell regarding the Fed’s implementation of the Main Street Lending Program and the Municipal Liquidity Facility, two programs designed to provide relief to small and mid-sized businesses and state and local governments. The letter requests documents and information regarding whether these programs helped reduce unemployment and what additional steps the Fed is taking to improve the health of the nation’s recovering economy and identify lessons learned for future relief efforts.
“I applaud the Fed’s attempts to assist these entities that were hard-hit by the pandemic, yet I am concerned that these efforts may not have provided assistance as effectively, efficiently, and equitably as they could have," wrote Chairman Clyburn. “For this reason, I seek to better understand the performance of the Fed’s pandemic relief programs to determine whether those programs achieved their intended objectives, and whether similar programs may be useful in responding to future crises."
The Main Street Lending Program and Municipal Liquidity Facility were created by the Fed in April 2020, in coordination with Department of the Treasury, backstopped by funds appropriated by Congress in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Trump Administration’s implementation of the programs was plagued by delays and bureaucratic infighting, issuing only a fraction of their available capital while over 200,000 businesses closed. The Main Street Lending Program did not issue its first loans until July 2020, more than three months after its launch. By the end of the program, the Fed had issued 1,830 loans totaling only 2.8 percent of available capital. Similarly, at the end of the Municipal Liquidity Facility, the program had loaned only $6.3 billion of its $500 billion lending capacity, likely due to the facility’s high interest rates and short repayment period, which may have deterred many jurisdictions.
Today’s letter is part of the Select Subcommittee’s ongoing oversight of the Fed programs. In August 2020, the Select Subcommittee called on Treasury Secretary Steven Mnuchin and Fed Chair Powell to implement changes to the Main Street Lending Program to help workers and businesses after early data indicated the program prioritized of big businesses over American jobs. As part of the Select Subcommittee’s investigation into the Fed’s backstops for municipalities backed by CARES Act funds, the Select Subcommittee also found the Fed’s bond purchasing programs benefited corporate executives and investors, not workers, exacerbating economic inequities.
In December 2020, the Select Subcommittee and the Committee on Financial Services demanded that former Secretary Mnuchin restore the Main Street Lending Program and Municipal Liquidity Facility. Mnuchin declined, hampering lending to Main Street businesses amid the ongoing public health and economic crises. In contrast, the Biden-Harris Administration has provided significant assistance to employers and employees, most recently through the American Rescue Plan.
“While the American economy is now steadily improving, due in significant part to the American Rescue Plan, many Americans, especially those who were struggling before the pandemic and were hit hardest by the economic crisis, continue to struggle," the Chairman wrote. “The pandemic provides an important opportunity to learn from what worked-and what did not-in providing economic relief effectively, efficiently, and equitably."
Today’s letter requests that the Federal Reserve produce records regarding the implementation, management, performance, and impact of the Main Street Lending Program and the Municipal Liquidity Facility, including information on the efficacy of the programs in reaching and aiding women- and minority-owned businesses, and asks for specifics on improvements to direct lending and current employment efforts.
