WASHINGTON (Reuters) – A sample of U.S. banks say they expect loan demand from businesses targeted by the Federal Reserve’s Main Street Lending Program to increase in coming months, but also gave no clear sign that use of the much-criticized program itself will change.
Rather, respondents to a Fed survey of senior loan officers noted that loans made under the Fed’s Main Street program accounted for less than 2.5% of the business loans they made.
The lenders cited a variety of constraints around the use of the program, including Fed-imposed cash flow requirements and repayment terms that ruled out some potential borrowers, and the ability to simply make the loans themselves without getting involved with the central bank.
“Respondents expected (commercial and industrial) loan inquiries to increase in the next three months,” from companies in the size category eligible for the Fed’s Main Street programs, or with no more than 15,000 employees or $5 billion in revenue. “However only a modest share of banks expected their willingness to extend (Main Street) loans to increase over the same period.
The latest August survey covered 86 banks including 33 with assets of at least $50 billion.
The Main Street program is a cornerstone of the Fed’s response to the pandemic. But uptake has been weak, a fact Fed officials have characterized as evidence the credit system is working without Fed support. Only about $2 billion of a potential $600 billion in lending has been approved by the Fed so far
(Reporting by Howard Schneider; Editing by Andrea Ricci)
