The Federal Reserve on Thursday announced a new $600 billion lending program for midsize businesses in an effort to help thousands of additional firms as part of $2.3 trillion in new funding designed to offset the negative impact of the coronavirus pandemic on the economy.
Under the Main Street Lending Program, the Fed said it will offer four-year loans to companies with up to 10,000 workers or less than $2.5 billion in revenue. The loans will defer both principal and interest payments for a year. Banks will be able to take out new loans or increase the size of existing ones and must retain a 5% share, selling the remainder to the Fed.
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” said Federal Reserve Board Chair Jerome H. Powell. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
Companies that take advantage of the program “must commit to make reasonable efforts to maintain payroll and retain workers,” the Fed said.
The program has been eagerly awaited because the Fed’s existing initiatives have focused on the stimulus package’s Payment Protection Plan, which provides forgivable loans to cover payroll and other operating expenses to businesses with fewer than 500 workers, as well as bailouts for large corporations such as airlines.
The Main Street Lending facility is aimed at helping thousands of additional midsize businesses.
The Fed has rolled out an extraordinary array of lending programs the past month as the pandemic has virtually shut down the economy, with restaurants, stores, movie theaters and other businesses closing to contain the spread of the virus. The travel and leisure industry has been decimated. The Labor Department said Thursday another 6.6 million Americans filed claims for unemployment insurance last week and a total of 17 million have sought benefits the past three weeks, reflecting a record wave of abrupt layoffs.
► Set up a new $500 billion lending program for state and local governments, which have lost massive revenue while getting hit with higher health and other costs during the crisis. Cities with populations of more than 1 million and counties with populations greater than 2 million are eligible.
►Provide additional funding to banks for the PPP program aimed at small businesses
► Expand its funding of student, auto and credit card loans to include commercial mortgages and other business loans. The facility's funding remains at $100 billion.
►Increase the amount of funding for corporate bonds and broaden the support to companies whose credit ratings were downgraded a notch since the crisis began.
This article originally appeared on USA TODAY: Coronavirus: Fed announced new $600B lending program for midsize firms