U.S. Treasury Secretary Steven Mnuchin said a decision to end several emergency loan programs being run by the Federal Reserve was based on the fact that the programs were not being heavily utilized.
The central bank said it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”
Federal Reserve Chair Jerome Powell said the threat also means that Congress and the White House should provide more stimulus spending to support the unemployed, states and cities, and small businesses, and to keep the economy afloat.
A Federal Reserve survey of business conditions around the country found that the U.S. economy grew at a “slight to modest” pace in September and early October, but that the pace of activity varied greatly among sectors.
The solid economic recovery under way could falter without continued financial support from the government, Fed Chair Jerome Powell said Tuesday.
Chairman Jerome Powell on Wednesday defended the Federal Reserve’s efforts to support the economy during the pandemic-induced recession from assertions that its programs bungled aspects of its response.
The central bank has faced criticism for not making the Main Street program easier to use for banks, which evaluate and issue the loans. The Fed buys 95% of the loan from the banks, reducing their credit risk.
Changes to the CRA laws are considered long overdue among banking experts, especially given the rise of online banking.
Federal Reserve Chairman Jerome Powell said the economic outlook still remains highly uncertain and depends heavily on the ability of the U.S. to get control of the pandemic.
Federal Reserve policymakers will meet this week for the first time since they significantly revised the Fed’s operating framework in ways that will likely keep short-term interest rates near zero for years to come.
Behind the Fed’s new thinking is an ailing economy in the grip of a viral pandemic and a stubbornly low inflation rate that has long defied the Fed’s efforts to raise it.
While there are still enough coins out there, they aren’t circulating as freely because many businesses have been closed and consumers aren’t out spending as usual.
A top Federal Reserve official on Friday said the small number of loans approved so far would likely expand by a significant amount in coming months, especially if the pandemic worsens.
The Federal Reserve says that its Main Street Lending Program designed to help small and medium-sized companies get through the pandemic has managed to make just eight loans in its first month of operations.
The Treasury Department will ramp up the size of the bonds and other securities it auctions across-the-board in the face of the unprecedented borrowing needs.
Besides keeping short-term rates pinned at nearly zero, the Federal Reserve also said it will continue to buy about $120 billion in Treasury and mortgage bonds each month to support the economy.
The extension of seven emergency lending programs through the end of the year is an acknowledgement that the programs might be necessary for longer than was first thought as the nation struggles to control the coronavirus.
The Fed said Friday that its Main Street Lending Program, which is targeted to mid-sized businesses, will now extend credit to not-for-profits with at least 10 employees and endowments of less than $3 billion.
The Federal Reserve said Friday that it purchased $1.3 billion in corporate bonds in late June as part of its effort to keep U.S. interest rates low and ensure large companies can borrow by selling bonds.
Fed officials say more than 200 banks have signed up to participate since the program began two weeks ago, but that’s a small slice of the nation’s roughly 5,000 lenders. None have made any loans yet.
