Congressional panel slams Fed's Main Street Lending Program as Hotel works oppose CMBS owner bailout
2020-08-09 — rollcall.com
The Main Street facility took three months to get up and running and has been little used relative to some of the other emergency lending programs created to help companies survive the pandemic. So far, only 509 banks have signed up to be Main Street program lenders, and 29 have made loans. Only 54 loans totaling $580.9 million have been issued to date. For comparison, the Paycheck Protection Program has pushed out more than 5.1 million loans worth $523.4 billion.
"I think the issue is that the Fed is trying to solve a problem that doesn't exist and it's incapable of solving the problem that does exist. By law, the Fed can only support loans, and more loans are not the answer here for most companies," Ramamurti said, urging Congress to act to provide direct support to midsize firms with strings on the money to ensure that workers also benefit.
The Main Street Lending Program relies on banks to issue mid-market companies five-year term loans with low interest rates. The Fed then effectively buys 95 percent of those loans from the bank. The way the terms work now, companies little hurt by the pandemic can get better loans from regular lenders.
Gwen Mills, secretary-treasurer of UNITE HERE, which represents hotel, casino and restaurant workers, opposed an asset-based facility, saying it would be a bailout for real estate investors that would do little to help laid-off employees.
"Lobbyists claim if the Fed doesn't rescue [commercial mortgage-backed securities] borrowers, hotels will default and workers won't have jobs to come back to, but that is not our experience, and this isn't the first time hotel owners got themselves in trouble using these inflexible loans," she said. "After the financial crisis, there were scores of defaults across the country, but defaults and foreclosures didn't lead to closed hotels. Hotel workers, who were used to seeing absentee owners come and go, understand that jobs are driven by occupancy. And only ending the pandemic can fix that."
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