If our government wants to really reach "main street", the minimum needs to be lowered to $10,000.
Neil Lowe, The Bank of Edison, Edison, Ga.
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Neil Lowe
President & CEO
The Bank of Edison
Edison GA
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Original Message:
Sent: 05-18-2020 17:46
From: Barb Rehm
Subject: Tuesday Topic: Main Street Lending
As the Paycheck Protection Program wraps up, attention is turning to the next piece of the government's coronavirus response: the Fed's $600 billion Main Street Lending Program. With a minimum loan size of $500,000, the program does not fit most people's definition of "Main Street." (And rest assured, the banking trade associations are lobbying to reduce the minimum loan size and have already succeeded in whittling it down from $1 million.) As with PPP, these loans will be made through banks. But unlike PPP, these will be true loans – not forgiven if the borrower meets certain criteria. The Fed is still working on the details, but it's expected that participating banks will retain 5% to 15% of these four-year loans and earn a 1% origination fee as well as annual servicing fees. The most comprehensive story I've seen on the Main Street Lending Program is in ProPublica, a non-profit, independent newsroom founded during the financial crisis by savings and loan executive Herb Sandler. While I dislike negative stories as much as the next person, I suspect you'll learn something valuable by reading this ProPublica piece, "The Trump Administration Says a New Bailout Program Will Help 35 Million Americans. It Probably Won't." The Wall Street Journal weighed in on the new program on Monday too, raising many of the same concerns, including whether the program is too strict to attract borrowers.
And just a few more thoughts today, back on PPP. Have you seen this map showing where the loans are being made? It's pretty cool. And even better, check out this part of the SBA's website where you can see how businesses answered various survey questions including whether they have missed a loan payment. The Fed said 600 community banks have used its PPP backstop, pledging 3,676 PPP loans for $30 billion in funding. The administration is reportedly planning to ease its loan-forgiveness rules, which is something lawmakers are sure to raise on Tuesday when Fed Chair Jay Powell and Treasury Secretary Steve Mnuchin testify before the Senate Banking Committee. You can watch the hearing here. For Powell's thoughts on the pace of an economic recovery, check out his "60 Minutes" interview from Sunday night. You can watch it or read the transcript here.
That's it for now. I'd love to hear any thoughts you're willing to share on the Main Street Lending Program. Will it work? Is it needed? Will your bank participate?
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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network, LLC
Arlington VA
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