WASHINGTON–The Federal Reserve’s Main Street Lending Program, created during the COVID-19 pandemic to support credit availability for midsize businesses and nonprofit organizations, has seen most of its loans repaid, though a significant portion resulted in losses, according to a new report released by the Government Accountability Office.
The GAO reported that 70% of the 1,830 loans issued through the Main Street Lending Program had been fully repaid as of Jan. 5. Another 16% generated losses for the program, while nearly 14% remained outstanding despite having reached their scheduled maturity dates.
The Main Street Lending Program was one of 13 emergency lending facilities established by the Federal Reserve under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. The program consisted of five separate lending facilities designed to provide financing to midsize businesses and nonprofit organizations during the economic disruption caused by the pandemic.
Only Program With Loans Outstanding
According to the GAO, the Main Street Lending Program is the only CARES Act-related Federal Reserve lending initiative that still has loans outstanding.
As of January, three of the program’s five facilities continued to hold outstanding loans totaling approximately $672 million. Those three facilities were among the nine Federal Reserve emergency lending programs that received funding appropriated through Section 4003 of the CARES Act, the report said.
Of the 1,830 loans originated through the program, 1,277 had been fully repaid by Jan. 5, representing about 70% of all loans issued.
About the Other Third of Loans
The GAO found that the remaining 30% of loans had either experienced losses or were at risk of loss. Approximately 251 loans, or nearly 14% of the total, remained outstanding as of Jan. 5 even though they had reached their maturity dates.
The report said 16% of all loans resulted in losses to the program. Those losses included about $1.3 billion in charged-off loan amounts as well as roughly $1.4 billion in authorized loan amounts that were sold back to originating lenders at a net loss.
The Federal Reserve told the GAO it plans to continue monitoring the facilities and publicly reporting on their status until all outstanding loans and assets have been resolved.
Review of Ongoing Oversight
The GAO also reviewed the Federal Reserve’s plans for ongoing oversight of the remaining loans and facilities. The agency found that the central bank has established processes for monitoring outstanding assets and reporting on their performance as the remaining loans are worked out and liquidated.
The Main Street Lending Program was launched in 2020 as part of a broader federal effort to stabilize financial markets and support businesses affected by pandemic-related economic disruptions. Unlike many of the Federal Reserve’s other emergency lending facilities, which have since been wound down and fully closed, the Main Street program continues to manage a portfolio of remaining loans as borrowers complete repayment or resolution efforts.
The GAO said the Federal Reserve intends to maintain oversight of the remaining facilities until no outstanding loans or assets remain.
