The joint $600 billion initiative would provide loans to companies with 15,000 employees or fewer or had revenues of $5 billion or less last year. Loans issued under the program would have a five-year maturity, with deferral of principal payments for two years and deferral of interest payments for one year.
But the launch of the program was delayed over disagreements between the Fed and the Treasury, The Wall Street Journal (WSJ) reported.
While the Fed favored easy terms that would increase the risk of the government losing money, the Treasury preferred a more conservative approach and capped the losses at $75 billion, sources told WSJ.
As a result of the inability to reach an accord, not a single loan has been issued as of Wednesday (July 8), and sources told the paper the Fed has said weeks have been wasted as businesses continue to suffer.
“Would the program be exactly the way I would have designed it, or exactly the way someone else would have designed it? No, but we all need to work together, and we have worked together quite effectively,” Boston Fed President Eric Rosengren told WSJ.
“Anytime you have a negotiation, there are going to be compromises that are made,” he added. “I expect that we’ll continue to have to make compromises.”
Treasury Secretary Steven Mnuchin, Fed Chair Jerome Powell, and their top lieutenants continue to work out the details. Mnuchin told WSJ the discussions are part professional process and didn’t reflect disagreements.
The Main Street program was designed to serve businesses that couldn’t meet the 500 or fewer employees requirement of the forgivable loan program from the Small Business Administration’s Paycheck Protection Program (PPP).
Last month, the Treasury agreed to extend the term of Main Street loans to five years from four and delay principal payments for two years, instead of one.
Last week, the Treasury reported PPP still has nearly $132 billion waiting to be borrowed. Of that number, more than $30 billion in approved PPP loans have been returned or canceled by businesses.
Also last week, Mnuchin said bipartisan work is underway on a potential PPP extension.
The secretary said he has had very productive conversations with U.S. Senator Marco Rubio of Florida and they intend to talk with U.S. Senator Ben Cardin of Maryland.