Fed’s Pandemic-Era Loans Face Another $2 Billion Loss

The Main Street Lending Program, which was authorized by the Federal Reserve in response to COVID-19, has seen 30% of its loans either experience a loss or be at risk of a loss, according to the U.S. Government Accountability Office (GAO).

The emergency lending program made 1,830 loans totaling $16.6 billion to small- to medium-sized businesses (SMBs) and nonprofits, the GAO said in a June 17 press release outlining findings from its report to congressional committees.

The loans were supposed to be paid back by early January. As of Jan. 5, 70% of the loans were fully repaid, 16% either resulted in losses or were sold to lenders at a loss, and 14% remained outstanding, with the borrowers unable to make their final payments, according to the release.

Among the loans that resulted in losses to the program, there were $1.3 billion in charged-off loan amounts and $1.4 billion in authorized loan amounts sold back to their lenders at a net loss. The loans that remained outstanding are worth $2 billion, the release said.

“About 70 percent of borrowers with loans outstanding through their scheduled maturity date were unable to make the loan’s final balloon payment (remaining principal) on time, leaving nearly $2 billion in authorized loan amounts at risk of non-repayment,” the GAO said in the release. “Elevated interest rates through the duration of the program and the timing of principal payment milestones generally were associated with a decreased likelihood of full loan repayment and increased likelihood of loan impairment.”

The GAO’s report was produced under the CARES Act, which requires it to annually report on the status and performance of Main Street Lending Program loans, according to the release.

The CARES Act, which was signed into law in March 2020, provided economic assistance and implemented programs to address issues related to the onset of the pandemic, according to the Department of the Treasury.

PYMNTS reported in June 2020 that the Main Street Lending Program was funded by Congress and the White House with $75 billion provided by the economic stimulus CARES Act.

In November 2024, it was reported that some Main Street Lending Program borrowers were struggling with high interest rates, balloon payments and post-pandemic changes in their customers’ behavior.