July 6, 2020 / 1:26 PM / a month ago

Boston Fed says Main Street program now 'fully operational' and ready to purchase loans

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

NEW YORK (Reuters) - The Federal Reserve Bank of Boston said on Monday the Main Street Lending Program is now fully operational and ready to purchase eligible loans.

The Main Street lending facility, which opened for lender registration in mid-June, is meant to extend easy credit to small and mid-sized businesses that cannot get it elsewhere.

The Fed encouraged registered lenders to start submitting qualifying loans. The U.S. central bank also announced it intends to publish a state-by-state listing of registered lenders that are accepting new business customers under the program and that choose to be listed. 

Lenders had still not made any loans under the program as of July 1, according to data released by the Fed last week.

Large financial institutions that work closely with the Fed, known as primary dealers, slashed in half their expectations for how much take-up they expect from the Main Street lending program, according to a survey released last week by the New York Fed.

It is not entirely clear why the loans have not drawn more interest. When the Fed first proposed it, staff worked urgently on standing it up as thousands of letters poured in with suggestions for how to make it more useful and questions about where to find participating lenders.

The central bank tweaked its plan in response to many of those suggestions by lowering the minimum loan amount, making the program available to a wider range of businesses and introducing a proposal that would open it up to nonprofit groups.

So far 300 lenders have signed up to participate, Fed Chair Jerome Powell said last week. He also indicated the Fed was open to making further adjustments to the program.

Reporting by Jonnelle Marte; Editing by Chizu Nomiyama

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