During the 2008 financial crisis, the Federal Reserve was stung by criticism that its lending programs to get credit flowing in the economy benefitted Wall Street not Main Street.
Former Fed Chairman Ben Bernanke, in an unprecedented effort to counter this conventional wisdom, agreed to be interviewed by CBS News “60 Minutes” program at that time and spent part of the interview walking down the main commercial street in his hometown of Dillon, S. Carolina.
It didn’t really work. Sentiment toward the Fed remained soured.
This time, the Fed is not taking any chances.
On Monday, as part of an aggressive step to bolster all corners of the financial markets, the Fed announced it will soon establish a Main Street Business Lending Program to support lending to eligible small- and medium-sized businesses. This will bolster lending from the Small Business Association.
Read:Small-businesses asked not to fire workers as government set to offer forgivable loans
Treasury Secretary Steven Mnuchin said Sunday the stimulus package now under consideration in Congress includes appropriations that could turbocharge this Fed lending to small and mid-sized firms by as much as $4 trillion.
“The Fed is now effectively the direct lender of last resort to the real economy, not just the financial system,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note after the announcement.
“The Fed threw a lifeline to Main Street by announcing a significant intervention into the real economy and financial markets that intends to limit what will be a gut-wrenching increase in first-time jobless claims, unemployment, income losses and bankruptcies this year,” said Joe Brusuelas, chief economist at RSM.
Even though the details remain sparse, “it certainly sounds encouraging that the Fed will have the ability to direct credit to small businesses, where it will be needed most,” said Tom Simons, an economist at Jefferies.
Firms with less than $5 billion in revenues would likely to be eligible, Brusuelas said.
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March 24, 2020 at 12:16AM
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Fed is now effectively the ‘lender of last resort’ to Main Street not just Wall Street - MarketWatch
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