For over 100 years, the Federal Reserve has acted as a liquidity facility for the banking industry, meaning that the Federal Reserve lends money to banks when they need it. With the advent of the COVID-19 pandemic and the CARES Act stimulus program, Congress provided a budget authorization that allows the Federal Reserve to make or purchase interests in loans to “Main Street” businesses. The Federal Reserve’s resulting “Main Street Lending Facility” has been gradually rolled out since early April, and it is about to reach the point where borrowers can begin submitting loan applications.
Although there are three “Main Street” lending programs, this blog will concentrate on two of them, the “Main Street New Loan Facility” (referred to below as a “New Loan”) and the “Main Street Priority Loan Facility” (referred to below as a “Priority Loan”). Although these two programs had substantial differences when first proposed, the terms have now converged, making some bankers wonder why the two programs have not been combined. This blog is based upon the most current term sheets issued by the Federal Reserve Bank of Boston on June 8. The Federal Reserve Bank of Boston is the lead Federal Reserve Bank responsible for implementing the Main Street program.
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