Federal Reserve’s Main Street Lending Program Attracts Few Big Banks

WASHINGTON — The Federal Reserve Bank of Boston on Wednesday released a list of lenders that have signed up for the central bank’s midsize business lending program and are willing to make loans to new customers through the initiative.Noticeably absent from the list are most of the nation’s biggest banks. Only Bank of America has so far agreed to participate and take on new clients, based on the Boston Fed’s map, while lenders like JPMorgan Chase, Citigroup and Wells Fargo are not listed.The detailed participant list released Wednesday was restricted to banks who are willing to lend to new customers. Most states have only a handful of open lenders, with seven listed in California and nine in New York, based on the Boston Fed’s release.Banks can also participate in the program by making loans to existing clients. While thousands of banks are eligible to sign up, only about 300 in total had signed up to participate, Fed officials have previously said. The Fed has not released a full list of all banks participating in the program.The Fed’s midsize business lending program, called the “Main Street” program, opened for lender registration in June and became fully operational on Monday. While the Fed first said that it would set up a Main Street program in late March, it has never attempted to support midsize businesses before, and Chair Jerome H. Powell has said that designing the program was a challenge.Even after multiple revisions, thousands of comments and extensive congressional grilling, it remains unclear how extensively the program will be used. Many lenders report that they are hearing of only limited borrower interest in the program.Some states have few Main Street lender options: In Hawaii, where businesses have been hard-hit by a decline in tourism, Bank of America is the sole bank accepting new borrowers through the program.While many large banks, measured by assets, are absent from the state-by-state list, Truist, Citizens, BBVA and Zions are among the larger lenders that are registered.The program works through banks, which make loans with relatively low interest rates to businesses. The Fed then buys 95 percent of the loans from the bank, leaving the original lender with some skin in the game. The effort is run out of the Boston Fed, and backed up with Treasury funding provided by Congress’ coronavirus response legislation.The minimum loan size is $250,000, and lenders have flagged reporting requirements as something that could dissuade smaller firms from using the program. Because the program offers direct loans, Congress set out restrictions in allocating money for the program, including executive compensation limits, and stock repurchase and dividend payout limits.Far fewer banks are slated to participate in the Main Street program than lend through the Small Business Administration-run Paycheck Protection Program. The programs are very different — the latter was aimed at smaller businesses and offered forgivable loans, which are more like grants, while the Main Street loans are not forgivable. Companies have five years to pay the money back.Some banks stood to make substantial sums of money from the paycheck protection loan originations, based on an S&P Global Market Intelligence analysis, though several of the larger banks have said that they will donate related profits. But the program created problems for banks, entailing fast-evolving guidance, lawsuits and rampant technical errors.While lenders can also earn origination and servicing fees for loans made through the Main Street program, those are capped: For instance, they can only make 1 percent of the loan principal in origination fees on new borrowing.


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