Pressure Increases for Federal Reserve to Lend Straight to U.S. Businesses | Financial Buzz

Pressure Increases for Federal Reserve to Lend Straight to U.S. Businesses

Businesses hurt by the coronavirus are suffering as the Federal Reserve continues to face pressure to utilize its emergency leverage to lend directly to these businesses.  The U.S. Treasury, bankers, Chamber of Commerce, and some senators have urged the central bank to utilize its power under Section 13 (3) of the Federal Reserve Act to deliver credit directly to businesses on “unusual and exigent” circumstances. 

On Tuesday, the Fed utilized that notion to resurrect two 20018 financial crisis-era programs to boost liquidity for 24 banks that deal directly with the Fed and to free short-term funding to large corporations.  The two programs do not fund small businesses directly.  This is a critical time where the small businesses need aide to survive the COVID-19 virus.  Fortifying small businesses will aid them in the losses caused by forcing closures.  These businesses range from corner store markets (bodegas) and restaurants to fashion boutiques etc. 

The treasury must approve any plan that is devised.  The Fed is not allowed to take on such a large credit risk.  Congress and lawmakers must be on the same page on approval.  “Everyone is very much aware that we’re going down this road and we need to put these things in place quickly,” said one industry source who has been discussing the matter with administration officials and lawmakers.

The Fed has urged banks to utilize its discount window and provided cash through commercial means in the markets.