Powell: Main Street facility to start loans in a few days

Fed Chair Jerome Powell spoke on the U.S. central bank’s coronavirus programs and future plans for economic recovery.

Video Transcript

JEROME POWELL: The main street facility is for small and medium sized companies. Companies that don't-- that aren't large enough or in some way don't have the ability to have access to the capital markets. So they don't issue public bonds or public equity. Meaning that the way they get their financing in their operations is really through the banking system and through non banks. So we had-- we have a facility that deals with companies that have access to the bond market. And there's-- Congress has done a lot for smaller companies that are under 500 employees with the Paycheck Protection Program.

So this is for the companies that are in the middle. And it is very challenging because it's an extraordinarily diverse space. The credit needs of different kinds of companies in different industries are extraordinarily diverse. Some of them borrow against assets, some against cash flow, some are much more volatile than others. So it's quite-- it's quite diverse. And trying to figure out the right credit products for that market is challenging. In addition, the world of bank credit is a world in which every-- every credit agreement between a borrower and a bank is negotiated.

So-- so each credit agreement is a little bit different. So it doesn't have the degree of standardization, for example, that the bond market has where there are forms of indentures and forms of prospectuses. And it's much more-- it's much more routine than it is. So it's challenging to get in there. But nonetheless, get in there we will. And we-- so we're-- we're days away from making our first loans in Main Street. We have we have three facilities that are part of it. They're meant to reach out to different parts of that broad space. In the meantime, many of those companies are finding that they can borrow from banks.

Others are waiting for us to get our facility up and running. It is far and away the biggest challenge of any of the 11 facilities that we've set up, are the three Main Street facilities. But, you know, and I would-- the last thing I'll say is, as we've shown, we're very willing to learn from experience. We put out a term sheet, proposed term sheet. We get-- we got a couple thousand letters from people on the first Main Street term sheet. We turned that around. We've consulted actively with all different kinds of companies and experts.

And you know, we've now released the documents and do expect to start making loans on Main Street in a few days.

- In a few days. Well, congratulations. You envisioning these loans to be million? Half a million? I mean-- I mean, that was me speaking. You speak. What size loans are we talking about?

JEROME POWELL: The current structure is that the smallest loans would be about a half a million. And the largest ones could be, you know, over 100. And that's for the larger companies there. We're-- we're-- we're working with companies that have as many as 15,000 employees and $5 billion in revenue. And there's no-- there's no limit on the bottom end. So you know, I can imagine us expanding on either end, too. I mean, the whole nature of this exercise that Congress has given us is, go find companies that have employees.

Really it's all about creating a context in which employees-- a climate in which employees will have the best chance to either keep their job, or go back to their old job, or ultimately find a new job. That is the point of this exercise is-- is to-- it's all about those 25 million people or so who've been laid off, the ones who may not be laid off, but may-- may ultimately be laid off. So that's what this is about. And so we're looking for companies in any-- any-- any part of the economy that have employees that are not able to get credit, that would have been able to get credit in 2019.

So we're looking back at companies that were in good, solid financial shape before the pandemic. We're trying to find those companies. And we're trying to create credit products that work for them. That's the nature of the exercise.