Senator Lee Introduces Pro-Business Fixes to Struggling Fed Program

August 11, 2020

WASHINGTON – Sen. Mike Lee (R-UT) has introduced an amendment to improve the Main Street Lending Program (MSLP) to better address the financial needs of businesses and banks as part of COVID-19 relief measures.

Congress previously authorized the MSLP during the second relief measure, granting authority to the Federal Reserve and Treasury Department to help banks lend to businesses in need of liquidity during the downturn by guaranteeing approximately $600 billion in loans. But unfortunately, due to certain requirements of the program, the MSLP has failed to provide businesses the liquidity they need and discouraged banks from participating as lenders.

Under MSLP’s current requirements, the minimum loan size is $250,000, an amount that is far too large to be useful to most small businesses. Additionally, the Federal Reserve has set the interest rate for the program’s loans to be LIBOR plus 3% – a rate that is unattractive to most businesses as lower interest rates are available outside the program, and which does not allow lenders to compete to lower interest rates. Finally, the lenders must pay the Fed a 1% servicing fee that is at least as large as the servicing fee lenders are allowed to charge borrowers, making it less attractive to banks and more difficult for them to compete for borrowers by lowering their own service fees.

As a result, of the more than 10,500 lending institutions that exist in the U.S., only about 300 are currently participating in the program. So far, MSLP purchased less than one-tenth of one percent of its total loan capacity, despite the widespread need for liquidity among businesses across the nation.

“Instead of refilling the Paycheck Protection Program or creating other costly programs that are not targeted to need, we should make a program that we have already paid for work. That is why I have drafted the Main Street Lending Program Proliferation and Promulgation Act, or MSLPPP. This amendment would make simple tweaks to ensure the MSLP works for businesses by providing banks the option to offer more generous terms,” said. Sen. Lee.

The Main Street Lending Program Proliferation and Promulgation Act would:

  • Remove the minimum loan size to allow businesses to borrow an amount that meet their needs.
  • Remove the minimum interest rate while allowing the Fed to set a cap
  • Remove the Fed’s 1% servicing fee


A one-pager for the bill can be found here.