Legal constraints mean Fed's Main Street program can't help businesses that need it most

Federal Reserve building.
(Image credit: DANIEL SLIM/AFP via Getty Images)

While the Federal Reserve has earned praise for many of its actions aimed at stabilizing the economy in the United States since the coronavirus pandemic began, its "Main Street" lending program — which is designed to rescue companies that are struggling to stay afloat during the crisis — has sputtered, Politico reports.

The main reason for that, Politico notes, is because the companies that need the Fed's help the most, like hotels with big mortgages, aren't eligible because their debt levels are too high. The Fed, which can't provide grants, is legally prohibited from lending to insolvent companies, and the central bank has subsequently remained cautious about when and where to step in. "It's just too hard to do this through the constraints the Fed has on it by law," David Beckworth, a senior research fellow at George Mason University's Mercatus Center, told Politico.

At the moment, borrower demand reportedly isn't especially high, but if the pandemic doesn't slow down going forward, it won't be a "very rosy picture," said Brian Crawford, executive vice president of government affairs at the American Hotel and Lodging Association. Read more about the program at Politico.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.