Van Hollen, Cardin Urge Administration to Extend Loan Facilities to Provide Critical Economic Relief to Small Businesses, Local Governments

Today, U.S. Senators Chris Van Hollen (D-Md.), a member of the Senate Appropriations and Banking, Housing, and Urban Affairs Committees and Ben Cardin (D-Md.), ranking member of the Senate Small Business and Entrepreneurship Committee, sent a letter to Federal Reserve Chairman Jerome Powell and Department of Treasury Secretary Steven Mnuchin urging them to extend the Main Street Lending Program (MSLP) and the Municipal Liquidity Facility (MLF) past the current December 31, 2020 deadline. In their letter, the Senators stress the importance of extending these resources to support our local businesses and governments that have been hard-hit by the COVID-19 pandemic and the ensuing economic crisis. The economic consequences of the pandemic have caused many businesses to shutter and have left state and local governments facing budget shortfalls, leading to job losses for many Americans. As the Senators continue to push their Republican colleagues to come to the table on an urgently-needed relief package, the extension of these facilities is also crucial in helping small businesses and local governments get by. 

“Our economy remains in the grip of the COVID-19 pandemic with a new wave threatening to reap an even greater human and economic toll in the weeks to come. At this time of grave danger to the American people, it is important that the Federal Reserve and Department of the Treasury utilize its monetary policy tools to address the pandemic’s impact on our economy,” the Senators begin. “You should use your authorities to extend the Main Street Lending Program (MSLP) and the Municipal Liquidity Facility (MLF) and clarify the use of authority to make new loans after December 31, 2020.”

The Senators noted that in May, Chairman Powell said that the Federal Reserve’s tools would only be taken away when the crisis ended. With new cases in the U.S. reaching record highs and no sign of this crisis ending, they underscore the continued need for these resources.

“As Americans lose their jobs, many are now unable to afford their most basic expenses. In 2019, the Federal Reserve estimated that 40% of Americans would find it difficult to come up with $400 for an unexpected expense. Americans are facing these unexpected emergencies now,” the Senators write. 

The Senators stress the urgency of the request, noting, “While Congress works to pass another fiscal relief package, it is urgent you take action now on this issue. We are less than seven weeks away from the expiration of these facilities. Moreover, the Federal Reserve and U.S. banks will stop accepting applications prior to the deadline. According to the Federal Reserve’s October statement, the MLF will cease accepting notices of interest for loans at 30 days before the expiration of the facility. That means that entities only have three weeks left to access this facility. Thank you again for your consideration of this very important matter.”

The full text of the letter can be viewed here and below: 

Dear Secretary Mnuchin and Chairman Powell:

Our economy remains in the grip of the COVID-19 pandemic with a new wave threatening to reap an even greater human and economic toll in the weeks to come. At this time of grave danger to the American people, it is important that the Federal Reserve and Department of the Treasury utilize its monetary policy tools to address the pandemic’s impact on our economy. Most important, you should use your authorities to extend the Main Street Lending Program (MSLP) and the Municipal Liquidity Facility (MLF) and clarify the use of authority to make new loans after December 31, 2020. The current December 31 end date for these facilities would come too early to allow these facilities to be fully effective.  

This past May, Chairman Powell said that these tools will only be put away when the crisis ends. This crisis is far from ending. Data from Johns Hopkins University indicates that new cases in the U.S. are at a record high. Johns Hopkins data also found that on November 13 alone there were 180,000 new cases reported.

These numbers are alarming and not just because of the public health implications. If we have learned nothing else from these past nine months, we know that the economy will not be fully restored until we have solved this public health crisis. While we have seen our financial markets rebound, most Americans are not benefiting from this limited recovery. Small businesses, particularly retailers, bars, music venues, transportation companies, and restaurants continue to be hard hit. The economic impacts are not just being felt by small businesses, state and local governments have also been hard hit by the pandemic. Moody’s Analytics estimates that state and local governments will see budget shortfalls of as much as $650 billion over the next two years. These business closures and budget shortfalls have led to job losses. The Bureau of Labor and Statistics’ most recent report found that the number of permanent job losses totaled 3.7 million in October, which is 2.4 million higher than in February. More troubling, the number of long-term unemployed increased by 1.2 million to 3.6 million accounting for 32.5 percent of the total unemployed. 

As Americans lose their jobs, many are now unable to afford their most basic expenses. In 2019, the Federal Reserve estimated that 40% of Americans would find it difficult to come up with $400 for an unexpected expense. Americans are facing these unexpected emergencies now. Between September and October, 2.3 million more Americans said that it was “very difficult” to pay their usual household expenses. And, the National Council of State Housing Agencies recently released a report that found that, by January 2021, American renters will owe up to $34 billion in back rent.

While Congress works to pass another fiscal relief package, it is urgent you take action now on this issue. We are less than seven weeks away from the expiration of these facilities. Moreover, the Federal Reserve and U.S. banks will stop accepting applications prior to the deadline. According to the Federal Reserve’s October statement, the MLF will cease accepting notices of interest for loans at 30 days before the expiration of the facility. That means that entities only have three weeks left to access this facility. Thank you again for your consideration of this very important matter.

Sincerely,