Main Street's shortcomings have provided fuel to many critics who charge that the Fed has done more to help Wall Street and large corporations than small businesses during the pandemic. Fed Chair Jerome Powell has responded that many small companies, hit hard by the downturn, likely need grants rather than loans. Yet the Fed has only “lending powers,” Powell has said, “not spending powers.”
To encourage banks to make the smaller loans, the Fed will eliminate a 1% transaction fee that it charges banks for loans below $250,000. It will also allow banks to charge borrowers a higher fee, and will double the fee that the Fed pays banks to service the loans to 0.5%, from 0.25%.
And the central bank also said that companies
seeking to borrow from the Main Street program may be able to exclude loans of up to $2 million that they have received from the Paycheck Protection Program, the small business lending program that was established by the aid package that Congress enacted in March.
If a borrower has applied for that loan to be forgiven, it can exclude it for the purposes of calculating its outstanding debts. Doing so would allow it to borrow more under Main Street.