In response to the economic crisis caused by COVID-19, the Federal Reserve has established a Main Street Lending Program. Under these facilities, U.S. taxpayers, through the Federal Reserve, will purchase 95 percent participations in loans to eligible businesses, i.e., those with up to 10,000 employees or up to $2.5 billion in annual revenue.
As we explained in comments we sent to the Federal Reserve regarding these programs, the taxpayer funds being put at risk, in the middle of an economic crisis, must ultimately benefit Main Street and not be a means to fund executive bonuses or payouts to shareholders, investors or others with no benefit to the real economy. This occurred too often during the 2008 financial crisis. At a minimum, the Federal Reserve must ensure the following:
Transparency: The Federal Reserve must ensure maximum transparency through prompt public disclosures of the terms, recipients and other beneficiaries of funds under these facilities as well as all fees and profits. The public has a right to know who its taxpayer dollars are benefiting and how.
Compliance with key terms: The Federal Reserve must require that participating banks have a robust process for ensuring that recipients comply with the attestations required under the terms of the facilities, including that the funds be needed because of COVID-19, that they retain employees, and that they comply with restrictions on compensation and capital distributions.
Accountability: The Federal Reserve must hold accountable any banks and recipients that fail to comply with their obligations by swift, meaningful and publicly disclosed penalties.