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Home > Coronavirus > Comment: Treasury Department moves to end select pandemic-era lending programs

Comment: Treasury Department moves to end select pandemic-era lending programs

Nov. 20, 2020 by Joseph Brusuelas

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Risks to the economic outlook have been rising recently because an array of benefits meant to blunt the economic downturn are scheduled to expire on Dec. 31. Those risks increased on Thursday when the Treasury Department told the Federal Reserve that it would not extend nine of the 13 liquidity and lending programs aimed at easing the effects of the pandemic.

The termination is premature and puts at risk the small and middle market firms that may need access to capital.

Given the recent surge in coronavirus cases and the general slowing of the economy, the decision not to extend these programs beyond Dec. 31 is premature and puts at risk the small and middle market firms that may need access to capital to get through what is going to be the roughest winter in some time.

For example, the Treasury Department’s decision not to replenish the Paycheck Protection Program and to terminate the Main Street Lending Program is not in the interests of the American economy, and especially small and midsized businesses, given the expansion of the disease and a corresponding pullback in economic activity by the American people.

Middle market businesses report that they are positive about their prospects. However, with exponential increases in COVID-19 across the country and new orders being put in place to contain its spread, their fortunes could change quickly without fiscal aid.

While the economy has rebounded over the past few months, its condition remains strained. There is a need not only for another round of robust fiscal aid, but also for the guarantee of a significant economic and financial backstop in case the pandemic spins out of control this winter.

We agree with the Federal Reserve that the emergency facilities established during the pandemic serve as a backstop for a fragile economy until a safe and effective vaccine can be put into place.

We are encouraged that the Commercial Paper Funding Facility and the Money Market Mutual Fund Liquidity Facility are to remain open. But the closing of the Main Street Lending Program and the Municipal Liquidity Facility creates conditions for a policy error that will be paid for by small and middle market firms that populate Main Street.

For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.

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Filed Under: Coronavirus, Economics Tagged With: coronavirus, Covid-19, Federal Reserve, Joseph Brusuelas, Main Street Lending Program, Paycheck Protection Program, Treasury Department

About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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