Watchdog Urges Fed to Loan More Virus Aid to States, Small Firms

The Federal Reserve isn’t moving quickly enough to get loans to cash-strapped small businesses and local governments struggling to cope with the coronavirus crisis, according to a panel created to monitor billions of dollars in aid approved in response to the pandemic.

U.S. central bank programs have purchased only two loans -- one to the state of Illinois through its municipal lending facility and a $12 million package through its Main Street lending program, which only became operational on July 6, the Congressional Oversight Commission said in a report released Monday.

“Our initial reaction is that a purchase of one $12 million loan over a week and one half seems like a small amount, given the economic challenges facing some small and medium sized businesses,” the panel said in its third monthly report.

In previous reports, the panel has said that Fed and Treasury Department relief efforts might be falling short in helping small business and state and local governments and found that only a small fraction of the money allocated for loans has been spent. In the new report, it said the Fed has lent only $13.6 billion of the $454 billion allocated for its programs, raising questions about whether the eligibility requirements need to be loosened.

The commission was created at the insistence of congressional Democrats during negotiations that led to approval of the $2.2 trillion CARES Act stimulus package earlier this year. The new report comes as Congress begins negotiations over another round of stimulus, which Democrats say must include more money for states and local governments. President Donald Trump met with top Republican lawmakers on Monday to iron out differences over a GOP-only proposal.

Members have said the lack of a chairman has hampered the panel’s ability to establish a strategy for policing the $500 billion in bailout money. Joseph Dunford, a former chairman of the Joint Chiefs of Staff, withdrew from consideration for the post earlier this month.

The oversight panel has four members: Democratic Representative Donna Shalala of Florida; GOP Senator Pat Toomey of Pennsylvania; Bharat Ramamurti, a former aide to Senator Elizabeth Warren of Massachusetts; and GOP Representative French Hill of Arkansas.