In the recently passed CARES Act, Congress created the Paycheck Protection Program, authorizing up to $349 billion in loans to small businesses (including nonprofits, sole proprietorships, and the self-employed) that can be forgiven—provided they keep workers on the payroll and don’t cut their compensation. These government-guaranteed loans are being made through banks and other lenders that participate in Small Business Administration lending. The Federal Reserve says it will complement the program with a new Main Street Business Lending Program aimed at firms too big for small business loans and too small to tap capital markets. The universe of potential borrowers for both programs is huge: There are almost 6 million “small” businesses with fewer than 500 employees, and another 18,000 with between 500 and 5,000 employees.
On Tuesday, April 14, the Hutchins Center on Fiscal & Monetary Policy at Brookings convened a virtual panel to discuss the shape, scale, and economic rationale for the small business lending program; the administrative challenges it poses to lenders, small businesses, and government; and the possibility that it will prove to cost far more than the initial $349 billion allocation.
Panelists included Sandy Baruah, former SBA administrator and now president and CEO of the Detroit Regional Chamber; Nellie Liang, Miriam K. Carliner senior fellow in Economic Studies at Brookings; Beth Mooney, chairman and CEO of KeyCorp; and Michael Strain, director of economic policy studies at the American Enterprise Institute. David Wessel, director of the Hutchins Center, moderated.
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PanelistNellie Liang Under Secretary for Domestic Finance - United States Department of the Treasury, Former Senior Fellow - Economic StudiesMichael R. Strain Director and Arthur F. Burns Scholar in Political Economy - Economic Policy Studies, American Enterprise Institute