Fed says backstop for small business loans fully operational

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The Federal Reserve's program to back emergency government loans to small businesses is 'fully operational,' the U.S. central bank said on Thursday, a boost to banks as they await a possible expansion to the total amount of funds they will be allowed to disburse to help companies through the coronavirus crisis.

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis

The Fed’s program is designed to make it easier for banks to offer loans under the $350 billion Paycheck Protection Program run by the Small Business Administration by extending credit to financial institutions that make them, using the loans as collateral. “Supplying financial institutions with additional liquidity will help increase their capacity to make PPP loans,” the Fed said.

With funds set to be exhausted shortly, U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza on Wednesday urged Congress to approve an additional $250 billion in funds. Democrats have said they are in favor, but only if there are additional safeguards to ensure that credit is reaching businesses in underserved communities that don’t have strong pre-existing relationships with banks.

 

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