What GAO found

The Board of Governors of the Federal Reserve System (Federal Reserve) has authorized 13 loan programs, called facilities, to ensure the flow of credit to various parts of the economy affected by the COVID-19 pandemic. The last of the nine facilities supported by the CARES Act funding ceased to purchase assets, such as corporate bonds, or grant loans as of January 8, 2021. As of September 1, 2021, the CARES Act facilities held approximately $ 19 billion in assets. The Federal Reserve‘s surveillance reviews completed in December 2020 identified opportunities to improve certain areas, including internal processes and controls. These reviews also identified areas requiring continued oversight, such as cybersecurity and conflict of interest. The GAO found that the Federal Reserve‘s plans for the ongoing monitoring of facilities align with federal internal control standards for the ongoing monitoring of an entity’s internal control system.

Available indicators suggest that the facilities have helped improve access to credit and liquidity in the credit markets for businesses and municipalities. For example, corporate bond spreads (which reflect borrowing costs) remained low and municipal spreads narrowed to pre-pandemic levels. In addition, officials from state and local entities that participated in the municipal liquidity facility (which targeted the municipal bond market) generally said the facility was beneficial and helped restore investor confidence in the municipal bond market. However, business and municipal credit markets remain vulnerable. For corporate credit markets, the stock of corporate bonds remains high and the high level of debt makes companies vulnerable to distress. Municipal credit markets also remain vulnerable due to the extended duration of the pandemic, which can negatively affect local economies. According to surveys of small businesses and independent lenders, access to credit has improved, but the recovery remains slow, including for companies in the service sector.

Loans under the Main Street facilities (which targeted small and medium-sized businesses and nonprofits) were concentrated among small for-profit businesses in certain economic sectors, such as restaurants. According to GAO’s generalizable survey of Main Street borrowers, about 88% said the program was “very important” in helping them keep their business going. Women-owned businesses participated at lower rates compared to their representation among US businesses. Although the estimates of the participation of veteran-owned and minority-owned firms were somewhat lower than their representation among U.S. firms, the differences were not statistically significant (see figure).

Estimated participation of types of businesses in the main street loan program

Why GAO did this study

On July 30, 2021, the last of the Federal Reserve’s 13 lending facilities stopped buying assets or granting credits. However, some of these facilities, including the facilities that have been supported by funding from the Treasury Department assigned under Section 4003 (b) (4) of the CARES Act, continue to hold assets and loans in. Classes. The Federal Reserve will continue to monitor and manage the facilities until these assets and loans are no longer outstanding.

The CARES Act included a provision requiring the GAO to report periodically on loans, loan guarantees, and investments under Section 4003. This report examines the Federal Reserve’s ongoing oversight and oversight of the law’s facilities. CARES; what the available evidence suggests about the effects of the facilities on credit markets for businesses, states and municipalities, and small businesses; and characteristics of Main Street Lending Program participants, among others.

The GAO reviewed applicable laws and agency and Federal Reserve Bank documentation; analyzed data from agencies and others on facilities and credit markets; interviewed Federal Reserve and Treasury officials and representatives of state and local governments; and conducted a generalizable survey of Main Street for-profit borrowers.

For more information, contact Michael E. Clements at (202) 512-8678 or [email protected]


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