Status of the Federal Reserve Emergency Lending Facilities

September 8, 2020 • Testimony

Committee on Banking, Housing, Committee on Banking, Housing, and Urban Affairs
United States Senate

Dear Chairman Crapo, Ranking Member Brown, and Members of the Committee:

My name is George Selgin. I’m a professor (emeritus) of economics at the University of Georgia and the Director of the Cato Institute’s Center for Monetary and Financial Alternatives. I thank your committee for allowing me to comment upon the Status of the Federal Reserve Emergency Lending Facilities.

My remarks here concern the Federal Reserve’s Main Street Lending facilities. So far, those facilities have lent only a very small fraction of the $600 billion quota assigned to them by Congress and the U.S. Treasury. The proximate reason of this low uptake consists of strict lending terms that either exclude or are uninviting to many struggling firms. But a more fundamental cause consists of the government’s belief that, by having the Fed “lever up” a smaller quantity ($75 billion) of funds appropriated to support Main Street loans, the Government avoids much of the burden the public would have to bear were Congress to fund Main Street lending to the full extent of its assigned $600 billion limit. I plan to explain why that belief is mistaken, and how setting it aside would allow the Treasury and the Fed to offer truly effective Main Street support.

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About the Author
George Selgin

Senior Fellow and Director, Center for Monetary and Financial Alternatives