Federal Reserve chairman Jerome Powell is set to tell lawmakers that U.S. small businesses may need “direct fiscal support,” rather than more loans, the Financial Times (FT) reported.
He’s set to appear before the House of Representatives financial services committee on Tuesday (Sept. 22), and his prepared comments, seen by FT, show that he plans to defend the Fed against criticism that it hasn’t done enough to help small- to medium-sized businesses (SMBs) as compared to its efforts for financial markets. For instance, some lawmakers have pointed out that the Fed’s $600 billion fund to lend to SMBs has only rarely been used because of perceived strict lending terms.
Powell plans to contest that the Fed’s powers are limited and that the crisis lending facilities were merely a “backstop,” FT reported. He says it will fall, ultimately, on Congress to get things done. The Fed, he says, has “lending powers,” while Congress has “spending powers.”
Powell plans to note that many borrowers benefited and will continue to benefit from Fed programs, but for others won’t.
The pandemic, after roughly six months strong in the U.S., has left SMBs mostly still struggling, PYMNTS reported. According to a survey, 75 percent of businesses on Main Street say they are still finding it difficult to stay afloat, with reduced revenues and many having to take on extra financial measures in order to stay solvent. Rent payments are still low, and 72 percent of businesses say they would have to close their doors if revenue streams were interrupted again.
The numbers show that 41.9 percent of SMBs have had to reduce payroll, and 26.1 percent have had to apply for loans from the Small Business Administration (SBA).
Research by PYMNTS does show that more SMBs can pay rent and make supplier payments now, so confidence is better than it was in March.
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