Roundtable Weekly
Oversight Commissioners Emphasize Increasing CRE Access to Fed Credit Lending Facility; Congressional Committee Leaders Urge MSLP Expansion
August 15, 2020

Congressional Oversight Commission logo

The need for commercial real estate companies to have greater access to Federal Reserve lending facilities during the ongoing pandemic was addressed during an August 7 hearing before the bipartisan Congressional Oversight Commission – a five-person panel tasked with monitoring the use of coronavirus aid funds.  (New York Times, August 8)

  • The panel focused on the shortcomings of the Fed’s Main Street Lending Program (MSLP), a $600 billion loan facility established in March as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist mid-market businesses respond to the negative impact of COVID-19.
  • The MSLP is administered by the Federal Reserve Bank of Boston, whose president, Eric Rosengren, testified before the Commission on the MSLP and other credit facilities.
  • Rosengren explained the MSLP is structured to assist businesses that are too small to raise money by issuing bonds and stocks, yet too large to qualify for the Small Business Administration’s (SBA) Paycheck Protection Program loans. (AP, August 7)
  • Banks who participate in the program must make loans for at least $250,000, with strict requirements, and loans cannot be approved for highly indebted companies. (Roundtable Weekly, August 7)
  • Hotels that pursue loans using the Fed’s MSLP must adhere to restrictive criteria based on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).  (Reuters / Yahoo News, Aug 12)
  • “This program is designed as a cash flow program, so it’s designed for a business that expects to be able to pay off the debt,” Rosengren said. (Roll Call, August 7)


Rep. French Hill (R-AR), below, a member of the Commission, asked Rosengran if there are discussions at the Fed “to expand a different Main Street facility that would be more of an asset-based loan rather than a cash flow loan?”

Rep. French Hill (R-AR)
  • Rosengran responded, “I know there are discussions about asset-based financing and some of the difficulties experienced, for example, in commercial real estate. So, there have been ongoing discussions about this, but there is no term sheet that is imminent.” (Watch hearing video and read testimony)

  • Another Commission member, Sen. Pat Toomey (R-PA), said, “I want to underscore a point that Congressman Hill raised … about considering asset based facilities. I think you're very well aware there are some real challenges in the commercial mortgage backed security market right now, in particular, the hotel subset of the commercial mortgage backed sector is experiencing some real difficulties. Do you have any thoughts on whether we ought to stand up a facility specifically designed, it would be designed generally for the broad category of real estate I think and other categories that would be more suitable for an asset based lending than they are for an EBITDA constraint?”

  • Rosengran answered, “Yes, so an asset program would differ from what we have for Main Street. Most of that type of lending has a much longer maturity than five years. So as though these are five-year loans with a balloon payment at the end of the five years, that's probably not appropriate for example, for retail or for commercial real estate such as hotels. So the nature of that program would be quite different. I know there is work being done thinking about how asset based can be addressed, including through the SBA.”

  • He added, “So I think there are a number of proposals that are being considered. I'm certainly aware that there are many concerns in the commercial real estate industry and those concerns will get even worse if the pandemic gets worse.”  (Watch hearing video and read testimony)

MSLP Revisions

Senate Banking Committee Chairman Mike Crapo (R-ID), below, and House Committee on Financial Services Ranking Member Patrick McHenry (R-NC) on August 10 wrote to Fed Chairman Jay Powell and Treasury Secretary Steven Mnuchin about utilizing the MSLP to support businesses and their employees struggling with the pandemic’s impact. 

Sen. Mike Crapo (R-ID)

  • The congressional committee leaders proposed utilizing the remaining funds appropriated by Congress for the Exchange Stabilization Fund “to expand MSLP and support more businesses.”

  • Sen. Crapo also submitted a letter to Treasury Secretary Mnuchin and Fed Chair Jay Powell encouraging the expansion the Main Street Lending Program (MSLP) by setting up an asset-based lending program and commercial real estate program.  (Sen. Crapo’s letter, July 31)

  • Four other U.S. senators recently wrote to Mnuchin and Powell with several recommendations on reforming the Fed’s MSLP credit facilities.  (Senators’ letter, Aug. 4)

  • "Many banks seem disinterested in the program because they either wish to retain more than 5 percent of a profitable loan or they have no interest in retaining any stake at all in an unprofitable loan," according to Sens. Mike Braun (R-IN), John Cornyn (R-TX), Kelly Loeffler (R-GA) and Thom Tillis (R-NC).

  • A coalition of nine real estate industry groups, including The Real Estate Roundtable, on July 21 submitted a set of recommendations to the Senate Banking Committee aimed at improving the Fed’s MSLP for commercial real estate owners and tenants.  (Real estate coalition letter,  July 21 and Roundtable Weekly,  July 24)

The Fed’s efforts to support commercial real estate businesses and their employees struggling with the pandemic – especially in the hospitality and retail sectors – will be a focus of discussion during The Roundtable’s September 22 Virtual Fall Meeting.

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