Small and mediumsized businesses that were in sound Financial Condition before the virus impact of the economy we will hear from the head of the fed in boston and banking and business leaders. Will come tog order. This is a hybrid hearing meaning some of our commissioners are appearing in person and witnesses will testify remotely. Let me offer a few Video Conferencing reminders. Before you start speaking there will be a slight delay before you are displayed on the screen. Click the mute button until your turn to speak or to ask a question. If there is a technology issue, well move to the next speaker until it is resolved. You should all have one box on your screens labeled clock to show you how much time is remaining. Congressional Oversight Commission pursuant to section 4020 of title 4, subtitle of the cares act, the Commission Must conduct oversight of the 500 billion authorized for the Exchange Stabilization fund. As a part of our oversight work, the commission has decided to hold this hearing today which will examine the main Street Lending facilities. The Federal Reserve established the main Street Program to support lending to small and mediumsized business answer Nonprofit Organization that is found sentence condition before the onset of the covid19 pandemic. The program operates through five facilities which we will learn more about this morning. The programs being administered by the Federal Reserve bank of boston. Todays hearing will have two panels. President eric rosengren, president and chief executive officer of the Federal Reserve bank of boston, will testify during the first panel. And the second panel will include industry participants. In the absence of a chair, the commissioners have agreed to each have one minute of opening remarks. I will now recognize myself for an Opening Statement. Our commissions pleased to convene this hearing of the main street Street Lending program. Thank you to our witnesses for lending your expertise today. I believe this is a timely and important discussion. I also commend my fellow commissioners. Together we have worked in a bipartisan, bicameral way to release three reports and organize this inaugural hearing. I would also like to thank our personal staffs for their diligence in this area, particularly in absence of a chair, and on behalf of all commissioners, i welcome our new chief clerk, amber, and thank you for the u. S. Senate for these facilities today. Leading to the implementation, the program generated Significant Interest and engagement. However, in the months since the programs been available, 95 million of the 600 billion allocated has been loaned to eligible businesses. I hope we will find answers today that will explain why if anything it took three months to stand up the program and what, if anything, needs to be alter the program to expand the universe of eligible borrowers. I yield back. And i now recognize commissioner roma murthy for one minute. Mr. Ramamurti thank you. Thank you to each of the witnesses appearing today. Four months ago, Congress Gave the treasury half 1 trillion. They pledged 75 billion to the Federal Reserves main Street Lending program for small and Midsized Companies. After taking three months, the fed has been operating it for about a month. In that time it has supported 18 loans for 104 million. That is 0. 07 of the lending capacity the fed touted for the program in april. While all of this money has been sitting on the sidelines, tens of thousands of businesses have permanently closed and millions of americans have lost their jobs. By any measure, the main Street Program has been a failure. My goal is why it was failed and how to fix it quickly before more americans lose their jobs and more good businesses have shut their doors. Twothank you, mr. Chairman. Mr. Hill thank you, commissioner. I now recognize congressman shalala for one minute. Ms. Shalala thank you. Good morning. Id like that our witnesses for like to thank our witnesses for being here today. I represent floridas 27th district which includes most of miamidade county. Covid19 is out of control in my district. We have a raging community spread. As a result, we have a financial disaster with 50 of businesses laying off workers and many others going bankrupt. Our economy is heavily reliant on tourism. Actually we are reliant on crowds. Unlike big businesses that can rely on Capital Markets for funding, small and midsized businesses are more susceptible to being permanently shut down. Recognizing this we approved , funding in the cares act in march to support up to 600 billion in lending to these businesses. However, while some florida businesses have benefited from i yield back. Mr. Hill thank you, congresswoman. I now recognize senator toomey for one minute. Sen. Toomey thank you very much, mr. Chairman. I also want to thank all the witnesses in participating in this hearing today. I think the Big Questions of learning about is certainly why relatively few borrowers have participated in this program, why it appears not to have a tremendous amount of demand. I want to understand whether through this program, banks are likely to originate loans that they would not otherwise engage in any way. And at some point we need to have a discussion about the fact that we are in a different place than the first we had these programs in march. We intended, at least i did as one of the negotiators of this to provide liquidities that , businesses could survive what we hoped would be a very brief, although we knew would be a severe downturn. Now we have the process of excess capacity in industries that could persist for some time. That is a new and different challenge. I look forward to exploring all of these and, again, want to thank the witnesses for joining us. Mr. Hill thank you, senator toomey. All commissioners statements will be added to the hearing record. Were fortunate today to have five witnesses appearing and appreciate their time. President rosengren is the president and ceo of the Federal Reserve bank of boston. He is a participant in the federal open market committee, the monetary policymaking arm of the united states. As ceo he leads the boston feds , work which includes Economic Research and analysis, banking supervision and Community Economic development activities, and a wide range of payments, technologies and finance initiatives. Ms. Lauren anderson serves as Senior Vice President and associate general counsel of the Bank Policy Institute. In this role she oversees the bpis advocacy across a range of domestic and international issues. She brings over a decade of experience in Financial Regulation and oversight, serving as Senior Advisor at the bank of england and before joining the bank of england, served at our fdic. Mr. Tom bohn serves as the chief executive officer for corporate growth. It serves 90,000 investors, executives, lenders and advisors to the growing middle markets of companies. Prior to joining acg in december, 2019, mr. Bohn served as ceo of the north American Veterinary Community where he saw unprecedented growth. Mr. Vince foster serves as the executive chairman of the main Street Capital corporation, a position hes held since november of 2018. Mr. Foster previously served as main streets ceo from 2007 until november of 2018 and served as main streets president from 2012 to 2015. He also has been a manager of the Investment TeamManagement Committee since the formation. Main Street Capital offers Capital Solutions for lower middle Market Companies. And our final witness, ms. Gwen mills, secretary treasure of unite here. Ms. Mills has been working with unite here for 20 years. She served as the political director from 2015 to 2017 and was elected secretary treasurer in 2017. Unite here has 300,000 members, largely serving the travel and Tourism Industry. We will now proceed to president rosengrens testimony. Hell testify and well move into two rounds of fiveminute questioning. Immediately following the questioning, ill recognize the secretary panel of witnesses for their testimony, and then well move into that questioning. Each of the witnesses full, written testimony will be made apart of the official hearing record. President rosengren, welcome and youre recognized for five minutes. Mr. Rosengren rep. Hill, commissioner, senators, thank you for the opportunity to speak about the main Street Lending program which the boston fed administers for the Federal Reserve system. My written testimony contains charts and details that i hope will be useful to you. But i will be brief in this overview. In addition to tragic loss of life, the pandemic poses an unprecedented shock to our economy. Many entities impacted by the pandemic rely on banks for loans. The main Street Program is designed to facilitate lending to small and mediumsized businesses and nonprofits that have suffered disruptions. And those that have cash flow problems due to the pandemic and given the uncertain outlook may have difficulty obtaining credit. It can provide a bridge as loans have no interest or principal payments in the first year and no principal payments until year three. Unlike the standardized credit instruments, this program purchases interests and loans that are by nature the bespoke agreements often with complex borrower specific terms and conditions. Since our portal opened for registration on the 15th of june, 519 institutions have registered, and their assets represent over 15 trillion, about 58 of banking assets in the united states. Main street relies on lenders to underwrite loans and keep skin in the game by banks retaining 5 of the loan. Borrowers need to meet the lenders underwriting standards and the programs terms and conditions, and be able to make certifications and commitments, including those required by the cares act. The Program Includes three loan facilities or forprofit businesses, and two for nonprofits that have been announced that are not yet live. Nonprofits and their lenders can nonetheless use the published terms and documents to begin discussing program loans. Ill describe early results. As of tuesday, over 530 million in loans are active in the portal. 54 loans. 18 loans with a combined value of 109 million have our commitment for purchase or have settled. The 54 loans submitted represent 29 distinct lenders. The largest number of loans are by institutions in the 10 billion to 50 billion range. Relatively Small Community banks have participated. There has been limited participation in banks with over 50 million in assets. But the programs modest initial numbers seem to be given way to more uptick as banks become more familiar with the program. Quickly scaling up a program to purchase participations in loans from diverse borrowers in a decentralized market that lacks standardization is inherently difficult and a significant achievement. The eventual size of the program will be determined by the path of the pandemic and the economy. Should conditions worsen, which we hope does not happen, i expect interest to expand rapidly. We will administer the program. Well do all in our power and purview to support the firms, nonprofits, and workers that make up our nations economy. Thank you for the opportunity to provide this overview. Id be happy to address any questions. Mr. Hill thank you, mr. President , for your testimony. And ill recognize myself for five minutes of questions. First, let me say that i was pleased to see the cfo Confidence Survey from Duke University recently showing that business believes that theyre doing better than maybe they thought they would at this stage of Business Reopening and that Market Access is improving. Theyre concerned mostly about obviously the demand of their products. Also i was encouraged yesterday that 1. 8 million jobs were created and the Unemployment Rate fell to 10 . We still have a long way to go and we are going to be talking about that today as we still have over 10 Million People eager to go back to work. And then in my home state of arkansas, we had a very positive week in the sense that tax revenues, particularly sales tax revenues, were actually over trend and set a record. Our income taxes were 4 over forecast, and our sales tax were 16 over forecast and 15 over 2019. So clearly the economy is reopening and as senator toomey says, we have to keep that in mind as we think through these Federal Reserve facilities and what their best structure should be to accelerate that and get more people back to work in this country. Im concerned, mr. Rosengren, about the affiliation rules when i looked at the main street term sheets. I am concerned about two things. One, it took three months to get the program up and running, and id like you to address that first. And secondly, it appears to me in this middle market that these affiliation rules that the Federal Reserve have adopted in the main Street Program really are a significant barrier to more entrepreneurial middlesized companies that dont have access to ppp and dont have access i wonder why they adopted the sba 7a type limitations on affiliation rules. Can you handle those two for me please . Mr. Rosengren certainly. First, why dont i address the question that you raised in your Opening Statement and having this question about why it took so long for this facility to get set up . This facility is very different than some of the other traditional kinds of facilities that Central Banks operate during a time of crisis. So most of our facilities operate through markets. Market securities, you can purchase them very easily through the market. They clear usually in a couple days, depending on the security. So its relatively easy to quickly purchase a large number of securities and hold those securities over time. This facility is a facility we didnt have during the financial crisis and really tries to get to a different segment of the population which is those businesses that are bigger than the ppp program was designed for and smaller than what the corporate facilities are designed for. Bank loans are inherently difficult because they are an agreement between a bank and a borrower. They take a long time for banks to negotiate with the borrower , and this facility has a variety of complex elements, including the requirements of the cares act and the 13ththree requirements. In order to design this program, we first had an initial term sheet. There was very substantial revisions to the term sheet. We came out with another term sheet that was again revised, and each of those times when we revised the term sheet, we were expanding the availability of more businesses to access the facility. So the types of changes that were made included lowering the loan size, changing the repayment terms and lowering the fed participation amount. The final term sheet for the forprofit businesses started on june 8. I would highlight as part of this process that its a highly automated process. We have to do programming, so we needed the legal documents to be in order. We needed the final term sheet to be completed. And we needed to be able to do the programming and the check and make sure the programming worked as expected and that all needs of this program. So that does take some time. It did take time to start up. And i think that gives you some idea of the complexity of the program and why it took so long. In terms of the mr. Hill thank you for that. I think the key thing is if we want to change the program, you dont anticipate taking another three months to produce a different main street term sheet if that was necessary . Mr. Rosengren it would depend on what the nature of the main street term sheets were. If the term sheet doesnt change the legal documents, it would be easier. Thats true for the nonprofit term sheet as well depending on the nature of what the changes are what determine how long it would take us to get set up. Mr. Ramamurti thank you, mr. Chairman. President rosengren you agreed , that the main Street Program is off to a slow start, but your testimony is that interest in the program will likely pick up if, quote, the pandemic and the economy worsen. But if you look at the data, main street companies are already getting crushed. The latest middle Market Indicator and Economic Survey of executives of Midsized Companies shows that in the second quarter, these companies experienced the largest decline in employment in the surveys history. They also had the biggest dropoff in the surveys history. Other surveys like the chamber of commerce and the m