The Fed Boldly Saves Markets. Now It’s Worrying About Main Street Business
- Next phase of risk deep into ‘the marrow of the real economy’
- Powell says more fiscal help needed in addition to Fed loans
Windows are covered with brown paper at a closed business on an empty pedestrian shopping area in Schenectady, New York, on May 15.
Photographer: Angus Mordant/BloombergThe Federal Reserve’s next front in the battle to support the U.S. economy is to prevent millions of American small businesses from becoming the Achilles heel of the recovery.
Fed Chairman Jerome Powell told the Senate Banking Committee last week that he’s concerned about America’s “jobs machine” -- its small and medium sized firms -- tipping into bankruptcy and destroying the “work of many families and generations.” If that happens, there will be fewer jobs when state governors declare it’s safe for households to go back to work.
The central bank is tasked with avoiding that outcome through its Main Street lending program approved by Congress, but it’s already proved a harder endeavor than imagined. The Fed is under increasing scrutiny about the facility -- one of its riskiest undertakings ever -- because it’s still not operational.
Fed officials are aware that the destruction of Main Street could be incipient and hard to detect in big, macro-data sets -- as smaller towns and rural areas see stores disappear one by one, or a handful at a time. As a result, they’re renewing contact with local leaders that they established in listening sessions over the past year to get first-hand information, and relying on reserve bank community networks.