Why Untapped Billions in Pandemic Aid Funds Are in Limbo

The U.S. government’s central economic response to the coronavirus, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (“Cares”) Act enacted in March, included $500 billion in financing to avert a crippling credit crunch. Much of that funding remains untapped, and what happens to it going forward is a point of contention between the outgoing Trump administration and the incoming Biden one.

When the pandemic shut down much of the U.S. economy, businesses saw revenue collapse and couldn’t pay their bills, and investors were too shell-shocked to lend. The Federal Reserve and Treasury, stepping in as lenders of last resort, offered emergency help to borrowers. (Such emergency loans are sometimes called 13(3) loans, after the section of the Federal Reserve Act that authorizes them.) Congress included $454 billion in the Cares Act for the Treasury to back those Fed lending programs, plus $29 billion for direct lending to passenger and cargo airlines and $17 billion to firms critical to national security. There were strings attached, such as caps on executive pay, for some types of help. A big chunk of the money, $195 billion, was handed directly to the Fed to backstop emergency lending programs aimed at Main Street, municipal debt, asset-backed securities and corporate credit.