Federal Reserve Lending Programs: Credit Markets Served by the Programs Have

What GAO Found

The Board of Governors of the Federal Reserve System (Federal Reserve) authorized 13 lending programs—known as facilities—to ensure the flow of credit to various parts of the economy affected by the COVID-19 pandemic. The last of the nine facilities supported through CARES Act funding ceased purchasing assets, such as corporate bonds, or extending credit by January 8, 2021. As of September 1, 2021, the CARES Act facilities held about $19 billion in assets. The Federal Reserve oversight reviews completed in December 2020 identified opportunities to enhance certain areas, including internal process and controls. These reviews also identified areas for continued monitoring, such as cybersecurity and conflicts of interest. GAO found that Federal Reserve’s plans for ongoing monitoring of the facilities align with federal internal control standards for ongoing monitoring of an entity’s internal control system.

Available indicators suggest the facilities helped improve access to credit and liquidity in the corporate and municipal credit markets. For example, corporate bond spreads (which reflect borrowing costs) have remained low, and municipal spreads have decreased to prepandemic levels. Also, officials from state and local entities that participated in the Municipal Liquidity Facility (which targeted the municipal bond market) generally said the facility was beneficial and helped restore investor confidence in the municipal bond market. However, corporate and municipal credit markets remain vulnerable. For corporate credit markets, corporate bonds outstanding remain elevated and the high level of debt leaves businesses vulnerable to distress. Municipal credit markets also remain vulnerable because of the pandemic’s extended duration, which may adversely affect local economies. According to surveys of small and independent businesses and lenders, access to credit has improved, but recovery remains slow, including for businesses in the services sector.

Loans made under the Main Street facilities (which targeted small and mid-sized businesses and nonprofits) were concentrated among small for-profit businesses in certain economic sectors, such as restaurants. According to GAO’s generalizable survey of Main Street borrowers, an estimated 88 percent said that the program was “very important” in helping them maintain operations. Women-owned businesses participated at lower rates compared to their representation among U.S. businesses. Although estimates of veteran- and minority-owned business participation were somewhat lower compared to their representation among U.S. businesses, the differences were not statistically significant (see figure).

Estimated Participation of Business Types in the Main Street Lending Program