By Dan Burns
(Reuters) - With time running out on a loan program that had seen little use so far, U.S. small- and mid-sized businesses are tapping into the Federal Reserve's Main Street Lending Program at a record pace.
Businesses drew nearly $2.7 billion in loans under the program in the week ended Dec. 16, Fed data released on Thursday showed. That was more than double the next highest weekly amount - about $1 billion - drawn the previous week and brings total Main Street loans outstanding to $10 billion.
The program is one of several emergency credit facilities the Fed, set up to cushion the economic blow from the COVID-19 pandemic, that are being shut down at year end under orders from outgoing U.S. Treasury Secretary Steven Mnuchin.
Under the program, businesses can borrow between $100,000 and $35 million for five years, with the Fed buying 95% of the loan from the original lender, who keeps 5%.
Main Street had seen little interest since its launch in the summer, hindered by complaints its terms were too strict and minimum loan sizes too large. Also, some said bank safety and soundness inspectors were sending mixed signals to loan officers about riskiness of the loans. The Fed made several adjustments that may have helped demand, but the uptick also comes as the economy is slowing again, with surging coronavirus cases weighing on consumer spending and forcing renewed business closures.
The program took nearly five months to generate the first $5 billion in loans and just five weeks to produce the next $5 billion.
Congressional Democrats have decried Mnuchin's decision to shutter the program, calling it a political maneuver intended to tie the hands of President-elect Joe Biden, who beat President Donald Trump in November's election. Mnuchin asserts he is following the letter of the law.