IN THE SENATE OF THE UNITED STATES
September 22, 2020
Mr. Perdue introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs
To make improvements to the Main Street Lending Program, and for other purposes.
This Act may be cited as the
Main Street Lending Improvement Act of 2020.
Main Street Lending Program
Sense of Congress
It is the sense of Congress that—
the Main Street Lending Program should serve as a
bad bank to hold nonperforming and illiquid loans during the economic shock triggered by the COVID–19 pandemic;
the Department of the Treasury and the Board of Governors of the Federal Reserve System have served as strong guardians of taxpayer monies and strived above and beyond their mandates in launching the Main Street Lending Program;
as of the date of enactment of this Act, the Main Street Lending Program has not operated as envisioned by Congress;
with bankruptcies hitting record highs not seen since the 2009 financial crisis, the Main Street Lending Program should serve as a vital lifeline to stave off a catastrophic wave of bankruptcies by small- and medium-sized enterprises;
earnings before interest, taxes, depreciation, and amortization is not a generally accepted accounting principal measurement and its calculations can vary from one company to the next;
the prominence of earnings before interest, taxes, depreciation, and amortization only emerged in the advent of the leveraged buyout in the 1980s; and
there are many companies outside of the earnings before interest, taxes, depreciation, and amortization leverage test that can still present themselves as growing concerns in a non-COVID economy.
Alternative asset test
It is the sense of Congress that, in carrying out the Main Street Lending Program, the Department of the Treasury and the Board of Governors of the Federal Reserve System should consider—
using earnings or cash flow metrics as a metric for eligibility in the facilities of that Program; and
providing alternative tests for borrowers because earnings before interest, taxes, depreciation, and amortization—
is not a one size fits all equation;
ignores the cost of assets and working capital; and
fails to appropriately measure the ability of an entity to generate cash as opposed to an operating cash flow test.
Boston Fed Helpline
The Federal Reserve Bank of Boston shall, with respect to the operation of the Main Street Lending Program—
create a lender helpline to address lender-specific questions; and
consider additional guidance and information with the focus aimed at addressing the concerns of small and mid-size financial institutions.
Exemptions for loans under $5,000,000
With respect to any loan, the amount of which is less than $5,000,000, a financial institution may collect interest on the entirety of the loan if a participation in the loan is sold to the special purpose vehicle under the Main Street Lending Program.
Streamline Main Street Lender Participation Program
With respect to the Main Street Lending Program, for financial institutions with less than $25,000,000,000 in assets—
the Department of the Treasury and the Board of Governors of the Federal Reserve System will strive to reduce borrower reporting burdens by limiting any reporting requirement to at most once a quarter and reduce the amount of data points they are required to submit;
the Federal Reserve Bank of Boston shall verify that the financial institution meets both the asset test and is a well capitalized institution under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) and the Federal Credit Union Act (12 U.S.C. 1751 et seq.);
the special purpose vehicle under the Program shall purchase 99 percent of the interest in a loan participation originated by the financial institution under the Program;
mortgage debt shall not be included in the earnings before interest, taxes, depreciation, and amortization leverage test;
the financial institution shall collect interest on the entirety of a loan, a participation in which is sold under the Program; and
the Federal Reserve Bank of Boston shall provide—
automatic preapproval for institutions under the Program for loans up to $5,000,000; and
the special purpose vehicle under the Program shall wire 99 percent of the participation amount to preapproved lenders upon the lender’s uploading of a borrower’s name, W–9, amount, type of Main Street Loan, and certification of lender’s receipt of signed loan documents;
additional borrower and loan information and uploading of closing documents in the special purpose vehicle portal may occur within 5 business days of funding; and
a borrower may only receive a loan originated pursuant to the terms of this subsection once.