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Former Fed Economists Call for Easier Terms for Main Street Loans

Two former Federal Reserve economists said the Fed and the Treasury Department should ease conditions and raise bank charges to spur participation in the central bank’s new effort to lend directly to U.S. small and medium-sized businesses.

After last week’s redesign the Main Street Lending Program to provide more favorable lending terms, the Fed officially opened the initiative this week. Politicians, bankers and industry lawyers have warned that the program could experience lukewarm demand due to its design.

the Main Street Program is open to businesses with up to 15,000 employees or less than $ 5 billion in sales last year. The Fed will buy back up to 95% of loans made by banks that meet certain standards, freeing banks to make more loans.

In a paper published by the Brookings Institution On Thursday, Nellie Liang and William English, who headed the Fed’s financial stability and monetary affairs divisions, respectively, suggest further changes to the program:

Longer terms: Under the latest conditions, principal payments can be delayed for two years and loans must be repaid within five years. Ms. Liang and Mr. English suggest extending these deadlines further, but adding incentives to companies that repay debts earlier.

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