Tag Archives: Treasury Secretary Janet Yellen

U.S. Treasury launches $9 billion coronavirus aid for low-income lending

By David Lawder

WASHINGTON (Reuters) – The U.S. Treasury on Thursday launched a new program to infuse $9 billion into minority and community lenders to boost financing for small businesses and consumers struggling with the coronavirus pandemic in low-income and underserved communities.

The Emergency Capital Investment Program, funded as part of a $900 billion COVID-19 aid bill signed into law at the end of 2020 by former president Donald Trump, will provide $9 billion in capital to Community Development Financial Institutions (CDFIs) and minority depositary institutions.

These institutions, from small mortgage lenders to minority-owned banks and rural credit unions and other lenders, will be able to increase loans and grants to their communities and extend forbearance to struggling customers, Treasury officials said.

The program sets aside $2 billion for participating institutions with less than $500 million in assets and another $2 billion for those with less than $2 billion in assets. Treasury officials said equity and subordinated debt investments into these institutions will lower their cost of capital, allowing them to reach more difficult lending cases.

Treasury Secretary Janet Yellen said in a statement that the program, negotiated in part by her predecessor, Steven Mnuchin, was aimed at reducing “financial services deserts” in low-income communities that have worsened during the pandemic.

“The Emergency Capital Investment Program will help these places in that the financial sector hasn’t typically served well. It will allow people to access capital, especially in communities of color.”

Yellen’s team developed a new capital multiplier formula to reward lenders with lower interest or dividend costs on Treasury capital that is used to make the most challenging loans in the poorest communities, Treasury officials said.

The $9 billion program, coupled with $3 billion in other support for CDFIs and minority lenders as part of the year-end COVID bill, could make a large impact on community lenders.

Research from the Federal Reserve Bank of Richmond shows that as of August 2019, there were 1,076 certified U.S. CDFIs, which could be banks, community development corporations, venture capital funds, loan funds, or credit unions with a mission to serve low and moderate income communities. The number of non-certified CDFIs is unknown, the bank said.

But most are tiny. The Richmond Fed survey found that nearly half of CDFIs surveyed had assets of $25 million or less, with 5% holding assets of less than $1 million and just 6% holding assets of over $500 million.

(Reporting by David Lawder; Editing by Chizu Nomiyama, Kirsten Donovan)

Biden to press for $1.9 trillion COVID relief plan with governors, mayors

By Andrea Shalal

WASHINGTON (Reuters) – U.S. President Joe Biden will meet with a bipartisan group of mayors and governors on Friday as he continues to push for approval of a $1.9 trillion coronavirus relief plan to bolster economic growth and help millions of unemployed workers.

Biden and Vice President Kamala Harris will also receive an economic briefing from Treasury Secretary Janet Yellen, shortly after she takes part in the first meeting of the Group of Seven rich economies since the new U.S. administration took office.

Biden’s proposed spending package, coming on top of $4 trillion enacted by his predecessor Donald Trump, will have important consequences for the global economy which is slowly recovering – but very unevenly – after last year suffering its worst downturn since the Great Depression in the 1930s.

Taking part in the Oval Office meeting will be Republican and Democratic elected officials whose states and cities have been hammered by the coronavirus pandemic and its economic fallout. Many have seen tax revenues fall and costs soar as they race to vaccinate their citizens.

The group includes four governors, including New York Governor Andrew Cuomo, a Democrat, and Maryland Governor Larry Hogan, a Republican, and five mayors, including Jeff Williams of Arlington, Texas, a Republican.

Williams, who met with Yellen virtually last week, said his city urgently needed the federal aid earmarked for state and local governments in Biden’s rescue plan. He said cities were crushed when Congress removed similar aid from a previous relief bill that passed in December.

“We’ve been crippled. We haven’t gotten help,” Williams told Reuters. “Our property taxes are down and costs are way up. It doesn’t matter if you’re a Democrat or a Republican, this is the right solution so we can achieve economic growth much faster.”

Arlington, which is home to the largest General Motors plant in the world, is bracing for a 10% drop in the appraised value of its commercial properties, which would cut revenues by some $30 million after an $18 million loss last year, Williams said.

More than 400 mayors wrote to leaders in Congress earlier this month to urge them to pass Biden’s relief package, but Republicans are backing a far less ambitious plan.

Biden on Thursday said the U.S. coronavirus death toll was likely to reach 500,000 next month, but said the United States was on track to have enough vaccine for 300 million Americans by the end of July.

Yellen, a former Federal Reserve Board Chair, will have a mixed message when she briefs Biden on the economy. While economic growth is picking up, unemployment remains high and many communities of color are not expected to recover for years.

(Reporting by Andrea Shalal; Editing by Lincoln Feast.)