The Federal Reserve’s Main Street Lending Program is sitting on roughly $4.7 billion in confirmed or pending losses against a $16.6 billion book, the Government Accountability Office found in a report released June 17. That’s a 28% loss ratio on a portfolio that was never supposed to be a write-down vehicle, it was supposed to be a bridge.
The Fed authorized the program at the height of COVID-19, with Treasury kicking in $75 billion in equity under the CARES Act to backstop up to $600 billion in loans to small and midsize businesses. It actually originated 1,830 loans totaling $16.6 billion. As of January 5, 70% were fully repaid. The rest split into $1.3 billion in charge-offs, $1.4 billion in loans sold back to lenders at a loss, and $2 billion still outstanding past maturity.
The buyer here was effectively the American taxpayer, and the asset was credit risk on small businesses that PPP couldn’t fully cover. There’s no exit multiple to point to, just a runoff. Compare that to PPP, which Treasury structured for forgiveness rather than repayment: Main Street’s repay-or-default design is exactly why it’s still generating loss data six years after origination, while PPP’s losses got absorbed upfront as grants.
GAO pins the non-payment on elevated rates colliding with balloon payment deadlines, a structural mismatch baked in when the program launched at near-zero rates in 2020. Borrowers signed up for four-year loans during a low-rate window and hit final balloon payments in a high-rate one.
GAO is required to keep filing this scorecard annually under the CARES Act. Expect another update, and another markdown, in 2027.
— Diana Kowalski