Too risky? Fed pressed to expand aid to some businesses

WASHINGTON (AP) — With the economy still in the pandemic’s grip, the Federal Reserve is facing a decision on whether to stretch an emergency lending program in a way that could bring more risk for the government and taxpayers. Lawmakers are pressing the central bank to deliver more aid to struggling small and mid-sized businesses.

The economic recovery has been uneven and painfully slow in the wake of shutdowns from the coronavirus. The pandemic has killed some 180,000 people in the U.S., and the number of laid-off workers collecting jobless benefits exceeds 14.5 million.

And now many lawmakers are asking the Fed to expand its lending to small and medium-sized businesses, by allowing companies to offer assets such as commercial properties as collateral. They warn that hard-hit hotels and shopping malls could suffer a huge wave of foreclosures, hurting local communities and jobs across the country.

“Inaction would be disastrous for taxpayers, for employees, for communities,” Rep. Van Taylor, a Texas Republican who is a leader of the bipartisan effort, said in an interview. He said the point is to save the jobs of the anxious hotel housekeepers, shift supervisors and other employees he’s heard from, most of them minorities.

The decision is on the doorstep of Fed Chairman Jay Powell and Steven Mnuchin, the Trump administration’s treasury secretary. Using money from Congress’ coronavirus relief package, the Treasury Department is guaranteeing the Fed’s lending programs — hundreds of billions each — to corporations, smaller businesses and state and local governments.

Powell and Mnuchin have said they’re considering the option.

But some critics say the lending expansion would be risky, and might actually help big investors in the companies rather than...