WASHINGTON (AP) — The Federal Reserve will provide support to the government's new small business lending program in its latest attempt to smooth the flow of credit in the virus-stricken U.S. economy.
The Fed said Monday that it will purchase loans that banks make under the government's small business program. The program was set up under the $2.2 trillion economic relief package and can provide $349 billion in loans to small companies. Those loans can be forgiven if they are spent on payroll, to encourage firms to keep paying their employees or rehire workers they may have recently laid off.
By purchasing the loans, the Fed would create an incentive for the banks to lend under the program. Buying the loans removes them from the bank's balance sheets and eases repayment concerns. If the banks held onto the loans, they would typically be required to hold some cash in reserve in the case of default.
The Fed's two-sentence announcement said that further details will be provided this week.
Instead of purchasing the loans, the Fed may also lend to banks and allow banks to use the small-business loans as collateral, but the impact would likely be similar.
20 "Past Their Prime" Stocks to Dump From Your Portfolio
Did you know the S&P 500 as we know it today does not look anything close to what it looked like 30 years ago? In 1987, IBM, Exxon, GE, Shell, AT&T, Merck, Du Pont, Philip Morris, Ford and GM had the largest market caps on the S&P 500. ExxonMobil is the only company on that list to remain in the top 10 in 2017. Even just 15 years ago, companies like Radio Shack, AOL, Yahoo and Blockbuster were an important part of the S&P 500. Now, these companies no longer exist as public companies.
As the years go by, some companies lose their luster and others rise to the top of the markets. We've already seen this in the last few decades with tech companies surpassing industrial and energy companies that once dominated the S&P 500. It's hard to know what the next mega trend will be that will knock Apple, Google and Amazon off the top rankings of the S&P 500, but we do know that companies won't stay on the S&P 500 forever.
We've identified 20 companies that are past their prime. They aren't at risk of a near-term delisting from the S&P 500, but they are showing negative earnings growth for the next several years. If you own any of these stocks, consider selling them now before they become the next Yahoo, Radio Shack, Blockbuster, AOL and are sold off for a fraction of their former value.
View the "20 "Past Their Prime" Stocks to Dump From Your Portfolio".