Atlanta Federal Reserve Bank President Raphael Bostic says U.S. businesses face will face a major survival crisis in May. Photo: Raphael Bostic, associate professor at the University of Southern California School of Policy, Planning, and Development, describes the impact of non-traditional loans on consumers and the mortgage industry, during an informational hearing at the Capitol in Sacramento, Calif., Jan. 31, 2007. The Senate Banking, Finance, and Taxation Committee was looking into whether to adopt federal guidelines regulating the mortgage industry. (AP Photo/Rich Pedroncelli)
Written by Ann Brown
Apr 16, 2020
Many businesses in the U.S. may not survive another month, according to Atlanta Federal Reserve Bank President Raphael Bostic. Banking officials announced that they were about to run out of Small Business Administration funding for the Paycheck Protection Program, designed to provide a direct incentive for small businesses to keep their workers on the payroll during the pandemic.
“Time is not our friend,” Bostic said in a videoconference with Birmingham, Alabama civic groups. “The goal is really to get as many key companies as possible to still be around at the end.”
Retail sales fell 8.7 percent in March and manufacturing fell to its lowest level since the end of World War II, according to the latest economic data.
“What we are hearing from our contacts is that May is going to loom as a large month in terms of the transition of concern from this being a liquidity issue — one where we are really talking about cash flows — to this perhaps translating and transferring into a solvency issue, and whether companies can exist at all,” Bostic said.
The U.S. The Federal Reserve has stepped in to help credit markets. The Fed injected as much as $2.3 trillion into lending while cutting interest rates to almost zero.
“It also is buying up junk bonds. At the same time, the $2.2 trillion coronavirus rescue package provided $349 billion for the paycheck protection program for small businesses and $500 billion for midsize and large businesses,” Bloomberg reported.