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Federal Reserve Board & CFPB OIG

Evaluation of the Federal Reserve System’s Loan Purchase and Administration for Its Main Street Lending Program (MSLP)

In response to the COVID-19 pandemic, the Federal Reserve System established the MSLP—composed of five different lending facilities—to facilitate lending to small and medium-sized for-profit and nonprofit organizations. Through the MSLP, the Federal Reserve Bank of Boston (FRB Boston) purchased 1,830 loans amounting to approximately $17.5 billion from lenders; the majority of these loans were purchased during the last 2 months of the program. Following the purchase of the loans, FRB Boston is now responsible for administering the loans, including assessing overall credit risk and identifying substandard loans. FRB Boston leveraged third-party vendors to support both loan purchases and loan administration. We plan to assess the MSLP’s processes for loan purchases and loan administration, including the design, implementation, and operating effectiveness of internal controls.

Federal Reserve Board & CFPB OIG

Evaluation of the Federal Reserve System’s Vendor Selection and Management Processes Related to the Federal Reserve Bank of New York’s Emergency Lending Programs

As part of its emergency lending program, FRB New York operated six emergency lending facilities, five of which were supported by multiple vendor contracts. FRB New York awarded some of its emergency lending program–related contracts noncompetitively because of the exigent circumstances, and other contracts pose potential conflict-of-interest risks to the System. FRB New York’s reliance on vendors highlights the importance of its monitoring of vendor performance. We plan to assess the Board’s and FRB New York’s processes related to vendor selection and management for FRB New York’s emergency lending programs.

Federal Reserve Board & CFPB OIG

Monitoring of the Federal Reserve’s Lending Facilities

In response to the economic effects of the coronavirus pandemic, the Federal Reserve recently announced that it would create new lending facilities to provide loans to employers, certain businesses, and communities across the country to support the U.S. economy. Specifically, the following programs have been created or are in development: the Main Street Lending Program, the Paycheck Protection Program Liquidity Facility, the Municipal Liquidity Facility, the Primary Market Corporate Credit Facility, and the Secondary Market Corporate Credit Facility. We are initiating an active monitoring effort of these programs to gain an understanding of operational, governance, reputational, and financial matters associated with them. Through this monitoring effort, we will refine our focus on the programs and identify areas for future audits or evaluations. Some of the topics we are considering include the design, operation, governance, and oversight of the lending programs; data collection and reporting associated with the programs; and the effect of the programs on the Board’s supervision and regulation activities.