SIGPR Fact Sheet — August 2023

Source document: On July 10, 2023, the Federal Reserve reported its; document type: congressional-materials.

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Special Inspector General for Pandemic Recovery | U.S. Department of the Treasury
2051 Jamieson Avenue, Suite 600 | Alexandria, VA 22314
www.sigpr.gov
July 2023

Office of the Special Inspector General
for Pandemic Recovery

SIGPR continues to keep Congress, the
Department of the Treasury and other stakeholders
aware of an impending crisis in the programs
created in March 2020 via the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act).
For both the Main Street Lending Program (MSLP)
and Treasury’s Air Carrier Loan Program (ALP),
SIGPR is noting an alarming rate of defaults by
borrowers who are failing to pay even the
interest payments on the loans.

As a result, SIGPR is increasingly concerned that
the default rate will grow exponentially in Years 3
through 5 of the loan programs as principal comes
due. Principal payments will be due starting in July
2023 through January 2024, depending on the loan
origination date.

On July 10, 2023, the Federal Reserve reported its
MSLP loan loss figure of $164 million as of June
30, 2023. The loan loss figure has steadily
increased over the past twenty-five months since
the Federal Reserve first reported a loan loss figure
of $4 million in June of 2021. The Federal Reserve
also reported that its MSLP loan loss allowance
was updated to $1 billion as of March 31, 2023.
This impending crisis of loan defaults comes as
SIGPR prepares to sunset.

The MSLP 70% balloon payments are due in
2025, which will likely trigger significant
borrower loan defaults after SIGPR sunsets.

MAIN STREET LENDING PROGRAM (MSLP) -
MS Facilities, LLC is a Special Purpose Vehicle
that was established by the Federal Reserve (under
Section 13 (3) of the Federal Reserve Act) with the
Treasury Secretary’s approval.

*Treasury has guaranteed $16.5 billion of this amount

Loan Terms:
MSLP loans cannot be reduced through loan
forgiveness and borrowers are required to provide
certain financial information (quarterly/annually).
•
Interest payments deferred Year 1
•
Principal payments are deferred for two
years:

o  15% due end of Year 3
o 15% due end of Year 4
o Balloon payment of 70% due at
maturity - end of Year 5 (as SIGPR
Sunsets)

Despite these extremely favorable loan terms,
SIGPR is already noting defaults by borrowers who
are failing to make interest payments on the loans.

DIRECT LOAN PROGRAM - CARES Act, Section
4003, allocated up to $46 billion for Treasury to
directly provide loans and loan guarantees through
December 31, 2020.

•
274 applications submitted
•
Treasury executed 35 loans – $2.7
billion in assistance.

 $25 billion authorized for passenger air
carriers and certain related businesses.

 $4 billion authorized for cargo air
carriers.

  $17 billion authorized for businesses
  critical to maintaining national security.

AIR CARRIER LOAN PROGRAM (ALP) -
Treasury’s ALP made 35 loans valued at $2.7
billion, 21 of which are still outstanding valued at
$960 million. These outstanding loans have
maturity dates ranging from September 2024
through November 2025.
•
All ALP loans had deferred interest for one
year.
•
Principal and payment-in-kind interest
deferred until maturity, prepayment at any
time, and a balloon payment at maturity.
•
As of May 1, 2023, Treasury has reported
that six Direct Loans valued at $33.7
million are in default.

Special Inspector General for Pandemic Recovery | U.S. Department of the Treasury
2051 Jamieson Avenue, Suite 600 | Alexandria, VA 22314
www.sigpr.gov

SIGPR’s Interim Report to Treasury
On May 12, 2023, SIGPR issued an updated
interim report to Treasury based on MSLP loan
information obtained from a review of 39 lender
banks holding 1,008 MSLP loans valued at
approximately $8.5 billion. The numbers below
include responses from 6 additional banks received
since the May 12, 2023, report:

Summary of Responses Received Compared
 to All MSLP Loans

Subpoena
Responses
MSLP Universe
% of
MSLP
Universe
Number of Banks
45
319
14.1%
Number of Loans
Issued
1,076
1,830
58.8%
Dollar Value of
Loans Issued
$10,031,190,171

$17,459,024,461

57.8%

Summary of 45 Subpoena Responses
Subpoena Criteria
Count
$ Loan Value (rounded)
Defaults
65
$775.1 million
Delinquent Interest
Payments
24
$119.7 million
Delinquent Financial
Reporting
213
$1.1 billion
Impaired Loans
32
$221.8 million
Material
Misrepresentation
5
$66.9 million
Combined Reported
Issues*
339
$2.3 billion (actual)
Paid Off
274
$2.9 billion

*Some loans had issues reported in multiple categories.

In addition, on April 11, 2023, SIGPR notified
Treasury that Signature Bank of New York, which
made five MSLP loans valued at $113.4 million,
failed. SIGPR will continue to monitor and notify
Treasury of MSLP participating bank closures and
loans that become impaired.
SIGPR resources dedicated to oversight of CARES
Act money:
•
SIGPR has seasoned federal prosecutors,
investigators, and auditors.
•
SIGPR provides exceptional service to the
taxpayers despite a lean budget. SIGPR
received an appropriation of $25 million in
March 2020 for its initial five-year term but
received zero funding in FY 2021. In FY
2022, SIGPR received $8 million to
supplement this no-year start-up funding,
and an additional $12 million for FY 2023.
•
SIGPR is investigating and auditing
numerous loans that mature as SIGPR
sunsets in March 2025.

SIGPR has developed 84% of its investigative
cases proactively rather than waiting for tips or
defaults and is investigating cases nationwide with
potential fraud totaling more than $356 million.

•
SIGPR has opened a total of 60 cases, of
which 38 cases remain pending, with at
least 130 potential defendants.
•
89% of SIGPR’s investigations involve
double and triple dippers involving
other CARES Act programs.
•
SIGPR’s investigations have thus far
resulted in 18 federal indictments, 21
arrests, and four guilty pleas which have
generated $2.6 million in court ordered
restitution.
•
$20,816,000 in MSLP loans have been
repaid following notification of an
investigation.
•
Recently, multiple arrests were made in
connection with two separate complex
fraud schemes representing over $60
million in alleged fraud loss.
•
One defendant was recently sentenced to
87 months in prison and ordered to pay
over $2.6 million in court ordered
restitution.
•
Recommendations for Suspension and
Debarment have been made to Treasury.

As part of its oversight, SIGPR audited Treasury’s
process in approving a $700 million direct loan to a
business identified as being critical to national
security.
In another project, SIGPR is auditing how Treasury
monitors borrowers’ compliance with their Direct
Loan requirements. SIGPR is auditing an airline’s
compliance with its direct loan agreement and is
currently auditing a national security business to
determine its compliance with its direct loan terms.
SIGPR also reviewed 16 borrowers’ Validation
Memoranda, which are documents that Treasury
created to confirm that loan applicants submitted all
required documentation and met other criteria. A
roll-up report of all 16 attestation reviews showed
that one Validation Memorandum contained
material deficiencies and this loan application
should not have been moved forward to the
underwriting process and 10 other Validation
Memoranda contained minor discrepancies.

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