Retail is reeling, as stores shutter and thousands of people lose their jobs while the coronavirus spreads.

Now, the Treasury Department must decide whether the risk of the industry toppling is worth putting taxpayer money where many others would not. Treasury Secretary Steven Mnuchin has shown little appetite for risk and losses, even as he attempts to support a cratering economy.

Many mid-sized retailers do not qualify for programs the government has begun to roll out to save ailing companies. They are too big to qualify for the Main Street lending program aimed at companies with fewer than 10,000 employees or $2.5 billion in sales. Their debt is too distressed to qualify for the Primary Market Corporate Credit Facility aimed at larger companies. 

That means companies like Macy’s, which has roughly $25 billion in sales but whose credit was downgraded to junk before the pandemic, may be out of luck if they want government relief. The retailer is working with investment bank Lazard to restructure its debt, according to people familiar with the matter who spoke on condition of anonymity because the information is confidential. They added that the company is not focusing on bankruptcy. 

Retail lobbyists are pushing for modifications for existing programs, as well as for new ones that would more directly help the industry. The lobbyists argue that without aid, tens of thousands of jobs could be lost. Landlords could be stripped of rent, which could upend the commercial mortgage market. They also note that retailers traditionally do business on razor-thin margins, so employing tough credit standards for lending across all industries may unfairly cut them out.

“The NRF urges you to take steps now to ensure that our nation’s largest retailers can rely on the same economic support programs that have been made available to America’s small businesses and largest corporations,” lobbying group National Retail Federation wrote to Mnuchin and Federal Reserve Chairman Jerome Powell last week in a letter obtained by CNBC.

“Prompt access to financial relief should be available to hard-hit businesses of all sizes. If appropriate attention is not paid to the financial needs of this important sector, the disruptions of the pandemic on retailers and their workers may have adverse long-term consequences on the larger economy.”

The retail industry is the largest private-sector employer, providing jobs for 29 million people, according to the NRF. It is a key contributor to the U.S. economy, supplying the consumer with daily essentials of food, gas, clothes and more.

But while some retailers like Best Buy and Walmart were strong before the pandemic, many more, particularly specialty retailers such as Victoria’s Secret and J.Crew, were already buckling. Eighty-one retailers have filed for bankruptcy since 2015, including 23 last year.

Broader challenges facing the retail industry — changing shopping habits, excess store footprints, bigger chains that compete on rock bottom prices — aren’t going away. More money helps keeps the lights on for a time, but it’s unclear for how long. Once retailers are allowed to reopen their stores, it is uncertain how many consumers will want to shop in public spaces. New social habits are being formed by coronavirus mitigation efforts, as well as heightened concern about the disease’s spread in the absence of a vaccine. It is a quandary also facing restaurants, bars and gyms.  

“If we prop up those retailers, it will just delay their fade into oblivion, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Covid gives the CEOs of those retailers their latest excuse, but unless we think bailing out CEOs is a good use of taxpayer money, the money will be wasted.”

Risk in the lending program will be borne by the Treasury Department, which is using taxpayer money to backstop the loan programs offered by the Federal Reserve. Those funds come from a $500 billion fund run by the Treasury to help businesses and state weather the pandemic. 

Mnuchin, himself a former banker, has demonstrated limited tolerance for risk in the program and keen focus on ensuring taxpayers get their money. He already flexed his muscle in negotiations with airlines for grants to pay payroll. Unlike much of retail, the airline industry was booming before the pandemic ground travel to a halt.  

Some of the retailers closest to the edge, like luxury chain Neiman Marcus, are suffering from debt left over from private equity-driven leveraged buyouts, while others binged on debt on their own. There’s limited political appetite for helping companies that got tax benefits from holding cash when times were good but who might want a helping hand now that times are bad. 

Neiman Marcus could file for bankruptcy as soon as this week, people familiar with the matter told CNBC. It has roughly 14,000 employees.

It’s unclear how many jobs would be saved from loans to the retail industry.

While the $2.2 trillion relief bill signed by President Donald Trump late last month required that companies taking on loans maintain 90% of their workforce, similar language was notably absent in detail around the program the Fed rolled out earlier this month. Retail has heavy fixed costs, making layoffs a key cost-saver when revenues fizzle. The retail industry has said it is pushing for employee retention tax credits and loan forgiveness for employee retention.

“Some of those retailers have been closing stores, firing employees, and stumbling toward bankruptcy, even in boom years,” said University of Michigan’s Gordon. 

A bankruptcy court last year approved a deal to give Sears a second chance at life in hope of preserving 45,000 jobs — despite a record of missing estimates and declining sales in the run-up to bankruptcy. After the court granted the reprieve, Sears went on to close more stores and lay off more workers. 

The NRF still has a chance to win its case. The Fed only recently closed its window for feedback for its newly launched program, which it will take into account as it works out final details. There is still roughly $200 billion remaining from the Treasury’s $500 billion pot of money. Congress is nearing a deal to infuse money into an interim relief package aimed at small businesses and will next consider yet another relief package on top of the huge bill passed last month.

“There’s a relatively callous disregard for retail, because there is an assumption that retail is under economic assault,” said David French, senior vice president of government relations at NRF, who stressed the retailers have undergone transformation and evolution before.

The question now is whether they will have another shot.