Pedestrians pass in front of a Macy's Inc. store in the Midtown neighborhood of New York, U.S., on Friday, March 20, 2020.

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.

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.

That means companies like Macy's may be in a bind. Macy's has roughly $25 billion in sales, likely excluding it from the Main Street lending program. But its credit was downgraded to junk by the S&P Global Ratings in February, before the pandemic fully unleashed its wrath. Its debt was investment grade for two out of three credit rating agencies prior to late March.

Macy's 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."