Despite the Federal Reserve establishing a facility to backstop PPP loans, Wells Fargo says it will not offer Paycheck Protection Program loans to small businesses with more than 50 employees. The bank had previously said an asset cap put in place as part of its punishment for various scandals was preventing it from facilitating more than $10 billion in PPP loans.
Modern Money Murmurs: Seeing as how the Fed's new facility effectively nullifies Wells Fargo's asset cap argument, my heart goes out to Wells Fargo customers who will suffer because the bank wants to keep playing footsy with the Fed over the asset cap. C'mon Charlie ... do better.
Some small business owners fear they won't get loans through the Small Business Administration's Paycheck Protection Program because banks are favoring customers who have accounts with them. Some business owners are afraid the money will be depleted before they can get their applications submitted.
Modern Money Murmurs: Considering a key aspect of the PPP is speed, it makes perfect sense banks are leaning toward helping customers with whom they already have a relationship. It simply speeds up aspects of the data collection and application processes.
Bank officials have said the Small Business Administration's portal for relief loan applications crashed on Monday, but a senior administration official say that is "not accurate," adding "SBA continues to process/approve/guarantee billions of dollars in loans and continues to add lenders to the system."
Banks appear strong enough to weather the coronavirus pandemic but they may run into trouble if large groups of borrowers default on loans, says Wharton professor David Zaring. "[Banks] look reasonably ready for a shock, but I don't know how long any business could survive an economic shock of this magnitude. I don't think banks are so different from other businesses in that regard," Zaring says.
Disruptions to supply-chain financing brought by the coronavirus pandemic pose a "sleeping risk" to the economy, analysts say. Companies may struggle with liquidity if banks cut off these types of loans, analysts say.
While Congress has authorized banks to postpone their adoption of new loan-accounting standards as they grapple with coronavirus disruptions and lending demands, it might behoove them to begin adhering to the new rules anyway to help better account for future losses, writes Telis Demos.
One in four US households are unbanked or underbanked and rely on use of cash and paper checks which could increase their exposure to the novel coronavirus, write Robert Hockett and Lawrence Rufrano. US officials should create a national digital payment system that can be accessed by everyone with no fees, they write.
Some 73% of Americans say their family is losing income amid the economic fallout from the coronavirus pandemic, a survey finds. Nearly one quarter said their household income has been cut "very significantly."
The Paycheck Protection Program, which started Friday, had a bumpy rollout as banks started taking applications but technical issues with the Small Business Administration's process system caused backlogs. Despite the difficulties, banks have collected hundreds of thousands of applications and are working around the clock to process them. A CBA spokesman said, "the majority of CBA members are now taking applications, and some are already funding loans … banks continue working around the clock to get this new program firing on all cylinders for small businesses" and the industry is still working with SBA to get the necessary final guidance for full implementation.
The Consumer Financial Protection Bureau should be helping consumers facing possible eviction from their homes and those being harassed by debt collectors during the coronavirus pandemic, writes former CFPB director Richard Cordray and two former employees at the bureau. "The CFPB is well positioned to make a difference for large numbers of Americans, but it must confront the circumstances and act immediately to mitigate the harmful effects of this crisis," Cordray and the others wrote.
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