House passes PPP revisions; on Otting's day of departure, a CRA reflection

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PPP revised

By a vote of 417-1, the House Thursday passed a bill that “reduces the level of Paycheck Protection Program funds that must be used for payroll to 60% from 75%. The bill also gives borrowers up to 24 weeks to use the funds, up from the eight set in the initial bill passed in March, and extends the deadline to rehire workers to Dec. 31.”

“The bill now goes to the Senate, where lawmakers of both parties are hoping for quick action,” the Wall Street Journal reports. “Senators backing it plan to push for a vote next week. The PPP changes are one area of bipartisan cooperation on Capitol Hill, amid deep divisions over unemployment benefits, state aid, liability shields for businesses and other issues in the next round of talks.”

The legislation comes after small businesses pushed to be able to use more PPP funds for purposes other than payroll, American Banker’s Neil Haggerty reports.

“The measure’s future remains uncertain because Senate leaders have not yet signaled support,” the Washington Post said. “Senate Small Business and Entrepreneurship Committee Chairman Marco Rubio, R-Fla., is supporting a different bill and made clear Thursday he does not back the House approach. There are similarities between the two pieces of legislation, though, and the White House also supports making changes to the PPP, so a compromise could emerge.”

The Small Business Administration is setting aside $10 billion in PPP funds “for community development organizations as a way of ensuring federal money for coronavirus relief reaches underserved communities. The funding will be restricted to community development financial institutions, or CDFIs, which are private banks that focus on low-income, low-wealth and other neglected businesses. The SBA also sees them as a vehicle to reach minority-owned businesses.”

“The carve-out was requested earlier by congressional Democrats, who raised concerns that minority-owned businesses, rural communities and others are not receiving an adequate share of federal coronavirus relief,” the Washington Post said. “The SBA has so far held off on designating funds for Minority Depository Institutions, lenders that are specifically owned or controlled by minorities.”

Financial Times

It depends

The executive chairman of BBVA, Spain’s second largest bank, said it “would cut its internal financial targets for this year and called for the relaxation of coronavirus restrictions to help kick-start the economy.” “Certainly our level of profits is not going to be what it was, in double-digit returns on equity,” Carlos Torres told the FT. “What we had in our budgets is not something that we can achieve. When we return to normal depends on when we pass this crisis.”

“His comments cast light on how one of the biggest lenders in a country still scarred by the last financial crisis plans to cope with the current economic turmoil, and come as banks are taking divergent approaches to assessing possible future losses.”

New York Times

Mr. Lonely

Joseph Otting, who is stepping down as comptroller of the currency on Friday, “is leaving behind a fractured landscape around a vital piece of banking legislation: the Community Reinvestment Act of 1977. Last week, when Mr. Otting introduced a revised rule — his signature accomplishment as comptroller — he cut a lonely figure. Banking trade groups said it had been put together hastily without enough testing. The Fed and FDIC refused to sign on. And community groups fear that the revision would ultimately hurt the poor.”

Joseph Otting
Joseph Otting

“Critics say that the revised rules have the potential to defang the CRA by making it easier for banks to meet their obligations. It will also cause regulatory disarray, perhaps for years. Banks with different overseers must figure out if the new rules apply to them and spend millions of dollars to comply. Even then, the rules could change again if a Democrat is elected president in November.”

Elsewhere

Inching back

Citigroup “looks to return a small number of staff to its New York headquarters in July or possibly August, with workers reentering its London offices possibly even earlier,” CEO Michael Corbat said. The return will be “granular, site-by-site and within those sites, job-by-job,” he told Bloomberg News. “Staff returning to work will begin next month at the Canary Wharf complex in London,” with about 5% of the bank’s 12,000 employees returning to its main New York City building about a month later.

“The return of our colleagues to our sites will vary depending on local conditions and be driven by data, not dates,” Citi spokeswoman Jennifer Lowney said. “We anticipate a slow and measured reentry once local conditions permit, beginning with only a small number of colleagues who have a clear and compelling need to operate from a given location.”

Doubled valuation

“Payment card issuing startup Marqeta has raised $150 million from a U.S. institutional investor, doubling its valuation to $4.3 billion,” Reuters reports. “The deal comes a year after Marqeta raised $260 million” in an earlier fundraising round.

“Backed by Goldman Sachs and Visa, Marqeta has developed a platform that it says makes payment card issuing and processing simpler and more efficient for businesses. Marqeta’s clients include many well-known technology startups such as payments company Square, Uber Technologies, Instacart and lending startup Affirm.”

Pandemic profit

Lastly, this isn’t within our normal bailiwick, but it’s a good read from Vanity Fair: “It’s Like, ‘F*@# You, America’“: Aided by the Fed’s Cheap Money, Carl Icahn Is Exiting Herbalife and Making a Killing

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Paycheck Protection Program CRA Joseph Otting BBVA Coronavirus Work from home Payment cards
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