PPP reload nearing; Treasury eyes blocking stimulus check garnishment

Register now

Receiving Wide Coverage ...

Getting closer

The White House and congressional lawmakers "were closing in on a more than $450 billion agreement that would replenish" the Paycheck Protection Program for small businesses, The Wall Street Journal reported. The imminent deal would add about $310 billion more to the PPP, which ran out of money last week, plus provide $75 billion in assistance for hospitals and $25 billion for virus testing.

Small business owners who were unable to get loans through the PPP last week "have accused some of the country's largest banks of unfairly favoring applications from their wealthiest clients," The New York Times reports. "Customers of Bank of America, JPMorgan Chase and Wells Fargo have sued the banks in federal court, saying data provided by the Small Business Administration on the average size of the loans shows they doled out money to larger customers first."

"The lawsuits — two against Chase and one each against Bank of America and Wells Fargo, all filed in the Central District of California — say smaller customers were not given the chance to apply as quickly as larger ones in some cases. In other instances, the lawsuits say, the banks sat on some smaller customers' applications instead of immediately submitting them to the SBA."

One of those loan recipients, Shake Shack, said it was returning the $10 million loan it got last week. The company, "which employs more than 8,000 people," said it instead raised capital from stock investors. (Wall Street Journal, New York Times)

But the owner of Ruth's Chris Steak House is apparently keeping the $20 million loan it received. "Even though loans are generally capped at $10 million, Ruth's Hospitality Group Inc. was able to qualify for $20 million under a provision that allowed it to seek loans for each of two subsidiaries," the Journal said.

"Hundreds of thousands of small business owners … missed out on the $350 billion program, even as larger companies sucked up some of the money," the Financial Times commented.

"The small businesses that received aid under the federal government's $350 billion rescue program weren't always the ones with the greatest needs or the best chances to survive the coronavirus pandemic. Whether a firm made the cut often came down to how and where it banked," the Journal said. "Some recipients were publicly traded companies that already had significant loans with big banks. Others were customers of community banks that had long made loans through the SBA. Thousands more that lacked the right ties weren't approved."

The government "inadvertently picked winners and losers when it set up the PPP. Banks that already made SBA loans were the first ones authorized to submit applications to the program; most gave priority to existing customers. Some lenders have been faster than others to launch their programs; others have prioritized certain customers."

The impending deal may include setting aside $50 billion to $60 billion for banks and community development financial institutions with less than $50 billion in assets, American Banker's Jon Prior reports. There may also be curbs on how much individual lenders could originate.

Wall Street Journal

Help on the way

The Federal Housing Finance Agency is considering allowing Fannie Mae and Freddie Mac to "buy home loans that recently entered forbearance," a move that would "help nonbank mortgage companies that lend to home buyers and then quickly sell the loans to Fannie and Freddie. Details were still being ironed out, though FHFA was expected to announce a change as early as this week."

AML fine

Federal and New York authorities fined the Industrial Bank of Korea a combined $86 million "over long-running gaps in its defenses against money laundering, after the lender's Manhattan branch was used to launder cash for Iran." The charges date back to 2010.

Financial Times

Kicking the payment can

Goldman Sachs said between 10% and 20% of its consumer loan and credit card customers "are taking payment holidays, a far higher level than at more established lenders such as Bank of America and Wells Fargo." Nevertheless, "a person familiar with the matter" who spoke to the FT said the bank "was not concerned about underwriting standards."

"We'll watch the portfolio and take whatever action we need to," the person said, adding that Goldman was "quite pleased" with its loan performance so far. "Anytime you get yourself in a position where you're doing right by the customer, that's a good thing," he said. "Customers remember it."

Opportunity knocks

The coronavirus has handed "online lenders on both sides of the Atlantic a second chance to prove their worth," the FT says. "As banks are criticized for being too slow to get cash into the hands of the smallest businesses, some fintechs see the crisis as a chance to show their credentials. At the same time, a long-held concern has re-emerged: that in times of stress fintechs will struggle to make loans because they lack deep balance sheets and depend on secondary markets for capital."

Washington Post

Reviewing garnishment

The Treasury Department "is reviewing whether it has the legal authority to prevent banks and private debt collectors from seizing $1,200 government stimulus payments as blowback builds over private lenders clawing back parts of the emergency financial relief package," the Post reports. "Reports quickly surfaced that some of these payments were being redirected from people who have overdraft fees, delinquent loans or other debt obligations. These garnishments have sparked a bipartisan backlash in Congress, with lawmakers arguing the money should be walled off from collection by banks and private debt collectors. Several large banks announced they would stop taking the money amid public criticism."


"We will find out the men from the boys. No doubt there's going to be some casualties where credit [decisioning] wasn't robust enough or funding sources weren't stable enough. But the ones who come out will be stronger and will get a bigger market share." — Ravi Anand, managing director of ThinCats, a U.K.-based fintech, on the prospects for online lenders competing with banks.

For reprint and licensing requests for this article, click here.
Paycheck Protection Program FHFA AML Goldman Sachs Coronavirus Treasury Department