Square gets OK for bank; Banks seek regulatory relief

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Credit Crunch

As “consumers face what could become the biggest credit crunch since the Great Depression, lenders and credit-reporting firms aren’t sure what to do about it,” the Wall Street Journal reports. “Lawmakers and others have asked the main U.S. credit-reporting firms what they can do to limit the damage to consumers’ credit standing if they miss loan payments. Representatives from the White House National Economic Council have been in touch with credit-reporting firms,” as have Congressional staffers.

JPMorgan Chase said it is “temporarily closing about 1,000 of its bank branches to reduce the spread of the coronavirus, in the first example of a big U.S. bank shutting its doors to deal with the escalating health crisis,” the Financial Times says. The bank said it “would close about a fifth of its Chase branches. In other branches, the bank is giving some staff the option to work from home. The closures fall heaviest in areas where there are other branches nearby, to minimize customer disruption.”

The branches that remain open will curtail hours.

The bank also announced “it committed $50 million to funds and community groups that are providing food, support and medical supplies for people hurt by the coronavirus in the United States, Europe and Asia,” Reuters reports. JPM “said it will initially give $15 million to groups coping with the disease’s impact on people, including donating $5 million to community development financial institutions in the United States that will provide low or zero-interest loans to vulnerable small businesses. The bank will also give $3 million to international groups that provide similar assistance.”

Fannie Mae and Freddie Mac and the Department of Housing and Urban Development said they are suspending foreclosures and evictions of homeowners behind on their mortgages and at risk of losing their homes for 60 days “in the latest federal response to the outbreak of the coronavirus.” Wall Street Journal, Washington Post, American Banker

“The financial shock from the coronavirus pandemic threatens the housing security of millions of Americans, prompting federal, state and local officials — and even judges and the police — to move quickly to ward off foreclosures and evictions,” the New York Times notes. “And over the past week, there has been a groundswell across the country to protect renters as well. There have been so many announcements that the National Low Income Housing Coalition, a nonprofit advocacy group in Washington, set up a website to track them.”

More Fed moves

The Federal Reserve said it was creating a Money Market Mutual Fund Lending Facility “that would make loans to banks secured by assets from money market mutual funds,” according to the FT. The Fed said the facility, which will be managed by the Boston Fed, “was similar to a tool it used during the 2008 financial crisis to prop up money market funds, but it would be purchasing a broader range of assets.” Wall Street Journal, Financial Times, New York Times, Washington Post

Wall Street Journal

All Square

Federal and state regulators approved Square Inc.’s application to start its own bank in Utah. “The bank, Square Financial Services, Inc., is expected to launch in 2021 and will be supervised by the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions. Square Financial Services will offer small-business loans to merchants that use Square devices to process their payments.”

“Square’s banking effort started over 2½ years ago and was marked by opposition from some bank lobbyists and community groups, who objected to Square’s decision to pursue a charter for a so-called industrial loan company.”

Everyone's problems

Banks have nowhere to hide in the coronavirus crisis,” the paper opines. “A problem for airlines is a problem for banks. A problem for oil producers is a problem for banks. A problem for restaurants is a problem for banks.”

“Sitting at the heart of the economy, banks are spared no pain. They are usually protected by the diversity of their lending — only one or two industries or regions struggle at a given time — but the widespread economic shutdown to contain the novel coronavirus is a crisis for nearly everyone, everywhere.”

Financial Times

Begging for relief

Banks have “launched a globally coordinated push” to “demand regulators relax or delay a raft of post-crisis rules on everything from capital and liquidity to accounting and climate change, which they argue are hampering their ability to respond to the coronavirus crisis.” The banks want the “Bank of England, the European Central Bank and U.S. regulators to ensure that new rules and standards do not impede their efforts to keep money flowing to the real economy.”

Timing is everything

HSBC “will be forced to delay a plan to slash 35,000 jobs and drastically shrink its balance sheet in Europe and the U.S. if the global coronavirus outbreak morphs into a long-term crisis,” the paper says. Last month “the bank said it wanted to cut annual costs by $4.5 billion and shed $100 billion of assets adjusted for risk by the end of 2022, with the aim of reducing its headcount from 235,000 to 200,000 over three years. However, the bank’s executives now accept that the coronavirus outbreak means they will be forced to adjust the pace at which they execute the restructuring.”

Elsewhere

Bonus points

Federal banking regulators “are considering giving banks additional regulatory points” under the Community Reinvestment Act “for lending to mid- to low-income Americans hurt by the coronavirus,” Reuters reported. “The measure could see banks get extra credit if they can show they assisted low-income borrowers suffering as a result of the virus by extending new credit, an official said. The official said they are also considering pushing banks for leniency around repayments of loans for homes and automobiles.”

Quotable

“The halting of all foreclosure actions and evictions for the next 60 days will provide homeowners with some peace of mind during these trying times.” — HUD Secretary Ben Carson

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