Treasury, SBA ease PPP loan forgiveness terms; U.S. faces coin crunch

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All is forgiven

“Small-business owners won’t have to pay back” their Paycheck Protection Program loans “even if they don’t rehire all of the workers they laid off, the Trump administration affirmed, effectively eliminating a rule that many borrowers had feared would leave them stuck with a large debt, ” the New York Times reported. “On Wednesday, the [Treasury Department] and the Small Business Administration, the program’s manager, released new loan forgiveness forms that slashed documentation requirements and will give many borrowers an easy pathway to having their debt eliminated.”

“The forms added a ‘safe harbor’ option that allows borrowers to simply affirm they were unable to operate ‘at the same level of business activity’ they had before the crisis because of government requirements or safety guidance, including social distancing rules. Those borrowers can have their loans fully forgiven if they meet the program’s other rules, including a requirement that they spend at least 60% of their aid money on payroll.”

However, small businesses with PPP loans “are facing potential delays in finding out if they will have the debt forgiven, after banks administering the program said they still need more guidance on which loans can be written off. On Wednesday night, JPMorgan Chase, Bank of America and Wells Fargo all told the Financial Times that they were still not in a position to begin accepting applications for loan forgiveness, as did regional lender PNC.”

“The new snag echoes the rocky launch of the Paycheck Protection Program two months ago, and continuing confusion and controversy over its terms.”

Nevertheless, the program “didn’t work for many that needed it,” the Wall Street Journal said. “The program kept millions of workers off unemployment rolls by providing temporary support for businesses facing pandemic lockdowns and disappearing demand. Yet the PPP left many of the hardest-hit empty-handed. Looking back, the program failed to take into account the near-countless varieties of small business, which employ nearly half of U.S. private-sector workers, and how best to help them, according to economists, business owners and bankers.”

“Some businesses were too small to have relationships with banks, which processed the loans, leaving small entrepreneurs—sole proprietors, mom-and-pop operations and the like—at the tail end of weekslong lines. Some had poor records or little, if any, payroll.”

Spare a dime?

The coronavirus pandemic has created “a nationwide shortage of quarters, dimes, nickels and pennies,” the Washington Post reports. “The economic shutdowns to stem the spread of the novel coronavirus, spurring the deepest recession in decades, have had the unintended consequence of halting the flow of coins through households, businesses and banks,” Federal Reserve chair Jerome Powell confirmed at his testimony before the House Financial Services Committee Wednesday.

Rep. John Rose, R-Tenn., “said he has been hearing concerns from banks in his district that are receiving only a fraction of their weekly coin orders. Randy Graham, CEO of First National Bank of Tennessee, said his bank got a notice from the Fed late last week to expect issues with the typical coin supply. Graham said the short notice made it difficult to build up existing stock or offset the loss with new orders of coins, even if the Fed expects the interruption to be short-lived.”

The Fed chair “tied the coin shortage to the broader fate of the economy as businesses and consumers navigate the coronavirus pandemic,” the Wall Street Journal said. “With the partial closure of the economy, the flow of coins through the economy has … kind of stopped,” Powell said. “We are well aware of this and are working with the Mint and we are working with the reserve banks. And as the economy reopens, we are seeing coins begin to move around again.”

“On Monday, the Fed said in a press release that coin production and distribution activities had been significantly hampered by the coronavirus pandemic, leading to a de facto rationing of what banks could obtain for their customers. Although production has been curtailed, demand has been rising as the nation reopens, which has led to the shortage, the Fed said.”

“Powell encouraged banks to reach out to their regional Federal Reserve banks to deal with the operational challenge of an interruption in coin delivery,” American Banker’s Neil Haggerty reports.

Missing money

Wirecard, the German payments company that has been under a cloud over alleged accounting irregularities, saw its shares crash by 66% on Thursday after it disclosed that its auditors “could not confirm the existence of €1.9 billion in cash, and that ‘spurious cash balances’ may have been provided by a third party.” The company said “there were indications a trustee of Wirecard bank accounts had attempted ‘to deceive the auditor and create a wrong perception of the existence of such cash balances.’”

The revelation forced the company to once again delay publication of its 2019 annual report, which had been scheduled to be released Thursday, the Wall Street Journal said.

Wall Street Journal


“The number of accounts in deferment, forbearance or some other type of relief since March 1 rose to 106 million at the end of May, triple the number at the end of April,” the Journal reports. “The largest increase occurred for student loans, with 79 million accounts in deferment or other relief status, up from 18 million a month earlier. Auto loans in some type of deferment doubled to 7.3 million accounts. Personal loans in deferment doubled to 1.3 million accounts.”

“The surge in missed payments suggests that the flood of layoffs related to the coronavirus has left many Americans without the means to keep up with their debts. Many people have used up their stimulus checks, and unemployment benefits in high-cost areas aren’t enough to replace paychecks or to help debt-laden borrowers pay down their bills.”

But consumers haven’t been able to tap their home equity as a life line. “U.S. banks’ holdings of home equity lines of credit were down more than 9% from a year earlier as of early June, the largest decline on record, according to Federal Reserve data. Originations of home equity loans fell 43% from March through May, according to Equifax.”

"Many lenders are getting stricter about offering the credit lines, known as Helocs. Both JPMorgan Chase and Wells Fargo have temporarily stopped accepting new Heloc applications, and other lenders have tightened standards. Banks are trying to protect themselves from the big losses they suffered in the 2008 crisis, when borrowers who had been using their homes as ATMs defaulted as housing prices unexpectedly tanked. But the lenders’ caution means that in many cases borrowers who thought they would be able to fall back on their home equity in a crisis can’t do so now."

Financial Times

AML fine

“Commerzbank’s London branch has been fined £38 million by the Financial Conduct Authority for failing to make adequate money laundering checks over a five-year period, the second-largest fine to be imposed by the City regulator for deficiencies in combating potentially illegal transactions. On Wednesday, the FCA announced it was penalizing the German bank for weaknesses in its systems for preventing the flow of dirty money through the U.K. capital between October 2012 and September 2017.”

“Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected,” said Mark Steward, the FCA’s executive director of enforcement and market oversight.

New York Times

Banking while black

A simple thing like “cashing a check can be a minefield” for some black customers, who “risk being racially profiled on everyday visits to bank branches. Under federal laws, there is little recourse as long as the banks ultimately complete their transactions.”

“There is no data on how frequently the police are called on customers who are making legitimate everyday transactions. The phenomenon has its own social media hashtag: #BankingWhileBlack.”


Final cut

A lawyer representing Marilyn Booker, Morgan Stanley’s former diversity officer who is suing the bank over racial discrimination, “said on Wednesday the bank cut her client’s budget for promoting diversity and financial education by 71% from the time she started in wealth management to 2019,” Reuters reports.

“It’s not that I wanted to sue. I was fired,” Booker said on CNBC. “Booker said she filed the lawsuit because she believes she was terminated for repeatedly pushing senior management to hear a proposal on increasing diversity and addressing bias against black financial advisers at the firm.”

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Paycheck Protection Program Coins Digital payments AML Diversity and equality