Survey: minorities slighted by PPP; Fed official to banks: Relax
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Just 12% of black and Latino business owners who applied for Paycheck Protection Program loans “received what they had asked for, while 26% said they had received only a fraction of what they had requested,” according to a survey conducted for two equal-rights organizations. “By comparison, in a survey of small businesses by the Census Bureau from April 26 to May 2, three-quarters said they had asked for a loan and 38% of them said they had received one.”
“The results suggest that the historically weak relationships that minority business owners have with banks are making it harder for them to tap into the aid program,” the New York Times reported. “The program was the first time some black and Latino business owners had ever sought a bank loan.”
“Kabbage, the small business lending start-up backed by SoftBank, said it had processed more than $3.5 billion in PPP loans, six weeks after shutting its lending operation in the middle of the Covid-19 crisis,” the Financial Times said. “The turnround follows a lobbying push by Kabbage and other fintech lenders for approval to help disburse $660 billion of government funding earmarked for U.S. small businesses. Kabbage’s surging demand marks a bright spot for the online lending sector, which has faced skepticism over its reliance on outside capital to fund loans.”
“Kabbage said in April that it would stop making new loans to its customers, calling on the government to step in and provide support. The company, which furloughed a significant number of employees at the time, has since processed loans representing roughly $175 million in fees from processing PPP loans. The amount of PPP loans processed by Kabbage has surpassed its lending volume last year, which totaled $2.8 billion.”
Publicly traded companies may be able to hold onto PPP loans “despite the Trump administration’s effort to claw back the funds” due to “conflicting regulations,” the Washington Post reports. On April 23, the Treasury Department told publicly traded companies “with substantial market value and access to capital markets’” to return the money. “The government gave publicly traded companies until May 7 to return the money, then moved the deadline to May 14 and finally to Monday.”
“But while some companies returned the money, many others declined to do so. Now, there are questions about whether the administration can force companies that received money under the initial PPP program to return it. The dilemma highlights the chaotic way in which federal bailout programs were thrown together on the fly after the U.S. economy suddenly shut down in mid-March.”
Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin are scheduled to testify before the Senate Banking Committee “on how they are handling $500 billion in emergency lending programs.” Mnuchin “is also likely to face questions on the Treasury Department’s role in administering the Paycheck Protection Program. The program got off to a bumpy start and has faced criticism over loans that went to large public companies, and rules limiting how small firms may spend the money to qualify for loan forgiveness.” Wall Street Journal, Financial Times, New York Times
Wall Street Journal
Do the right thing
Federal Reserve Bank of Atlanta President Raphael Bostic said Monday “he doesn’t plan to heavily second guess decisions banks have taken during the coronavirus crisis.” “We’ve tried to be as clear as possible that we will remember that banks have operated in an emergency situation, have made emergency decisions, and we won’t penalize them for that nine to 12 months from now when we do our regulatory reviews,” Bostic said, adding “I’m going to make sure we hold to that.”
The Fed wants banks to “deploy their capital as much as they can, to provide loans, to work with their borrowers, to find ways to help reduce the short-term stresses many businesses and many families are feeling,” Bostic said. “I’ve been pleased that in just about all the conversations I’ve been having with bankers, they are doing this of their own accord, they are eager to do it. And what we’ve tried to do is encourage that as much as possible.”
Proxy adviser Glass Lewis is recommending that former ExxonMobil CEO Lee Raymond be ousted from JPMorgan Chase’s board, “raising pressure on the bank’s lead director who is set to transition to a regular board seat this year. In a circular to shareholders ahead of JPMorgan’s annual general meeting on Tuesday, Glass Lewis said the bank’s decision to repeatedly allow Raymond to breach its mandatory retirement age was an ‘extreme outlier’ that could no longer be justified. Raymond is 81 years old, while JPMorgan’s board retirement age is 72.”
“The bank gave him waivers from its mandatory retirement age in previous years because of his experience, skills, and a high level of shareholder support. JPMorgan has already promised to begin the search for Raymond’s successor as lead independent director, in a victory for climate change activists and the New York City comptroller who are also arguing for the former oil boss to be removed from the board entirely.”
“This crisis must serve as a wake-up call and a call to action for business and government to think, act and invest for the common good and confront the structural obstacles that have inhibited inclusive economic growth for years.” — JPMorgan Chase CEO Jamie Dimon in a staff memo prior to the bank’s annual meeting on Tuesday.