WASHINGTON – The Treasury Department urged lenders privately to prioritize existing customers when issuing loans to the federal government’s smaller coronavirus assistance program, according to a report released Friday by a Democratic-led congressional monitoring subcommittee.
The Treasury Department’s actions were one of several ways in which the Trump administration and several large banks disadvantaged businesses, including those owned by women and minorities, in an unfavorable way when they applied for $ 670 billion. Wage protection program, said the report of the House Select Subcommittee on Coronavirus Crisis. Banks and other lenders issued PPP loans, and the Small Business Administration guaranteed them.
The Treasury Department, which helped run the program with the Small Business Administration, denied to the subcommittee that it had asked banks to prioritize existing customers, the report said.
The report said documents obtained by the subcommittee show that the Treasury Department instructed PPP lenders to “go to their existing customer base”
“We urged all banks to offer loans to their existing small business customers, but no Treasury officials ever suggested that banks should do so with the exclusion of new customers,” a Treasury Department spokesman said. “The subcommittee’s conclusion to the contrary is false and is not supported by its own record.”
The SBA had no immediate comment Friday.
On March 28, a day after the law establishing the PPP was passed, Rob Nichols, president of the American Bankers Association, sent an email to the Commerce Group’s board about a call with Treasury officials the previous day. “Treasury would like banks to go to their existing customer base,” the email said, according to the report. “This will allow loans to move quickly,” added Mr. Nichols.
A spokesman for the American Bankers Association said Friday that the email “shows how long the ABA has been trying to help the government get the PPP program off the ground in the midst of a pandemic.” He noted that while banks initially processed loans faster for customers, as they already knew, “over time, it became easier to gather information to process new customers in this new and unprecedented program.”
A senior banker from JPMorgan Chase & Co.
also told the congressional panel that “there was an early understanding from the Treasury that banks were working with existing customers,” the report said.
“Given the time-consuming regulatory requirements on board a new client and the need to move very fast for struggling companies, we initially focused on existing customers,” said a JPMorgan spokeswoman, noting that Finance Minister Steven Mnuchin “encouraged small businesses” to go to their own banks for this reason. ”
One concern for banks in the early days of PPPs was the challenge of surveying new customers in time to process their loans quickly at a time when companies were being deluged with applications. Federal law generally requires banks to check new customers thoroughly to prevent money laundering.
“The congressmen who are preparing this report highlight the issues that are directly related to the way in which they structured the program and the banks that were raised with them and the SBA during the implementation of the violent neck,” said Richard Hunt, CEO for the Consumer Bankers Association, a retail banking trading group. Sir. Hunt said the programme’s average loan size of $ 100,729 showed that “banks were able to reach the companies most in need.”
At Citigroup Inc.,
The employees expressed concern in an internal presentation on April 4 that “a policy of not taking non-customers may create an increased risk of different impacts on minority and women-owned businesses,” the report said.
A representative of Citigroup had no immediate comment. Citigroup told the panel it was working with community lenders to help these demographic groups, the report said.
The congressional panel reviewed eight of the major U.S. banks, saying seven of them restricted PPP lending to existing customers.
The payslip protection program was rife with complaints when it opened in early April, as some lenders prioritized customers with existing conditions amid overwhelming demand despite rules from the Trump administration that the program was “first come, first served” , first time ”.
The first round of financing was quickly exhausted, leaving many small businesses closed, while several larger, well-known companies received loans. Some of these companies later returned the money after public setbacks. Many companies that struggled early on to get loans eventually got them.
Lawyers for small businesses, members of Congress from both parties and the Small Business Administration’s own inspector general have expressed concern that the PPP’s implementation may have made it more difficult for certain groups to access the program, including minorities and business owners in rural areas. A report released in August by the Federal Reserve Bank of New York concluded that areas with a large number of black-owned companies may have received fewer PPP loans due to weaker relationships with financial institutions.
The panel’s report is part of an ongoing study of PPP’s implementation. It also claimed that the Treasury Department and the SBA did not provide guidance to lenders to prioritize non-profit markets, contrary to congressional intent. The agencies have previously disputed this claim, in part by referring to their push for community-based lenders to issue the loans.
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