WASHINGTON – The Treasury Department has urged lenders to give priority to existing customers when lending to the federal government’s coronavirus program for small businesses, according to a report released by the Democratic-led Congressional Subcommittee on Congress.
The Treasury Department’s actions were one of several ways in which the Trump administration and several large banks have disadvantaged businesses, including those owned by women and minorities, when applying for the $ 670 billion payroll program, the report said. subcommittee of the Chamber of Voters coronavirus crisis. Banks and other lenders issued PPP loans, and the Small Business Administration guaranteed them.
The Treasury Department, which helped launch the program with the Small Business Administration, denied the subcommittee that it had told banks to prioritize existing customers, the report said.
The report states that the documents received by the subcommittee indicate that the Ministry of Treasury instructed PPP creditors to “move to the existing customer base”; when issuing loans.
“We have called on all banks to offer loans to their existing small business customers, but no Treasury official has ever offered banks to do so except for new customers,” a Finance Ministry spokesman said. “The subcommittee’s conclusion to the contrary is erroneous and is not confirmed by its own records.”
The SBA had no immediate comment on Friday.
On March 28, the day after the PPP law was passed, Rob Nichols, president of the American Bankers’ Association, emailed the trading group’s board a telephone conversation with Treasury officials the day before. “The Treasury would like banks to move to an existing customer base,” the statement said. “This will allow loans to move quickly,” Mr Nichols added.
A spokesman for the American Bankers Association said Friday that the e-mail “shows how much the ABA has tried to help the government launch a PPP program in the middle of a pandemic.” He noted that although banks initially processed loans faster for their customers they already knew, “over time, it has become easier to gather information to process new customers in this new unprecedented program.”
Senior banker with JPMorgan Chase & Co.
also told the congressional commission that “from the outset, the finance ministry understood that banks were working with existing customers,” the report said.
“Given the time-consuming regulatory requirements on board a new customer and the need to move very quickly for needy businesses, we initially focused on existing customers,” said JPMorgan spokesman, noting that Finance Minister Stephen Mnuchin “urged small businesses to go into their own banks.” .
One of the concerns of banks in the early days of the PPP was the task of checking new customers in time to quickly process their loans at a time when companies were overwhelmed with applications. Federal law usually requires banks to scrutinize new customers to prevent money laundering.
“The members of Congress compiling this report highlight issues directly related to how they structured the program and the banks violated with them and the SBA during the frantic implementation,” said Richard Hunt, executive director of the Consumer Bankers Association, a trading group. retail banks. Mr Hunt said the program’s average loan of $ 100,729 proved that “banks have been able to reach those businesses that need it most.”
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Employees expressed concern in an internal presentation on April 4 that “non-consumer policy may increase the risk of different impacts on the business of minorities and women belonging,” the report said.
A Citigroup spokesman did not receive immediate comment. Citigroup told the board that it is working with community lenders to help these demographic groups, the report said.
The congressional board inspected eight of America’s largest banks and said seven of them had restricted PPP lending to existing customers.
The payroll program was filled with complaints when it opened in early April, as some lenders gave priority to clients who already had relationships, amid huge demand, despite rules adopted by the Trump administration that the “who came who who the first “.
The initial round of financing was quickly exhausted, leaving many small firms out of business, while several large, well-known companies received loans. Some of these companies later returned the money after a public reaction. Many businesses that tried to get loans early eventually got them.
Small business lawyers, members of Congress from both parties, and the Inspector General of the Small Business Administration expressed concern that the introduction of PPPs could make it 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 large numbers of black-owned businesses may have received fewer PPP loans due to weak relationships with financial institutions.
The commission’s report is part of an ongoing investigation into the implementation of the PPP. He also argued that the Treasury and the Association had not instructed creditors to prioritize underserved markets, contrary to the intentions of Congress. Authorities have previously denied this allegation, citing their persistent demands for loans from local lenders.
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