WASHINGTON – The Treasury Department has privately urged lenders to prioritize existing customers when issuing loans for the federal government’s small business coronavirus assistance program, according to a report released Friday by a subcommite of Democratic-led congressional administration.
Treasury Department actions are one of the many ways the Trump administration and many large banks have set up unscrupulous businesses, including those owned by women and minorities, that are at a disadvantage when applying for $ 670 billion Paycheck Protection Program, said a report from the House Select Subcomm Committee on the Coronavirus Crisis. Banks and other lenders provide PPP loans, and they are guaranteed by the Small Business Administration.
The Treasury Department, which assisted in running the program along with the Small Business Administration, denied the subcommite that it told banks to prioritize existing customers, the report said.
The report said the documents obtained by the subcommite show the Treasury Department instructing PPP lenders to “go to their existing customer base” when issuing loans.
“We encourage all banks to offer loans to their existing small business customers, but no Treasury official has suggested that banks should do so excluding new customers,”; he said. Treasury Department spokesman. “The subcommite’s conclusion to the fight is untrue and not supported by its own record.”
The SBA had no immediate comment on Friday.
On March 28, a day after the PPP-sponsored law was enacted, Rob Nichols, president of the American Bankers Association, emailed the trade group board about a call to Treasury officials the other day. “Treasury wants banks to go to their existing customer base,” the email said, according to the report. “This will allow it to move faster,” Mr. Nichols added.
A spokesman for the American Bankers Association said Friday that the email “shows the length of time the ABA is trying to help the government overthrow the PPP program amid a pandemic.” He said that while banks initially processed loans faster for customers they already knew, “over time it became easier to gather information to process new and unprecedented customers. program. ”
A senior banker from JPMorgan Chase & Co..
the congressional panel also said that “from the outset there was an understanding from the Treasury that banks are working with existing clients,” the report said.
“Due to the timely regulatory requirements to accommodate a new client, and the need to act very quickly for struggling businesses, we are primarily focused on existing customers,” said a JPMorgan spokesperson, citing the Secretary of Treasury Steven Mnuchin “encouraged small businesses to go to their own banks for this reason.”
One concern for banks in the early days of PPP was the challenge of educating new customers on time to process their loans quickly at a time when companies were flooded with applications. Federal federal law requires banks to scrutinize new customers to avoid laundering money.
“Members of Congress formulating this report emphasize issues directly related to the way they developed the program and the banks raised with them and the SBA during the breakneck implementation,” said Richard Hunt, chief executive of the Consumer Bankers Association, a trade group for retail banks. Mr. Hunt said the program’s average loan size, at $ 100,729, proves that “banks have reached those businesses that are most in need.”
At Citigroup Inc.,
Employees expressed concern at an internal presentation on April 4 that “a policy of not taking non-customers could create an increased risk of diverse impacts on minority and women’s ownership,” he said. of the report.
A Citigroup representative made no immediate comment. Citigroup told the panel that it has partnered with community lenders to help demographic groups, the report said.
The congressional panel reviewed eight of the largest US banks and said that seven of them limit PPP lending to existing customers.
The Paycheck Protection Program had complaints when it opened in early April, as some lenders prioritized customers with existing relationships in the midst of extreme demand, despite rules issued by the Trump administration that the program is “first come, first served.”
The initial round of funding was quickly depleted, leaving many small companies while many larger, well-known companies received loans. Some of those companies eventually returned the money after the public backlash. Many businesses struggle early to get the loans they eventually receive.
Small business advocates, members of Congress from both parties and a small business inspector general inspector are concerned that implementing PPP may be difficult for some 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 high numbers of Black-owned businesses may have received fewer PPP loans due to weaker linkages. in financial institutions.
The panel report is part of an ongoing investigation into PPP implementation. It also accused the Treasury Department and the SBA of failing to provide guidance to lenders to prioritize unsecured markets, contrary to Congress’ intentions. Agencies have previously argued that statement, in part by mentioning their push for community-based lenders to issue loans.
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