17.1 C
Wednesday, October 21, 2020

Treasury encouraged banks to prioritize PPP loans for existing clients, hurting minority and women-owned small businesses, House report says

US President Donald Trump shows a signed Paycheck Protection Program and Health Care Enhancement Act in the Oval Office of the White House in Washington, DC, on April 24, 2020.

Olivier Douliery | AFP | Getty Images

The Treasury Department privately encouraged banks to prioritize existing clients when implementing the federal government’s Paycheck Protection Program that provided coronavirus relief to small businesses, according to a report Friday from a House oversight panel.

The Trump administration’s directive to favor existing clients in PPP lending decisions disproportionately hurt minority and women-owned business, the Democratic-led Select Subcommittee on the Coronavirus Crisis said in its report.

“As a result, small businesses that were truly in need of financial support during the economic crisis often faced longer waits and more obstacles to receiving PPP funding than larger, wealthier companies,” the congressional panel said in statement. 

Congress established the PPP as a part of the CARES Act, designed to provide forgivable loans to small businesses and non-profit organizations to help them weather the Covid-19 pandemic and preserve jobs. The Small Business Administration relied on banks and other private lenders to process the funds.

Documents obtained by the subcommittee revealed that the Treasury told banks to “go to their existing customer base” when issuing loans, according to an email sent by the CEO of the American Bankers Association, Rob Nichols, to the group’s board of directors on March 28.

“From early on there was an understanding from Treasury that banks were working with existing clients,” Jennifer Roberts, a senior banker from JPMorgan Chase & Co, told the subcommittee in July, according to the report.

Banks and other financial institutions faced challenges in vetting new customers and processing applications in a timely manner during the early rollout of the PPP. The congressional panel found that seven of the eight banks involved in its investigation limited PPP lending to existing customers.

But this tactic hurt underserved groups, the House panel found. Research shows minority and women-owned businesses are less likely to have existing relationships with lenders.

An August report by the Federal Reserve Bank of New York found that 41% of Black-owned businesses closed between February and April 2020 — higher than any other demographic group. The New York Fed pointed to “racial disparities in access to federal relief funds,” including “stark PPP coverage gaps.”

In the CARES Act, Congress specified “the Administrator should issue guidance to lenders and agents to ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in underserved and rural markets.”

The reported concluded neither the Treasury nor SBA offered “meaningful” directives for lenders to prioritize underserved groups, according to financial institutions interviewed by the subcommittee.

The congressional panel also found that several banks in its investigation processed PPP funds for larger commercial clients at a faster rate than smaller loans, offering different channels and levels of assistance for customers depending on the type of customer.

“JPMorgan processed loans above $5 million almost four times faster than loans under $1 million,” the report detailed. “PNC processed loans above $5 million more than twice as fast as loans under $1 million.”

The Treasury and the ABA did not immediately respond to CNBC’s request for comment.

A spokesperson for the SBA said in a statement, “PPP loans have … been broadly distributed, with about 27 percent of the funds going to low and moderate income communities, which is in proportion to their percentage of the population.”

A Republican Select Subcommittee spokesperson said in a statement, “PPP helped support more than 51 million jobs across the country, including tens of millions of jobs in minority and rural communities. Speaker Pelosi and House Democrats have harmed minority-owned small businesses and underserved populations by blocking an extension of PPP nearly 40 times on the House floor.”

The report comes as efforts to pass a new coronavirus stimulus package continue, with President Donald Trump, Treasury Secretary Steve Mnuchin and Senate leaders at odds.

Speak Your Mind

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Get in Touch


Recommend for You

Walmart divides Black Friday deals into 3 separate events that kick off online

An employee works on a display ahead of Black Friday at a Walmart store in Chicago, November 20, 2018.Kamil Krzaczynski | ReutersFor shoppers who...

Special Report: Plastic Pandemic: COVID-19 Trashed The Recycling Dream

The coronavirus pandemic has sparked a rush for plastic.From Wuhan to New York, demand for face shields, gloves, takeaway food containers and bubble wrap...

‘This is insanity’: Doctors slam Trump’s drive to greet supporters outside Walter Reed hospital

US President Trump waves from the back of a car outside of Walter Reed Medical Center in Bethesda, Maryland on Ocotber 4, 2020.Alex Edelman...

‘Lock Up The Bidens’: Trump Picks Target For Final Stretch – His Opponent’s Family

Topline President Trump has begun focusing a disproportionate amount of his attention at campaign events on his Democratic opponent Joe Biden’s family in an...

Democrats Attack Trump On Twitter Following Report He Paid $750 In Taxes

Topline A bombshell report in the New York Times detailing President Trump's tax information dating back two decades led to a social media onslaught...

Related Articles

Simon Pegg Talks ‘Inheritance’ And That ‘Shaun Of The...

Simon Pegg at the 'Ready Player One' in Hollywood,...

The Coronavirus May Actually Reinforce US-China Economic Ties

In these self-isolated days, silver linings are almost entirely obscured by clouds. Yet should...

In These Factories, Inspector Robot Will Check Your Work

The UK company P2i adds water-repelling nanocoatings to smartphones and other gadgets. Normally,...