President Donald Trump on Tuesday touted the "amazing" numbers of emergency small business loans being issued — even as anxious lenders warned that the administration was leaving scores of their customers in limbo.
At an event in the East Room of the White House, Trump praised the success of the Paycheck Protection Program, which was designed to head off massive layoffs during the pandemic. Congress created the program to channel aid to struggling small businesses through government-backed loans that can be forgiven if employers maintain their payrolls.
The administration relaunched the effort Monday with $320 billion in new funding that Congress approved last week after an initial $350 billion was exhausted April 16. The Small Business Administration, which is running the program, said that as of 1 p.m. Tuesday more than 475,000 new loans had been approved for more than $52 billion — about 16 percent of the new funds that Congress approved last week. The SBA said 5,100 lenders handled the loans.
"We're processing loans at a pace never achieved before," Trump said.
That is true for a program that has been up and running for less than a month, but the president's optimism belied growing angst among large banks that submitted tens of thousands of applications. They say they've received no word from the government about whether the loans will be approved.
At the heart of their concerns is a decision by the SBA to let big banks with thousands of applications submit them in single, consolidated batches rather than inputting them to the SBA's systems loan-by-loan.
The SBA announced the policy Sunday as it prepared for a deluge of hundreds of thousands of applications, which threatened to overwhelm its already unstable systems with unprecedented demand. Banks went along with the policy, despite earlier preparations they had made to enter loans into the SBA's system.
Representatives of the nation's largest banks said Tuesday that they had no idea how the agency was processing the batch filings, raising questions about a huge number of applications.
“There is just acute anxiety and anger because banks are doing everything they can to serve these small business customers, said Greg Baer, who represents large lenders as president and CEO of the Bank Policy Institute. "But the vast majority of their loans just aren’t getting through the system, and no one can or will explain why.”
Bank of America said in an internal company memo obtained by POLITICO that from Sunday through early Monday it had sent 184,000 applications to the SBA and was waiting for the agency to process the loans. The bank as of Tuesday afternoon believed it had just 1,000 loans approved so far, according to a source familiar with the matter. JPMorgan Chase submitted a similar number of applications as Bank of America, another source said. Wells Fargo said it submitted more than 100,000 applications on Monday.
"What we're seeing is it's all or nothing in the batching system," Consumer Bankers Association President and CEO Richard Hunt said in an interview.
The SBA did not respond to requests for comment.
Some of the banks left in the dark were beginning to try to input the applications manually, which proved to be its own challenge for lenders of all sizes.
The SBA's systems have suffered glitches and crashes throughout the existence of the program, which imposed an unprecedented level of loan applications on the agency. The SBA this week said it was "pacing" incoming loan applications as it tried to manage the load. It told lenders it was capping loan originations to no more than $60 billion per bank and would limit incoming loans to 350 per bank per hour — a limit that banks say is all but unachievable amid the slowdown in the SBA's system.
On Tuesday, the SBA told banks that they could no longer use automated bots to input loan applications, in another mitigation effort to take stress off its systems.
The uncertainty came as many of the same big banks face growing scrutiny from Washington about whether they gave priority to large customers over smaller businesses during the initial wave of Paycheck Protection Program applications.
Treasury Secretary Steven Mnuchin on Tuesday announced that any loans above $2 million would be subject to extra scrutiny before they are forgiven. He said borrowers would be subject to criminal liability if they misrepresented their financial need. The administration is discouraging large, publicly traded companies from seeking the money after loan approvals for Shake Shake, Ruth's Hospitality Group and other major corporations sparked a public outcry.
Congress tried to tackle concerns about inequality in the program by setting aside $60 billion of loan money for small lenders to distribute. On Tuesday, the SBA said that those lenders — banks with less than $50 billion in assets — had about $39.6 billion in loans approved in the latest round of PPP funding, or about 75 percent of the total dollar amount of loans approved so far.
Bank representatives said they were in the dark about SBA's thinking behind the system for large lenders. Regardless of the intent, one source at a bank who declined to be identified said it appeared to be putting big lenders at the back of the line.
"That's clearly what's happened," the person said. "They're in the hundreds of loans processed, which is crazy, because they have tens of thousands of loans."
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Trump lauds 'amazing' SBA loan program as big banks feel angst - POLITICO
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