SBA more than triples size of emergency pandemic loans; Tesla to accept bitcoin

Wall Street Journal

Q2 surprise?

Shares of fintech companies such as PayPal, Square, Shopify and others have cooled down recently after a strong rally in the past year, but they “might just find a second wind, ” the Journal says.

“A broader positive trend for fintech upstarts has been a shift toward usage of debit cards over credit cards. A major revenue source for many neobanks and digital wallets such as Square’s Cash App, which have seen an influx of customers using them as a destination for direct deposits, are fees collected when debit cards are used.”

“Neobanking fintechs do have future things to navigate, like improving payment and digital-wallet technology at traditional banks, or more competition for deposits as rates rise. But in the nearer term the market might be surprised enough by big second-quarter numbers to stimulate these high-growth shares once more.”

Enablers

Greensill Capital, the supply chain financial startup that collapsed earlier this month, relied on several big Wall Street banks “to fuel its expansion. Greensill’s closest Wall Street relationship was with Credit Suisse, which provided it financing through $10 billion of investment funds. But a clutch of other big players—including Citigroup and Morgan Stanley—played key roles in Greensill’s rise.”

“Citigroup expanded its business with Greensill despite repeated warnings internally not to do so because of reputational issues, according to people familiar with the Citigroup-Greensill relationship. The big U.S. bank operated a trust that processed payments for Greensill’s borrowers, forwarding money on to investors in the Credit Suisse funds. Citigroup also worked on a failed last-ditch attempt to raise fresh capital for the startup. Greensill was founded in 2011 by former Morgan Stanley and Citigroup banker Lex Greensill.”

Wise move?

Fidelity Investments “plans to launch an exchange-traded fund that tracks the price of bitcoin, furthering the money manager’s push to bring cryptocurrencies to mainstream finance. The ETF, called Wise Origin Bitcoin Trust, will aim to match an index that takes spot prices from various bitcoin markets. The ETF, which requires the Securities and Exchange Commission’s approval, would mark a major step forward in the firm’s bitcoin ambitions. If it is approved, the ETF could be available for purchase on the large brokerage and wealth-management platforms that oversee trillions of dollars of individual investors’ assets.”

New York Times

Raise your cap

The Small Business Administration is raising the cap on its Economic Injury Disaster Loan program to $500,000, effective April 6.

“The pandemic has lasted longer than expected,” Isabella Casillas Guzman, the agency’s administrator, said Wednesday. “We are here to help our small businesses, and that is why I’m proud to more than triple the amount of funding they can access.”

“The SBA has approved $200 billion in disaster loans to 3.8 million borrowers since the program began last year. Unlike the forgivable loans made through the larger and higher-profile Paycheck Protection Program, the disaster loans must be paid back. But they carry a low interest rate and a long repayment term. The agency has $270 billion left to lend through the coronavirus program.”

Bitcoin on wheels

Tesla CEO Elon Musk said Wednesday “that the company would accept Bitcoin as payment for cars in the United States,” with foreign sales expected later this year.

Notably, “Tesla will hold the digital currency, rather than convert payments to dollars, and handle the crypto transactions internally, Mr. Musk said. That means when someone buys a Tesla with Bitcoin, the price of the car could well rise — or fall — over time. In other words, Tesla is turning one-time payments into assets with shifting value, or, essentially, investments.

Elsewhere

Safety first

Goldman Sachs told “all but critical staff” at its big Indian operation in Bengaluru “to return to working from home on Wednesday, reversing moves to get staff back to one of its biggest global offices as coronavirus infections in the city grew,” Reuters reported. “The Bengaluru office seats about 7,000 employees, the bulk of its Indian workforce.”

“We continue to work on plans to return our people to office safely, and those plans will vary division by division, country by country, city by city,” a Goldman spokesperson said. “The safety of our people is our most important priority and we will remain flexible as we monitor evolving government guidelines and the uneven global vaccine rollout.”

Quotable

“Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency.” Tesla CEO Elon Musk, announcing that the electric car maker will accept the digital currency in the U.S. for vehicle purchases.