By Laura Davison and Mark Niquette, Bloomberg
A House panel overseeing the coronavirus response is launching probes into how several banks, including JPMorgan Chase, Bank of America, Wells Fargo & Co and Citigroup Inc., made decisions about how to implement small-business loans under the government’s Paycheck Protection Program.
The investigations, launched by the Democratic-led Select Subcommittee on the Coronavirus Crisis, is seeking to determine whether banks and Treasury Department guidance favored larger, well-connected businesses over smaller companies from rural or minority communities when making small business loans to combat the economic fallout from the coronavirus pandemic.
“Some large lenders apparently created a two-tier system for processing PPP loan applications,” according to the letters sent by the committee Monday. “The banks’ wealthiest clients had access to a personalized application process that ensured their applications were processed first.”
“Other applicants had to use poor-performing electronic portals, faced significant processing delays, and sometimes needed to find another lender to consider their application,” the letters said.
Republicans on the subcommittee didn’t sign onto the letters asking the banks to turn over documents.The requests come as the Trump administration is facing criticism for not releasing the details of the companies that received billions of dollars through the Small Business Administration’s PPP program, a high-profile federal coronavirus-relief initiative.
The subcommittee asked the banks for records about the PPP applications they received and what guidance they received from the Trump administration about prioritizing under-served and rural markets as required by law in response to reports the large banks were favoring their largest customers.
The SBA failed to take steps to prioritize underserved borrowers while issuing rules that hurt businesses and contradicted the law that created the PPP, according to an inspector general’s report issued in May.After the PPP launched April 3, many borrowers complained that banks wouldn’t take their PPP application unless they had an existing lending relationship, and that larger firms got funding at the expense of mom and pop shops in the initial round of funding.
Entities including Shake Shack Inc. and the Los Angeles Lakers returned PPP loans after a public outcry, and the SBA and Treasury have taken steps to ensure more minority-owned and other disadvantaged small business owners get access to PPP funding. But lawmakers say they’re still hearing complaints that those businesses still need help.
The committee also called on Treasury SecretarySteven Mnuchin and SBA Administrator Jovita Carranza to release details about which companies received funding and in what amount after Mnuchin testified at a Senate committee hearing last Wednesday that such information would be withheld because it’s proprietary or confidential.
Lawmakers criticized Mnuchin’s decision not to release details about which companies received loans.”The administration’s decision to hide basic PPP loan data is a disturbing sign of its lack of concern for who gets this funding, how much they receive or why,” House Speaker Nancy Pelosi said in a June 12 statement. “The administration must immediately reverse this decision and uphold its obligation to release this data.”
The leaders of the House committees on Ways and Means, Financial Services and Small Business also sent a letter on Saturday to Mnuchin and Carranza asking them to provide no later than June 19 the names of all recipients of PPP loans, the dollar amount received, and the names of all applicants who did not received a loan.
“At a minimum, we owe the American people that information,” that letter said. “As the pandemic continues to cause financial hardship for countless small businesses, we must understand whether this program is functioning as intended and determine how best to help businesses going forward.”
The applications for PPP loans, which are forgivable if borrowers meet certain criteria, say such data will “automatically” be released. Moreover, the SBA, which oversees the lending program, told Bloomberg News in April that such loan-specific information would be made public “in the near future.”
The SBA reported that as of Friday, loans had been approved for almost 4.6 million small businesses totaling $512.3 billion, with about $130 billion in funding remaining before the agency stops accepting new applications on June 30.
The panel requested the documents be submitted by June 29.
