Shame on the big banks for not intervening at a critical time: the Covid-19 pandemic | Genetic marks

A financial collapse. Economic growth in free fall. Tens of thousands of small businesses go bankrupt. Millions of licensees. A stock market crash. No, it’s not 2020. At the moment. It was in 2009, the time of our last Great Recession.

At that time, and despite many questionable decisions made by our country’s top banking leaders that benefited themselves to the detriment of many others, the federal government saw fit to bail out those same parties. with billions of dollars of taxpayer dollars in order to save our economy. The CEOs of these banks accepted these funds and used them to erase their past sins and get back on a healthier footing.

Fast forward 11 years and our country is now grappling with yet another economic disaster, this time brought on by a global viral pandemic. Our government, in order to save millions of small businesses facing financial ruin caused by forced shutdowns and “safe-in-place” orders, has approved $ 350 billion to help these struggling businesses.

In order to get this money to as many businesses as possible as quickly as possible, the government decides to use federally insured financial institutions and particularly seeks to build on the already established Small Business Administration (SBA) and its extensive network of member banks. They do it with the Paycheque Protection Program (PPP), which was part of a $ 2.2 billion stimulus bill and was designed to help small businesses keep staff on their payroll.

“Just lend money to these desperate small businesses,” the government tells these banks. “We will guarantee it, and even forgive it.”

One would think – especially as doctors, police, firefighters, not to mention grocery store clerks – are literally risking their lives to do their part in these terrifying times, the bankers of this country would see this as an opportunity to step up and pay for themselves. . They would jump at the chance to help all those small businesses that they’ve been courting on TV, radio and online all these years.

And some banks – especially small independent banks, not to mention credit unions – have done just that. They were the first to process loan applications for their struggling small business clients last Friday when the SBA opened their loan window.

And then there’s Bank of America, Wells Fargo, and other big banks like JPMorgan Chase and Citigroup who all said “not so fast”. These banks last week, at such a critical time, gathered together and decided to slow things down. They limited loans only to customers and credit card holders. They proposed “new” loan requirements and asked for more documentation beyond SBA guidelines. They capped the amount of loans they were going to make. The rules aren’t clear, they cried, and we have to work harder!

“You’re kidding me @BankofAmerica”, Melissa Perri, CEO, tweeted. “With this requirement to have a credit card to apply for PPP?” What type of scam is this? I have been a loyal customer for years with my business accounts. #bankofamerica #PPPloan ”

“#Bankofamerica I have been a professional client for 17 years”, complains Eric Martel, an entrepreneur. “I tried to apply for SBA paycheck protection to pay employees and they refused me. Looking for another bank.

Outrage made #bankofamerica a trending hashtag on Twitter that day and prompted Republican Senator Marco Rubio, a prominent member of the team that developed the Paycheck Protection Act, to voice his concern, tweet that “It’s a @BankofAmerica, a requirement not a government requirement. They should drop it. This money is 100% guaranteed by the federal government.

So shame on Bank of America, right? Well yes. But I don’t think that’s the only problem.

Choosing to favor only clients over everyone else, requiring excessive documentation, or limiting loans was a bad and misguided decision. Complaining publicly was a bad PR move. Not being more proactive in the weeks of preparation was poor planning.

But in their defense, Bank of America and other big banks loaned a lot of money as part of the stimulus package. There were technical issues with the SBA loan system. The SBA and Treasury rules were unclear and placed a little too much on the lender. Some banks – like Wells Fargo – were subject to federally imposed loan limits because of their past wrongdoing. Banks have an obligation to their shareholders and customers – and the economy as a whole – to monitor their balance sheets. They are notoriously conservative (except when they aren’t, like in the years leading up to 2009), and we want them to be.

The good news is that the treasury department just got out additional guidance for lenders this week and key policymakers like Rubio are pushing through more changes to make the stimulus package – to which he has contributed so much – a success. He posted a series of tweets Monday, which addressed its concerns, including the Federal Reserve’s intention to “help free up more space on lenders’ balance sheets to issue #PPPloans or by making #PPPs more attractive to secondary market buyers,” or by buying #PPP loans directly from lenders ”.

Anyway, the behavior of these banks does not surprise me.

I hate to say I told you, but I saw it coming last week when I written here that “for some of them [banks]This stimulus bill is a potential problem… it’s just a pain in the neck and may not be worth every headache.

I believe that is what is really happening with Bank of America and its other major lenders. They see this program not as an opportunity to grow their small business lending practices (like many smart little banks and credit unions), but as a burden, a hassle, and a distraction from what really earns them money. money: their large corporate clients. Hope I am wrong about this. But if I’m right – and I believe I’m right – then that’s the real reason they should be ashamed of themselves.

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