Big banks that received taxpayer bailouts during the global financial crisis a decade ago are now too slow in helping small businesses seeking assistance through a $349 billion emergency lending program, a high-level Small Business Administration official said in a recorded teleconference obtained by The Washington Post.
Amato’s comments offer a rare candid glimpse at the frustrations of federal officials working with thousands of banks to ramp up one of the most ambitious economic stimulus programs in U.S. history.
During the teleconference, Amato acknowledged the SBA struggled to launch the emergency lending program, intended as a lifeline to millions of small-business owners during the economic collapse caused by the coronavirus. But big banks had not done enough to help the program and small businesses, he said.
“There is really no risk to the bank,” Amato said of the lending program. “It just comes down to … the same banks that literally took billions of dollars with one page from [then-Treasury Secretary Henry Paulson] are the ones saying the documentation isn’t clear enough for them.”
Officials with the SBA press office did not immediately provide a comment for this report.
The Trump administration acknowledged glitches with the program but touted it as a success and praised the banking industry’s work.
Retailers employ millions. But some of the country's best-known brands may be left out of coronavirus aid programs.
“I think, overall, the banks have done a phenomenal job; some of them are further ahead” than others, Treasury Secretary Steven Mnuchin said during a CNBC interview Wednesday morning.
The administration has asked Congress for an additional $250 billion to fund the program, which has received unprecedented demand. “I want to assure all small businesses out there, we will not run out of money. … If you don’t get a loan this week, you will get a loan next week or the following week. The money will be there,” Mnuchin said.
The Paycheck Protection Program is key to the administration’s efforts to blunt the economic fallout from the coronavirus. But the program got off to a slow start after the Small Business Administration and Treasury Department released the final rules just hours before it was set to launch Friday.
Several of the country’s largest banks didn’t immediately participate in the program, saying they needed more time to understand how it would operate. Others limited applicants to companies with which they already had a relationship, leaving thousands of small businesses scrambling to find a lender.
Bank of America was alone among big banks to begin processing applications Friday, earning it praise from President Trump. But the bank angered thousands of small-business owners by initially taking applications only from customers it was already lending to. By Wednesday, the bank said it had received 250,000 applications from small businesses seeking about $40 billion.
Citigroup, meanwhile, still isn’t taking applications.
Demand for the program also quickly overwhelmed some lenders. Wells Fargo never formally began taking applications, but by Monday morning so many people had expressed preliminary interest that it said it already had reached the $10 billion cap it had set for loans under the program. On Wednesday, the Federal Reserve said it would lift temporarily the cap it had put on Wells Fargo’s size in 2018 after repeated allegations of consumer abuses rattled regulators’ confidence in the bank.
Amato’s gripes about big banks echo statements by Sen. Marco Rubio (R-Fla.), chairman of the Small Business and Entrepreneurship Committee. Some big banks were putting “crazy restrictions” on who could apply for a loan through the program, he said in a Twitter video last week.
“Please don’t be a bunch of jerks. When you needed the country to help you, they did,” he said, referring the 2008 global financial crisis, when banks took billions in taxpayer bailouts. “Now the country needs you to help them and we’re paying you to do it, and it’s the government’s money, it’s the taxpayers’ money.”
Amato said since so many large banks delayed their participation in the program, the SBA is looking to nontraditional lenders to fill the gap.
“We are trying to work quickly with national non-bank lenders and other sources that may make up the difference for the companies like, sadly, BofA, Wells Fargo and [JPMorgan] Chase that haven’t really stepped up to the plate to take on all the small businesses they can,” Amato said.
The banking industry has complained that the program’s rules were still evolving, making it difficult for them to begin lending. Amato dismissed those concerns. “So what they are saying is 'I don’t give … a hoot about the small businesses … what I care about is whether or not I have enough paperwork. It’s just crazy,” he said in the webinar.
Wells Fargo and Bank of America didn’t immediately respond to requests for comment.
A Chase spokesperson referred questions to a conference call between Trump and industry executives on Tuesday afternoon during which its co-president, Gordon Smith, said the bank had already taken 375,000 applications for $40 billion in loans.
Amato made his comment during an April 6 teleconference recorded through Zoom and posted online by Faith Jones, a lawyer and small-business consultant.
Amato has served as district director of the SBA’s Nevada District Office since 2017 and spent more than 30 years in small-business development and commercial lending. He previously worked at Wells Fargo and American Express, according to his LinkedIn page.
His comments appeared to anger bankers in his district. “Nevada bank employees have been working around-the-clock,” Phyllis Gurgevich, president of the Nevada Bankers Association, said in a statement after The Post published Amato’s comments.
The process has been slowed by technical issues at the SBA and the lack of industry guidance, she said. “It would be helpful if local SBA officials spent more time resolving those critical issues and less time mistakenly criticizing banks that are actually participating in the program and trying their best to deliver this much-needed help to small businesses in Nevada and across the country,” Gurgevich said.
The SBA’s relationship with the banking industry is critical to the Paycheck Protection Program. The emergency fund relies on banks to vet and approve loans of up to $10 million to small businesses with no more than 500 employees. The SBA backs the loans, which are offered at an ultralow interest rate. Small businesses can have the loans forgiven, meaning they won’t have to pay it back, if they spend most of the money on retaining or rehiring employees.
The Treasury Department and the SBA have scrambled to address the industry concerns about the program’s structure, including raising the interest rate banks could charge to 1 percent from 0.5 percent. Big banks have been particularly concerned about the legal liability they could face if regulators later determined that the small businesses they lent to committed fraud.
Former Federal Reserve chair Janet L. Yellen told House Democrats on a conference call this week that banks would issue loans faster if it was clear they would not face lawsuits for fraud in the program. “Banks’ concern about liability could cause them to restrict the loans they initiate and engage in due diligence that could slow down payments,” Yellen told The Post.
The banking industry also complained that the program is plagued by confusing rules and unanswered questions. Even after borrowers’ applications are approved, money cannot be disbursed until the SBA finalizes the language to be included in the promissory notes. The SBA’s online system for inputting the applications also has been slow and repeatedly inaccessible, banking industry officials say.
Nearly a week into the program, banks still lack a written program guide and essential procedures for the program, said Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, a trade group for lenders that originate SBA loans. “We don’t know the rules of engagement and have still managed to approve $100 billion in loans,” Wilkinson said.
Without proper guidance, banks could saddle small businesses with loans that don’t adhere to the program’s final rules and won’t qualify for loan forgiveness, industry officials say.
“Lenders aren’t sitting on the sidelines for the sake of getting a few pieces of paper. We are cranking away. But we do not have the necessary guidance to protect borrowers,” said Kristen Granchelli, vice president of government affairs at the trade group.
“It’s as if Treasury is begging the banks to participate but setting them up to fail,” Granchelli said.
In the webinar, Amato criticized banks for refusing applications from longtime customers during their moment of need.
“I can’t tell you how many phone calls I have where a doctor will call me, or a business owner will call me, and say, ‘I’ve been with such and such bank for 25, 30, 40 years … and they say they aren’t taking my [Paycheck Protection Program] application because they’re not involved in the program,'” he said. “That should tell you a lot about what that bank really is focused on, but that’s just my editorializing."
The emergency lending program is aimed at helping small businesses hobbled by the current economic crisis, which has devastated some of the country’s most vulnerable employers: small retailers, bars and restaurants, entertainment venues and factories that have all shut their doors.
The crisis also presents an unprecedented challenge for the SBA, which has struggled to handle a historic influx of loan applications and scrambled to write the rules for the $349 billion aid program while the program already is in motion.
The SBA is the smallest among the “major federal agencies” listed in the president’s budget request, with less than $1 billion in annual funding. For fiscal 2021, it saw an 11 percent funding cut compared with the previous year.
During the webinar, Amato also addressed delays to the agency’s disaster loans, a long-standing SBA loan program managed by the government rather than the banks. That program has received extra firepower through legislation passed by Congress last month, the Cares Act, and is meant to give cash advances of up to $10,000 to businesses facing a short-term cash crunch.
The program received more than 3 million applications in just three days, he said, and is struggling to deal with the backlog. The agency is bringing in unspecified “third-party private resources” to help it meet the challenge, Amato said.
“They are muddling through it. If it were up to me, I would write you a check tomorrow,” he told business owners. “But it is coming. … Be patient."
Dalton Bennett and Allie Caren contributed to this report.
Have a tip or story idea about how the government is handling the Cares Act and its response to economic fallout caused by the coronavirus? Send an email to email@example.com
Coronavirus: What you need to know
Where do things stand? See the latest covid numbers in the U.S. and across the world. In the U.S., pandemic trends have shifted and now White people are more likely to die from covid than Black people.
The state of public health: Conservative and libertarian forces have defanged much of the nation’s public health system through legislation and litigation as the world staggers into the fourth year of covid.
Grief and the pandemic: A Washington Post reporter covered the coronavirus — and then endured the death of her mother from covid-19. She offers a window into grief and resilience.
Would we shut down again? What will the United States do the next time a deadly virus comes knocking on the door?
Vaccines: The CDC recommends that everyone age 5 and older get an updated covid booster shot. New federal data shows adults who received the updated shots cut their risk of being hospitalized with covid-19 by 50 percent. Here’s guidance on when you should get the omicron booster and how vaccine efficacy could be affected by your prior infections.
For the latest news, sign up for our free newsletter.