Janet Yellen has a message for policymakers racing to get emergency coronavirus relief into the hands of small-business owners: You can encourage banks to issue loans faster by clarifying they won’t face lawsuits for fraud in the program.

The former Federal Reserve chair made the point to House Democrats on a conference call earlier this week — and spelled it out to me in a Tuesday email. “I did indicate to the caucus that banks’ concern about liability could cause them to restrict the loans they initiate and engage in due diligence that could slow down payments,” Yellen said. 

“Banks rightly worry about this in the aftermath of the financial crisis where they bore considerable put back risk,” Yellen continued. “I didn’t give any blanket recommendation but suggested to the caucus that it is an issue and providing some sort of safe harbor for banks on this would likely speed payments.” 

Banking industry representatives are making the same case to lawmakers and the Trump administration, as public pressure builds to cut through bureaucratic snarls hobbling the $349 billion forgivable loan program.

The administration already is asking Congress to commit another $250 billion to the initiative, called the Paycheck Protection Program, citing surging demand. And congressional Republicans, at least, appear ready to act on the request this week.

Getting the existing funds into the hands of desperate small-business owners has been anything but smooth.

Banks balked at the initial terms, arguing they were not being fairly compensated for their participation. Borrowers report they are running into a thicket of confusing document requests from overwhelmed and occasionally unresponsive lenders. And the Small Business Administration’s online portal for processing applications has crashed repeatedly.

“President Trump said banks have processed $70 billion in taxpayer-backed loans for 250,000 small businesses since Friday” when the program launched, The Post’s Erica Werner, Jeff Stein and Renae Merle report. “He did not say, though, how many of those loans have been approved or how many firms have received any of the money. And his data suggests the program has reached a small fraction of U.S. companies: There are 30 million small businesses in the United States that employ 60 million people.” 

But that's not the only headache, industry sources say. 

Bankers are struggling to balance swift action with their own interest in defending against legal liability down the road. 

The banks confronted such a reckoning in the aftermath of the global financial crisis, when federal prosecutors sued them over errors in applications for government-backed home loans.

The Treasury Department, in guidance posted Monday, clarified that banks could skip the vetting they are typically required to perform for new loans if those applying for them are already customers. Small-business owners who don’t have an existing relationship with a bank say that forces them to the back of the line — a complaint echoed by some lawmakers. 

Sen. Marco Rubio (R-Fla.) tweeted:

Per one industry source, “The banks’ position is, if you want us to onboard new customers, you should allow us to do due diligence after the fact. … If they make that change, we would welcome it, because it would help us serve small businesses that don’t have an existing banking relationship.”

The issue has created some strange bed-fellows. 

Elsewhere, Yellen has advocated tougher regulations on the sector amidst the crisis. She has recommended the Fed ban the biggest banks from paying dividends to shareholders in order to preserve their capital. 

But she is warning the economic pain from the fallout of the pandemic could be severe, estimating in a CNBC interview that unemployment already could have surged to 13 percent as GDP stands to take a 30 percent hit this quarter. 

In addition to Yellen’s backing, the industry can point to support from the Wall Street Journal editorial board.

“Treasury in its guidance writes that lenders ‘will be held harmless for borrowers’ failure to comply with program criteria.’ But Congress didn’t repeal the Bank Secrecy Act or the False Claims Act, and many banks simply don’t trust that they won’t later be sued for making loans to borrowers who fudge their qualifications,” the paper’s editorial team writes, arguing lawmakers “should provide explicit legal protection to banks and fix the other problems they created in their attempt to rescue small businesses from the government decision to deny them customers.”

A certain amount of fraud may be inevitable in the coronavirus relief effort. 

That's according to Neil Barofsky, who served as inspector general for the $700 billion Troubled Asset Relief Program. “There’s a general rule of thumb in government programs that a good 10 percent… is going to get lost to fraud,” he said in an MSNBC interview Tuesday.

“It’s just going to take the mother of all firehoses to try to put out this fire and try to keep people able to feed their kids and maintain a life,” Barofksy said. “The fact that we’re going to lose a chunk of it to fraud, as a former federal prosector, inspector general, that makes me a little nauseous, a little sick. But it’s going to be a necessary part of this program. But that doesn’t mean you give up. And that’s where oversight comes in."

Speaking of which: Trump removed Glenn Fine, chairman of the federal panel overseeing the $2 trillion coronavirus relief package, as part of a broader effort to oust inspectors general in his administration, The Post’s Ellen Nakashima reports. “In just the past four days, Trump has ousted two inspectors general and expressed displeasure with a third, a pattern that critics say is a direct assault on one of the pillars of good governance,” she writes.

Fine was and his staff were caught flatfooted when notified of the decision Monday and given no explanation, Nakashima reports: “Trump cast his decision to remove Fine as merely cleaning house of Obama-era holdover appointments, saying those officials could be biased.”

Market movers

After a historic day, markets slumped back down.

Dow gives up more than 900 points: “The Dow Jones Industrial Average closed 26.13 points lower, or 0.1 percent, at 22,653.86. The 30-stock average rose as much as 937.25 points, or 4.1 percent, at its session high,” CNBC's Fred Imbert and Yun Li report.

“The S&P 500 ended the day 0.2 percent lower at 2,659.41 after jumping more than 3 percent. The Nasdaq Composite fell 0.3 percent to 7,887.26 following a 3 percent rally.”

  • The market is still trying to figure out what to think: “Some investors believed stock prices were getting ahead of the reality where coronavirus shutdowns are likely to weigh on the economy significantly beyond the second quarter. The major averages have rallied about 20 percent from their March 23 lows.” 

U.S. slashes 2020 oil-output forecast: The forecast was cut “by more than 1 million barrels a day, as collapsing crude prices and plummeting demand threaten to shutter production in the country’s biggest fields,” Bloombergs Stephen Cunningham reports.

“Production is expected to average 11.76 million barrels a day through December, down from a previous forecast of 12.99 million barrels, the Energy Information Administration said … The agency also trimmed its 2021 output expectations by 1.6 million barrels a day to just over 11 million daily barrels.”

  • This comes just before a major meeting between OPEC, Russia and other producers: “[President Trump], who has been trying to broker a deal to end the price war between the Saudis and Russians, faces pressure from his counterparts to join in a global supply-cut agreement after prices plunged to their lowest levels in almost two decades.”

Coronavirus fallout

In the U.S.:
  • Trump team looks to reopen the economy. Planning is in the early stages, but Bloomberg's Mario Parker reports.The effort would likely begin in smaller cities and towns in states that haven’t yet been heavily hit by the virus. Cities such as New York, Detroit, New Orleans and other places the president has described as ‘hot spots’ would remain shuttered.” Larry Kudlow told Fox News it could start within four to eight weeks. 
  • Some officials see reasons to be optimistic: “U.S. authorities on Tuesday reported 30,700 more people infected with the novel coronavirus and over 1,800 more deaths — the highest daily death toll so far. But amid the grim data, some officials said they saw grounds for hope that the pandemic’s devastation would at least not be as bad as the direst projections,” Brady Dennis, William Wan and David A. Fahrenthold report.
  • Jobless Americans to see extra payments as soon as this week: “Qualifying New York residents will see the additional benefit payments this week, according to the state Department of Labor. New Jersey also aims to get the payments out this week, though it may take longer, spokeswoman Angela Delli-Santi said,” Andy Sullivan of Reuters reports. But other states have encountered a number of problems and are facing delays.
Corporate impact:  
  • FHFA head says Fannie and Freddie are unlikely to aid mortgage companies: “I’ve seen zero [evidence] to suggest that there’s a systemic crisis across the nonbank servicers,” Mark Calabria, who leads the Federal Housing Finance Agency, told the Wall Street Journals Andrew Ackerman. “If this goes on for a year, maybe. But I think the frustration here is a lot of just misrepresentation.”
  • Government bailouts could leave out major retailers: “Without further action by officials, little of that money will flow to retail companies such as Macy’s, Gap or J.C. Penney. The reason: After years of losing ground to online competition and diminished mall traffic, some retailers might not be able to repay the government,” Peter Whoriskey and Heather Long report.
  • More than 1,000 companies told FEMA they can help. But few are following through: “As of early Monday, only three companies had supplies the agency could actually buy,” the WSJs Rachael Levy reports. The issues stem from companies asking for payment upfront, which FEMA cannot do because the agency sometimes spends hours trying to vet offers to avoid being ripped off. “Another issue: Some companies have oversold what they can actually get to FEMA.”
  • SEC's Clayton: Companies should report tapping bailout funds. Per the WSJ's Dave Michaels: “The need for bailout money or other sources of cash is ‘sensitive information,’ [SEC Chair Jay] Clayton said. ‘I encourage companies to get out there [and] disclose where they stand’ in order to limit speculation about the companies’ plans.” He made the comments on CNBC.
  • Jack Dorsey pledges $1 billion to relief efforts. “Mr. Dorsey said he would put 28 percent of his wealth, in the form of shares in his mobile payments company Square, into a limited liability company that he had created, called Start Small. Start Small would make grants to beneficiaries, he said, with the expenditures to be recorded in a publicly accessible Google document,” NYT's Mike Isaac reports.
  • The pandemic has been a boon for K Street lobbyists. The disease, and the federal rush to spend trillions containing it, has set off a free-for-all among interests trying to secure a piece of the action. Of 700 new lobbying registrations this year, at least 70 mention the virus, the AP's Richard Lardner and Brian Slodysko report.
  • Thomas Barrack taps lobbyists for coronavirus-related work. CNBC's Brian Schwartz reports that Barrack, the real estate investor and Trump friend, hired a team at Brownstein Hyatt Farber Schreck to focus on “issues related to COVID-19 relief packages," per the lobbying disclosure.
Around the world:
  • Boris Johnson spends second night in ICU: “ According to the latest update on Tuesday evening, he was ‘stable’ and ‘in good spirits’, but being closely monitored,” BBC's Victoria King reports.
  • Wuhan finally emerges from lockdown: “Wuhan staged a grand light show under the theme ‘Heroic City, Heroic People’ to celebrate the reopening of the central Chinese metropolis where the virus emerged late last year,” Anna Fifield and Lyric Li report.
  • Japan plans to direct economic stimulus to households and businesses: “In the first emergency phase, the government plans to hand out ¥300,000 (about $2,750) to households whose income dropped significantly after the virus started to affect the economy,” the WSJ's Megumi Fujikawa reports.
  • Chinese mogul faces probe for criticizing Xis handling of the outbreak: “The probe against Ren Zhiqiang, a real-estate mogul and a well-connected Communist Party member, comes as Beijing trumpets its success in containing the coronavirus and seeks to quell public anger around initial government missteps,” the WSJs Chun Han Wong reports.

Money on the Hill

Senators continue to face scrutiny for their stock trades. 

Richard Burr jettisoned shares in a Dutch fertilizer company right before it collapsed: “The chairman of the Senate Intelligence Committee, Richard Burr (R-N.C.), sold off almost $47,000 dollars worth of shares in a small Dutch fertilizer company in 2018, just weeks before its stock began a sharp 40 percent collapse,” Pro Publicas Robert Faturechi reports.

“Investors may also have been disappointed by developments in the Trump administration’s trade policy that hurt OCI. The company had been positioned to benefit from the expected sanctions on Iranian oil and petrochemical imports. But in November 2018, the Trump administration waived some of those restrictions.”

  • The senator previously face questions about his trades before markets tanked during the pandemic: Burr’s Senate office and a law firm advising him both declined to answer questions from ProPublica. A spokesman for OCI did not respond. In his role as chair of the intelligence committee and a member of the finance committee, Burr has oversight on some Iran matters and sanctions policy, but there is no evidence he knew in advance about the Trump administration’s sanction waivers.”

Perdue bought stock in a company that makes PPE: “Sen. David Perdue (R-Ga.) bought stock in DuPont de Nemours, a chemical company that produces personal protective equipment, on January 24, the same day the Senate received a classified briefing on the spread of the novel coronavirus, The Atlanta Journal-Constitution reported on Monday,” Business Insider's Sonam Sheth reports

“The revelation came from Perdue's financial-portfolio disclosures. The latest, filed on Sunday, included 110 items related to stock trades. … Perdues spokeswoman, Cherie Gillan, told The Journal-Constitution that ‘since coming to the US Senate in 2015, Sen. Perdue has always had an outside adviser managing his personal finances, and he is not involved in day-to-day decisions.’ ” Gillan says Perdue did not attend the Jan. 24 briefing. 

Loeffler continued to defend her trades: “On its face, the timing of the investment deals — which [Sen. Kelly Loeffler (R-Ga.)] said were made without her knowledge by her investment advisers — have raised suspicions. Her congressional disclosures, which require senators to reveal only a range of transaction amounts rather than precise figures, state that she and her husband sold between $1.2 million and $3.1 million in stocks in the three weeks after the Jan. 24 coronavirus briefing,” Manuel Roig-Franzia reports.

“Those sales, which were revealed on a Senate disclosure report in mid-March, took place before the stock market cratered amid concerns about the pandemic. But interviews and a review of both public and previously undisclosed documents that Loeffler provided at The Post’s request paint a more nuanced picture. A detailed summary prepared by the senator’s office of the couple’s stock sales shows they add up to $1.8 million, a figure closer to the low end of the range she’d reported. In isolation, those sales could support a pandemic-profiteer narrative.”

  • Loeffler also defended her husbands trading: Jeffrey Sprecher, chairman of the New York Stock Exchange, “was making bullish moves at the same time, betting that the market would go up a few months later, according to previously undisclosed summaries reviewed by The Post. Those moves involved entering into sophisticated financial contracts, known as ‘puts,’ that would benefit him if the stocks rose and risked big losses if the market crashed. The technique that the couple appears to be employing is a form of hedging designed to cushion an investor against risk during a time of volatility. The puts are intended to protect their portfolio from the market’s ups and downs." 

Pocket change

Another top Juul official is leaving the company.

“Cole Hatton, who was Juul’s principal engineer, was one of the firm’s first employees. He’s also named on the patent for the Juul device as a co-inventor, along with the company’s co-founders, Adam Bowen and James Monsees,” Bloomberg Newss Lauren Etter reports.

The move comes just days after the departure of Guy Cartwright, a senior executive in charge of leading a $1 billion restructuring of the company, and less than a month after Monsees announced that he was leaving the Silicon Valley startup that he helped build. … The personnel changes come amid a transformation underway at the e-cigarette company that began in December 2018 when tobacco giant Altria Group Inc. paid $12.8 billion for a third of the company.” 

Chart topper

Per a new note from Cowen Washington Research Group: “The total number of unemployment claims in the six key states the week ending March 14 was 39,807. By the March 26 report, the total was 756,039. The total number in the key six as of last Thursday is now over 2 million, which is more than 5 times Trump's raw vote margin of victory from 2016.”



  • The Fed releases minutes from its unscheduled meetings on March 3 and March 13 when it lowered the benchmark interest rate to near zero


  • The Labor Department releases weekly jobless claims
  • The University of Michigan releases its latest consumer sentiment numbers

The funnies

From The Post's Tom Toles:

Bull session