Updates from US banks
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The largest US bank and the US Secretary of the Treasury are on a collision course with the federal government’s $ 350 billion emergency small business loan program, with JPMorgan Chase saying he would be “very likely” unable to launch loans as planned on Friday.
A note sent to Chase’s business clients Thursday afternoon said Chase “was still awaiting advice from the Small Business Administration and the Treasury” on how the loans would be made. “As a result, Chase is unlikely to be able to start accepting nominations on Friday April 3, as we had hoped,” he said.
Minutes earlier, Treasury Secretary Steven Mnuchin told reporters in Washington that the program “will be operational tomorrow”, adding: “I encourage all small businesses to contact your lenders.”
He also said he was doubling interest rates on loans to 1%, from 0.5% announced earlier in the week, to encourage bank participation.
A person familiar with the situation said Chase saw Mr Mnuchin’s comments but had not received any information directly from the Treasury.
The conflicting statements came after banks expressed doubts about the realism of the timing for launching the loan program. Institutions have not yet received the appropriate application forms and other basic information needed to begin processing applications.
In a key part of the federal economic response to the coronavirus pandemic, the Trump administration urged companies employing fewer than 500 people to begin applying for bailout funding through their banks starting Friday. The program was set up as part of a $ 2 billion stimulus package approved by Congress last week.
The tight schedule reflects the urgency to provide cash to businesses to prevent them from collapsing under pressure from the pandemic, which has forced many businesses to shut down and left others with considerable trade. reduced.
Eric Rosengren, Chairman of the Boston Federal Reserve, said banks in his district were struggling to help interested customers apply. “At this stage, [the banks aren’t] able to do a lot, ”he said. “Details are not available for banks. Until you have the details, you can’t do anything about the subscription or figure out what the process will be.
A senior executive at a major US bank said his teams had been working “24/7” since the program was announced, but preparations had been hampered by lack of information from government officials .
“At the most basic level, we have not received the loan application that clients have to complete,” the banker said, adding that a version posted on the Treasury website “conflicts” with legislation allowing the loan.
The banker said it was “very unlikely” that the program could be launched on time, although another person familiar with the discussions between the banks and the government said lenders “still hope” to be able to meet the time limit.
An executive at another major US bank called the plan a “mess.” The executive added: “The infrastructure is not ready. Safe to say this is going to be delayed from the very aggressive schedule [from the White House]. “
Banks are also pushing back what they call the cumbersome draft application form, arguing that disbursements could be slowed by requirements to verify salary and tax data that are not easily collectable.
Paul Merski, congressional relations manager for the Independent Community Bankers of America, a small banking advocacy group, said its members were unsure whether they should use their own forms to document the creation of the loans or whether the administration would publish sample documents.
He added that loan officers need to be sure that if they collect the correct documents, they will not be held responsible if the loan application turns out to be fraudulent.
The Treasury and the Small Business Administration did not respond to requests for comment.
The White House has suggested that the program stay on track. “Small businesses are America’s backbone and Donald Trump has said we are going to take care of them in unprecedented ways, ”White House spokesman Judd Deere wrote on Twitter on Thursday. “The The White House, the SBA, and the Treasury are all gearing up for tomorrow. “
Additional reporting by Lauren Fedor in Washington