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Major banking trades, including the Community Development Bankers Association (CDBA), American Bankers Association (ABA), Bank Policy Institute (BPI), Independent Community Bankers of America (ICBA), National Bankers Association (NBA), and National Association of Affordable Housing Lenders (NAAHL), are collectively urging Congress to appropriate $1 billion for the Community Development Financial Institutions (CDFI) Fund to aid in economic recovery in response to the coronavirus pandemic. In letters to House and Senate leadership, as well as Appropriations Committees, Financial Services and General Government Subcommittees, and authorizing committees, the banking trades described the CDFI industry's track record of promoting economic stabilization, job preservation and creation, and addressing community needs that would enable them to effectively channel federal funds into the low-income communities they serve.
President Trump on Tuesday praised some of the country's largest financial firms for pledging to take new steps to help small businesses disrupted by the coronavirus. Trump heralded their plans as he hosted a video conference with leaders of banks, including Darrin Williams of Southern Bancorp. You can view the video call here; Williams begins speaking around 6:30. The participants — who also included executives from community banks — have been helping the Treasury Department and Small Business Administration distribute $349 billion for the Paycheck Protection Program.
Community banks are eager to make loans to help their small-business customers stay afloat while the economy remains shut down due to social distancing, but many face a significant hurdle: They don't have enough deposits on hand to meet loan demand. As a result, small banks have been turning with more frequency to deposit placement firms like StoneCastle Partners in New York to help to secure the funding they need to offer bridge loans or participate in the federal government’s emergency small-business loan program. In the last week, Farmers & Merchants Bank in Miamisburg, Ohio, has gone to its “absolute max” to draw $18 million from StoneCastle so it can quickly get loans into the hands of business clients suffering from the economic shocks of the coronavirus outbreak, said CEO Shon Myers.
Websites have crashed, phones are jammed and confusion reigns as businesses rushed at today's kickoff to get their chunk of the $350 billion Paycheck Protection Program. This is a race to save jobs in the present and the future, and to ensure that as many workers as possible keep their benefits and paychecks during the coronavirus lockdown. Because many banks only are accepting existing business clients, and some other banks aren't processing PPP loans at all, it's likely that many small businesses will get left out because they picked the "wrong" bank years ago.
CDBA and the major banking trades wrote congressional leaders to strongly urge that the provisions which would enhance and incentivize SBA's 7(a) loan program be included in the final CARES Act legislation. Private-sector banks and credit unions, whether they currently participate in SBA lending or not, will be turning to the SBA’s 7(a) loan program as the way to deliver capital and economic relief to the economy while conventional lending recedes in the wake of the current economic turmoil. However, in order to quickly stimulate essential lending, lenders need the tried and true enhancements that would encourage banks and credit unions to lend and borrowers to seek capital now.
The Federal Reserve will temporarily stop all examination activity for banks with less than $100 billion of assets as it shifts supervisory priorities due to the coronavirus pandemic, the central bank said Tuesday. The Fed is shifting its supervisory focus to monitoring and outreach to "help financial institutions of all sizes understand the challenges and risks of the current environment." The agency said it will be minimizing examination activities in order to do so, with the greatest reduction at smallest banks. The temporary shift will last until at least the end of April, when the Fed will reassess whether conditions have changed.
Banks and credit unions are eager to take advantage of newfound flexibility for restructuring loans battered by the coronavirus outbreak. Federal regulators and the Financial Accounting Standards board gave lenders a helping hand Sunday, agreeing that short-term loan modifications tied to the pandemic do not have to immediately count as troubled-debt restructurings. Normally, any concession made to a borrower would trigger classification as a TDR. In the aftermath of the financial crisis, restructured loans at banks topped $140 billion at the end of 2011. Clearly, regulators are hoping to head off a similar surge due to the coronavirus outbreak. The issue had also gained the attention of some lawmakers. Many banks, including Howard, the $4.4 billion-asset Camden National in Maine, and the $6.7 billion-asset Tompkins Financial in Ithaca, N.Y., started approving temporary deferments and other loan modifications for hard-pressed clients well in advance of Sunday's statement.
The stakes are high for the financial services industry as lawmakers battle over the details of a new stimulus package to provide economic relief for businesses and consumers affected by the coronavirus outbreak. Although Senate Democrats blocked a vote on a package sponsored by Majority Leader Mitch McConnell, R-Ky., a whole host of provisions benefiting banks, credit union and other financial firms appears still to be on the table in McConnell's plan and other proposals being floated on Capitol Hill. McConnell's package included several industry-backed measures intended to make it easier for banks to lend and protect client funds. His bill would authorize an expansion of Federal Reserve liquidity programs, delay a controversial new accounting standard for loan losses, give the Federal Deposit Insurance Corp. the authority to guarantee business transaction accounts, provide regulatory relief for troubled debt restructurings, and ease a capital requirement for community banks. Democrats, who decried Senate Republicans' package as putting corporations over workers and families, have offered up a number of their own proposals to help consumers in the midst of the pandemic. These proposals include a temporary cap on interest rates for consumer loans, a moratorium on negative credit reporting, and a temporary ban on overdraft fees. Here is a cheat sheet of the proposals that have been floated by Republicans and Democrats as Congress is working out how to provide relief to banks and consumers during the national emergency.
Restaurants and shops are closed across the U.S. to try to slow the spread of the coronavirus. The Federal government has started to address the resulting economic pain with an emergency declaration by President Donald Trump releasing $50 billion for public-health measures and congressional passage of a multi-billion dollar relief bill providing some paid sick leave and extended unemployment benefits, among other assistance. Fortunately, the U.S. Senate stepped up on Thursday to do more. Senate Republicans released a trillion-dollar economic recovery proposal that includes $1,200 direct payments to many Americans, reduces the tax liability of large corporations and provides support for ailing industries like airlines. A crucial part is a plan by Senator Marco Rubio of Florida for government grants and loans of up to $10 million to eligible small- and mid-sized businesses, conditional on those businesses retaining their employees during the crisis. As the legislative process continues, the bill can be improved. A critical step would be to ensure that government grants would extend to non-payroll expenses, such as rent. In addition, the size of the program needs to be significantly increased from its current $300 billion. Bolder action than Rubio has proposed is required. The coronavirus has delivered what could be a knockout blow to small business.
Congress is negotiating a sweeping stimulus package to offset the cascading damage wrought by the coronavirus. The package includes $500 billion for two waves of direct payments to taxpayers and an additional $500 billion in loans for businesses. To help small businesses specifically, those of us in the nonprofit small business lending space are coming together to ask Congress to apportion $1 billion of the $500 billion earmarked for businesses to go to the Community Development Financial Institutions Fund. The fund, which has strong bipartisan support, promotes economic revitalization in distressed communities throughout the country by supporting the work of the nation's network of community development financial institutions, or CDFIs. A supplemental appropriation of $1 billion to the fund will allow CDFIs across the country to leverage $12 billion in capital that will be deployed to communities in need.