Late Thursday, the government made some changes to the Paycheck Protection Program in response to bankers' concerns. The Wall Street Journal has the details, including an increase in the interest rate for these small business loans to 1% and the creation of liquidity facility for the purchase of these loans. I'd love to hear what you're thinking about this program. Will it work? Do you think it will help your customers?
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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network, LLC
Arlington VA
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Original Message:
Sent: 04-02-2020 17:27
From: Barb Rehm
Subject: Weekly News Roundup
President Trump extended the government's social-distancing guidelines through April 30 while noting best-case estimates envision 100,000 to 240,000 of us could die from the coronavirus. It's disconcertingly unclear whether we should be wearing masks, but there is some good news out Washington and California, where the new-cases curve appears to be bending.
And one last note before we get to all the other stories you might want to read this week: my new colleague, Rob Blackwell, is launching a podcast next week that features an interview with former ICBA CEO Cam Fine. I'll be sure to send you a link to the podcast when it's available.
"Coronavirus Emergency Loans: Small Business Guide and Checklist"
A cornerstone of the $2 trillion economic rescue package is the "Paycheck Protection Program," which will funnel $349 billion through the Small Business Administration's 7(a) program to help companies stay afloat during the coronavirus crisis. This program is a no-brainer for both borrowers and lenders. The money is free to small businesses – no fees and no repayment in a lot of cases – and poses no risk to lenders and provides a source of fee income. I know you're getting lots of great information on this program from your national and state trade associations, but this link from the U.S. Chamber of Commerce could be useful to your small business customers. It's clear and concise and will answer most of the questions you get from potential borrowers.
"Top U.S. Banks May Shun Small-Business Rescue Plan on Liability Worries"
Hmmm, maybe the program isn't such a no-brainer? Reuters reports that bank executives are balking, worried about financial and legal risks. "Their main concern is that the Treasury Department has said it expects lenders to verify borrower eligibility, and take steps to prevent fraud, money laundering and protect customer information under the Bank Secrecy Act, sources said. Banks are worried they could face regulatory penalties or legal costs down the line if things go awry in the haste to get money out the door, or get blamed for not moving funds fast enough if they perform due diligence the way they would in ordinary times, the sources said." So, it looks like the launch of this program may be messy, but I'm confident the government and the industry will find a solution. They have to because this program is key to the government's rescue efforts.
"How the Coronavirus Response Could Transform SBA"
American Banker has a great story on the challenges facing the SBA as it tries to move $349 billion through banks to businesses affected by the coronavirus. It also contains an important point by Frank Sorrentino, CEO of ConnectOne in New Jersey: "I believe when we get through this, people are going to have more confidence in their banks. They're going to think very hard about the relationship they thought they might have had with some nonbanks. I actually believe they'll come back to banks in a big way."
"Washington Quietly Prepares a Bank Rescue - Just in Case"
Did Dodd-Frank work or not? This Politico story doesn't directly raise that question, but it certainly hints at it. The government's $2 trillion corona-related rescue resurrects a variety of tools used during the 2008 financial meltdown, including the FDIC's transaction account guarantee, or TAG. Small banks pushed for this and won while big banks said it wasn't necessary. It's yet another reminder of the industry's big-small divide. But TAG is not yet a done deal because Congress left it up to the FDIC whether to proceed or not, and it's possible the agency will wait to see how the Fed handles money market mutual funds. The central bank has said it would help a fund that gets into trouble, but that is not the same thing as backing ALL money market funds as the Fed did in 2008. If the Fed does end up backstopping the money markets and FDIC does reconstitute TAG, industry critics will argue Dodd-Frank did not work. If that's what policymakers conclude, it could lead to stricter bank regulation.
"With $10M, Eastern Bank Donates to Charities, Food Banks, Establishes Loan Funds"
This story in a small Massachusetts newspaper illustrates of how you can get great press for helping your community.
"High Anxiety Among Energy Lenders as Oil Prices Plummet"
With oil prices down 70% since January, regulators want banks in Texas to report problem credits more frequently.
"How Powell and Mnuchin Became the Duo in Charge of Saving the Economy"
Fed Chair Jay Powell and Treasury Secretary Steve Mnuchin need each other.
"The Fed Transformed: Jay Powell Leads Central Bank into Uncharted Waters"
You may not want to read yet another story on all the things the Fed has done to bolster the economy, but this The Wall Street Journal piece is quite good. It's comprehensive, has lots of interesting detail, and gives a sense of how markets are reacting.
"After Coronavirus, Branch Banking Will Be Very Different"
As this crisis evolves, retail banks need to keep adapting. This Financial Brand story outlines eight areas worth considering including consolidating branch traffic and using interactive teller machines.
"Leading a Consumer Bank Through the Coronavirus Pandemic"
Lots of good information and things to think about in this new McKinsey & Co. report.
"What's Going to Happen to the Smaller Banks, the Community Banks"
Seeking Alpha predicts the coronavirus will speed the industry's consolidation.
"After Suspending Dividends, Banks Need to Trim Pay"
This The Wall Street Journal article is focused on European banks, but it makes a point worth considering: should bank executives cut their pay before the economy worsens and critics start blaming "fat cat" bankers?
"10 Digital Miscommunications - and How to Avoid Them"
This is a great – and needed – guide to making the most of communicating by email. Number 8 is my downfall.
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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network, LLC
Arlington VA
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