House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer are pressing the Trump administration to set aside at least $10 billion in small business rescue money for minority banks and other community lenders, saying they’re concerned the aid is not reaching underserved, low-income areas.
The demand from the top Democrats comes as administration officials revealed plans to limit the flow of government-backed loans amid fears that the funding, which is designed to avert massive layoffs during the pandemic, will soon run dry.
Congress replenished the Paycheck Protection Program with $320 billion after an initial $350 billion in funding was exhausted April 16. Lawmakers agreed to carve out $60 billion for small lenders to dole out, but Democrats now say that might not be enough to ensure the loans get to some of the hardest-hit businesses.
The program is set to begin accepting loan requests again Monday morning, and banks expect to unleash a huge queue of applications. In preparation, the Small Business Administration, which is running the program, on Sunday told lenders it planned to pace the number of loans processed in its system.
The agency will cap the dollar amount of loans that individual banks can originate at about $60 billion, which will limit the participation of the country’s biggest lenders. Lenders with less than $50 billion in assets will not be subject to that ceiling. As the SBA tries to throttle the flow of loan requests, the agency told banks with a large number of pending applications that they would be able to submit them in a one-time, bulk filing.
In a letter late Saturday to the Treasury Department and the SBA, Pelosi, Schumer and four other key Democrats asked the administration to use its administrative power to set aside $10 billion in loan funding to be disbursed by minority lenders and community development financial institutions, which focus on borrowers who lack access to traditional banks.
“These institutions’ specific mission to serve low-income, rural and minority small business owners and communities uniquely positions them to increase the amount of PPP loans that reach our underserved businesses,” they wrote. “These businesses are the heartbeat of the diverse communities they serve and are particularly vulnerable during this crisis.”
Lawmakers who signed the letter included House Financial Services Chairwoman Maxine Waters (D-Calif.), House Small Business Chairwoman Nydia Velazquez (D-N.Y.), Senate Small Business ranking member Ben Cardin (D-Md.) and Senate Banking ranking member Sherrod Brown (D-Ohio).
The request underscored concerns that hundreds of billions of dollars in aid would fail to reach multitudes of some of the most vulnerable small businesses and their employees. The worries were compounded by the fact that large companies and firms with access to other forms of financing were able to secure the government-backed loans before the first round of funding was exhausted.
The loans are enticing because they carry a 1 percent interest rate and can be forgiven if businesses maintain their payrolls for eight weeks.
Banks were growing increasingly frustrated with the Trump administration over its hurried and rocky rollout of the Paycheck Protection Program. Treasury has taken the position that the latest round of funding will be enough to meet demand, which banks say is unrealistic based on the vast number of applications.
Treasury Secretary Steven Mnuchin has said he expected this to be the “last tranche” of funding. Behind the scenes, Mnuchin and other Treasury officials have also told banks they believe it will be enough money, sources familiar with the matter said. A Treasury spokesperson said Saturday that the total funding for the program is expected to cover 60 million workers, which is the department’s estimate of the employment of small businesses.
“This second round of funding for PPP has been set up to fail,” one bank executive said. “No one realistically thinks that there is enough money to meet the demand. There are threats from Congress about investigations and hearings while special interests apparently continue to lobby to gain access. Without clear rules and expectations, it is an impossible position for the banks.”
In their letter to Treasury and SBA, Senate Democrats said “neither the public nor policymakers are getting information in a timely or complete manner, and the administration’s process for requesting funds and making changes is backwards.”
“The first time Congress received a full data report on PPP was April 14, almost a week after the Administration announced PPP was running out of funding and requested an additional $250 billion,” they said.
The lawmakers urged the administration to bolster transparency around the small business aid efforts, including the Paycheck Protection Program and separate Economic Injury Disaster Loans. They said they expected the SBA to publish the company names and addresses of Paycheck Protection Program borrowers and lenders, including loan amounts.
“This reporting is essential to making sure these programs are reaching all small businesses we intend to assist,” they said.