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Small business rescue earned banks $10B in fees

490 points by gnrlbzik 6y ago

solarhoma 6y ago
No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years.
- gnrlbzik 6y ago
  I hope so too, so at least it is in the limelight of what the heck goes on.
- Ididntdothis 6y ago
  There will be plenty reporting about corruption and nothing will happen. This is just a continuation of 2008. People have accepted this corruption as normal.
  - seph-reed 6y ago
    I solemnly swear to stand by those who fight corruption, even when they go too far I will recognize and respect their intent, I will remember them as heroes, and I will do everything I can to make their sacrifice not be in vain.
    - covidacct 6y ago
      Xi Jingping consolidated power by rallying people around the flag of anti-corruption. Same with Putin. Obviously, neither of those people is anywhere close to non-corrupt. Don't rally around anti-corruption. Rally around accountability, oversight, openness, and balances of power. Doing things right is harder than calling out others for doing things wrong, and plenty of horrible corrupt people are all too happy to call out wrong-doers. Support people who do things right, not people who complain about others doing things wrong.
      - Ididntdothis 6y ago
        “Xi Jingping consolidated power by rallying people around the flag of anti-corruption. Same with Putin. Obviously, neither of those people is anywhere close to non-corrupt.“ So did trump with the talk of “deep state” and the “swamp”. It’s always the same playbook.
    - silverreads 6y ago
      Stand with whistle blowers, and stand against anyone who seeks to punish them. The correct way to blow a whistle is as loudly as possible for all to hear. Anyone who says otherwise is driven by profit, and profits being wiped out IS the most appropriate punishment for corruption.
  - drawkbox 6y ago
    Every decade this will playout now. If recessions actually helped reduce income inequality and directly triggered UBI or some other system, more like the types of policies that were enacted after the Great Depression, you can bet there would be many less recessions. As of right now, it is an every decade, or maybe less now, wealth extraction market raider party. Why wouldn't there be as nothing in the market or policy pushes back on it. We need a new Teddy Roosevelt or FDR, someone from wealth that will shake it up, break up companies at the top, bring back to markets for all again, FDR's moves (SEC, FDIC, Social Security which buys half of all treasuries) made the most investable market in the world for nearly a century. The market raiders are back. What made the Roosevelt's unique was that they were from mega wealth, but they created a market and system that all classes benefitted from. Other wealth hated them [1]. FDR/Teddy put in more safety nets and the market made a great investable area for the investor class. To this day Social Security and the SEC still stand and they were just that, investments in the country and part of fair capitalism instead of Gilded Age type predatory capitalism. > As the New Deal took hold, and as FDR prepared to run for re-election in 1936, the Liberty League launched a major effort to unseat him. In the end, however, the wealth behind the Liberty League sealed its fate. Never one to shy away from “a good fight”, FDR took on the forces wealth behind the Liberty League and other like-minded groups in a devastating full frontal attack. Characterizing the League as a tool of what he called “selfish big business,” FDR would go on to remind the public that the wealthy interests behind such groups tended “to consider the Government of the United States as a mere appendage to their own affairs.” Indeed, based on the experience of the late 20s and early 30s, he continued, we “know now that Government by organized money is just as dangerous as Government by organized mob.” He then fully acknowledged their contempt, when he famously said: > Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master. > FDR won the 1936 election in an unprecedented landslide, taking 46 states and more than 60% of the popular vote. The American Liberty League never recovered; and as for fascism, the United States would go on to destroy it, not only through the military might we unleashed during the Second World War, but also through the effective regulation of capitalism that was established in the New Deal. Social Security buys half of all t-bills while it is regressive so that it flew under the radar more from being cut by wealth but allows many people to have good retirements or people without parents or disabled that need assistance, highly underrated program that Republicans want to get rid of. Social Security is an investment so that the low end is brought up and not a crisis. SEC made our markets trustable unlike overseas for a long time and even now, who trusts China's market? SEC made US an investable market for the world and all classes. Private equity is killing that off and the public markets are constantly under attack. Wall Street forgot that the SEC is here to make investments sound, which leads to more investment. We need another FDR or Teddy Roosevelt badly. Teddy would definitely round house kick many 'representatives'. FDR would call us fearful as we vote and do policy based on fear not opportunity anymore. We need a Newer Deal to defeat fascism and Gilded Age resurgence, like they said it was a national security issue then as it is now "and as for fascism, the United States would go on to destroy it, not only through the military might we unleashed during the Second World War, but also through the effective regulation of capitalism that was established in the New Deal. Time for a Newer Deal is overdue. [1] https://rooseveltinstitute.org/how-fdr-took-forces-wealth-and-power/ https://rooseveltinstitute.org/how-fdr-took-forces-wealth-an...
- kitotik 6y ago
  It’s a shame that finding the corruption in a few years is generally the best case scenario in these type of situations. Long after the public has any real memory or care to actually do anything about it. A handful of scapegoats get prosecuted and the world continues on as normal.
  - solarhoma 6y ago
    Nail on the head with that comment. The scapegoats are usually the ones who committed gross amounts of fraud or they are not influential/connected enough to avoid prosecution.
- chosenbreed37 6y ago
  > No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years. I find this perspective interesting. Presumably the fees charged by the banks form part of their revenue and their profits. I would have thought that this funds the salaries and bonuses from the CEO to the janitor and everyone else in between. The bottom line is the people "getting their cut first" could potentially include many people commenting on this thread. Disclosure: I have worked for one or two banks directly or otherwise. I'm not disputing that there may be corruption/fraud going on. But I see that as a separate issue.
- Aunche 6y ago
  > But, the rich need their cut first. Everyone needs their cut to do work...
lordnacho 6y ago
Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank to decide this with its own money. - Part of it is regulatory. We don't want money laundering. Have to ask whether this really ought to be up to law enforcement to do, or as it is now a massive burden on the banks, which also have bad incentives. What if we had the central bank give everyone an account that was interoperable with the rest of the banking system? Then if you want to hand out money, you just do it. If you want to borrow money, find a lender.
- theplague42 6y ago
  There have been suggestions over the years for the post office to offer banking services. They have branches literally everywhere, they're independent yet still a government agency, and have no profit motive.
  - alexpetralia 6y ago
    I could not imagine the amount of financial, operational, technological and regulatory infrastructure that would need to be ported over, however.
    - toomuchtodo 6y ago
      We have the US Digital Service [1] and 18F [2]. We (US citizens) should demand Congress to provide them the authority to deliver the modernization required to implement such infrastructure. Use Login.gov [3] to provide for digital identity management of these accounts. Perform in person KYC using USPS and DHS/CBP branches, and identity proofing online using traditional service providers (IRS already does this for your IRS account, SSA might, I haven't checked recently). The path to success is straightforward. EDIT: So I did some digging, and it appears that the US Treasury has partnered with Comerica Bank in Texas to provide this sort of service to Social Security benefit recipients [4] (because the Treasury requires electronic payment of social security benefits, and you can't leave seniors unbanked). The challenge is going to be to find Congressional reps supportive of bringing this functionality in house, which isn't unreasonable IMHO, to provide this as a utility to all US citizens. I have already fired off a FOIA request to get details on the contract between Treasury and Comerica. [1] https://www.usds.gov/ https://www.usds.gov/ | [2] https://18f.gsa.gov/ https://18f.gsa.gov/ | [3] https://login.gov/ https://login.gov/ [4] https://www.usdirectexpress.com/ https://www.usdirectexpress.com/
_iyig 6y ago
Wish I lived in a world where $10 billion in graft got someone arrested. Jailed, if I’m recklessly ambitious.
- deleted 6y ago
  [deleted]
eezurr 6y ago
That's about a 2% fee which doesn't seem out of line with other transaction processing fees that are out there. That fee probably has built in insurance for fraud and other failures. And also the cost of the transaction. I bet that fee is the same fee as a year ago?
- AndrewKemendo 6y ago
  That's exactly it. In effect it cost 2% to use the banking system to complete this transaction. With these kinds of insane numbers ($350B!) even tiny percentages are huge.
- solarhoma 6y ago
  Yes but these fees are huge with larger loans. Why are the fees percent based rather then flat rate? The banks giving out these loans are not taking on any risk with the loan. So how are they getting away with large fees associated with the loans?
  - eezurr 6y ago
    Because successful fraud takes everything.
    - ric2b 6y ago
      Not from the bank, they just roll back the transaction. Some merchant might end up on the hook, though.
    - burmer 6y ago
      If the money is to mitigate risk, then why can't the fee be (mostly) refundable? The bank takes on the risk of processing some enormous transaction and takes a percentages of the transaction as insurance in case of fraud. Then after a period of time with no issues, the money flows back, less some nominal amount for the actual work involved processing the transaction.
- gadders 6y ago
  Doctors aren't working for free, so I'm not sure why bank employees are expected to.
lonelappde 6y ago
The headline misses the point. The total means nothing out of context. What's the fee per loan? >Loans worth less than $350,000 brought in 5% in fees while loans worth anywhere from $2 million to $10 million brought in 1% in fees. I've read that the average loan is $50K, so that's $2500 per loan, which seems high, And 1% of a $1millio loan is ridiculous, as it's not subsidizing the smaller loans, AND these loans are scaled to #employees, so the size of the loan is proportional to the #people benefited and so the fees should be per loan (cost based), not per $ lent.
- lmeyerov 6y ago
  The root problem was Trump team didn't put in enough money, included too many rich businesses, and didn't require a fair order. Banks knew they didn't have enough meat yet were feeding a frenzy: of course the big dogs pushed through to the front. So now we blame Banks instead of Trump. Yet if Trump repeats the plan without prioritizing actual small businesses, the co's big enough for in-house accountants and big loan relationships will keep getting the lion's share.
  - beervirus 6y ago
    > Trump team didn't put in enough money You know, the president doesn't write legislation or appropriate money. That's on Congress.
    - lmeyerov 6y ago
      Yes, because we know exactly where the buck doesn't stop. They're getting ready for round 2, and if the rule setters do the same thing, we'll get the same result. People want to blame the banks -- and banks share the blame -- but they are not the root cause. The legislated rules are like physics, you don't get mad at the water flowing wrong but at the people who planned the river. The planning committee is doing all sorts of weird stuff, but the people with the most control is republicans, and via veto etc, the president. Those are the people deciding to whom the river flows and with how much water. They knew there would be more applicants than money, and the bigger applicants would have accountants and bank managers ready to leap, yet they still didn't put any priority order in for small businesses. Instead, they spent that time putting in carveouts for big hotel owners. If you think they didn't make it fair, it's their blame. I don't even know why we're doing this via banks to beginwith, that just adds a massive & confusing middle layer of uninvolved for-profit companies. Feels like not knowing how to use the system, or corruption... which is again, a problem upstream.
drawkbox 6y ago
Anytime needed stimulus goes through banks, don't be surprised if it never makes it out of said bank or to the intended locations as they are self-preservation first as expected. Banks should help the river and get access to the flow, they shouldn't be a dam that holds back the flow, filtering only for their customers or large companies masquerading as "small business". Had policy sent the money directly to companies from the SBA/IRS, customers then would choose the banks to service that guaranteed government grant/loan essentially. Much like the FAFSA system for student loans, you get your amount, then a servicer handles the actual loan but there is literally no risk to them as it is guaranteed. Why we sent guaranteed money to be held up in banks and did information and credit checks, on already known information from the IRS, well we know why, to pilfer it. Had they ran it a better way, using the actual market, directly to businesses/individuals, that is lots of money out there for banks to go get and the market knows it is out there as well. Markets like knowing hundreds of billions and trillions are out there to go get. Make them earn the fees if they must. Instead, it was a direct transfer from the Fed and treasury to QE that was pilfered by the usual suspects: hedge funds, market makers, foreign funds, oligarchs, wealth/value extraction ops, naked short selling, short and distort and more. The SBA money was pilfered by banks and large companies. The 'stimulus' for the economy, routed around the entire actual economy, never reaching individuals or true small business. Companies that received SBA funding many are listed on the public markets. I doubt most people would call "small business" companies that have IPOed and been on the market for years. These companies have other access to funds, they just wanted the 1% loans and took from hundreds and thousands of small businesses that supply them, subscribe to their services, buy their software, consume their products, feed them and other services. Examples of companies that got SBA PPP and other [1]: - Drive Shack Inc. (DS) $5,276,742 - Golf company like TopGolf... wow. That would have funded many, many small businesses. - New Age Beverages Corp. (NBEV) $6,868,400 - Revenues 250~ million... Isn't it safe to say if you have a stock ticker and one of 3812~ companies on the public markets that you aren't "small business"? How to fix it... We need a micro small business emergency stimulus. - Less than 50 employees across ALL locations, less than 2-3 million revenues and sole proprietors. - There can be no gaps to allow this to go to the already serviced. - Include sole proprietors and really small companies (< 10 employees) with priority that matches their numbers in the market. The current "small business" designation is really small to medium to large businesses. However, sole proprietors are 73% of all small business. America is mostly small businesses. SBA/Chamber of Commerce has 30.2 million for companies under 500 people. [2] Lots are sole proprietors or very small companies with < 5 people. 22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner. 99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer. Small business is the engine of America. Small businesses comprise what share of the U.S. economy? Small businesses make up [3]: - 99.7 percent of U.S. employer firms, - 64 percent of net new private-sector jobs, - 49.2 percent of private-sector employment, - 42.9 percent of private-sector payroll, - 46 percent of private-sector output, - 43 percent of high-tech employment, - 98 percent of firms exporting goods, - 33 percent of exporting value. It is time to help the lower/middle, sole-proprietors and small business or America as we know it is much much different after this. About 8 trillion in 'stimulus' and QE, at a cost of 20k to every citizen, for that individuals got $1200 many haven't got yet and small businesses finding out how small of fish they a really are. The banks helped the big fish, but the big fish need the small fish to survive. Money trickles up and down and all around, but money only trickles where other money is found. This market is broken for lower/middle and people or small business. It is gangbusters for wealth and value extraction ops. How long can this go on? The stimulus for individuals, families and small business is vaporware, time for some vaporwave as we fade away into the ether. Good luck wealth and big business with no one to skim from and no small business to use as research and development or suppliers. Maybe it needs to be framed in the way that it is an additional bailout for their own companies and interests. Most of that money makes it back into banks, larger companies, wealth, top end etc. If consumers have purchasing power and small companies buy up their services, supply them, and are where they make their money broadly, maybe their self-interest will align with the actual market. Our policies already downplay the importance of wages, consumer base purchasing power and just keep piling on the backs of a finite resource. How long do can the wealth extraction keep happening before there is none left and stagnation takes over in a big way? Rich people and large companies can only buy so much, the long tail of small businesses and consumer purchasing power is America, it is under attack. Real wages and purchasing power have barely budged in 40 years [4]. Worker share of GDP being on a long dwindle down [5] and velocity of money is off a cliff [6], that is why we are so stagnant. Richest 1% of Americans Close to Surpassing Wealth of Middle Class [7] Money trickles up and down and all around, but money only trickles where other money is found. If there isn't purchasing power or demand, that is hard to create. Why are we widdling it down day by day, year by year, decade by decade? What happens when The Giving Tree is a stump? [1] https://www.wsj.com/articles/these-are-the-public-companies-that-got-small-business-loans-11587493742 https://www.wsj.com/articles/these-are-the-public-companies-... [2] https://www.chamberofcommerce.org/small-business-statistics/ https://www.chamberofcommerce.org/small-business-statistics/ [3] https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371. [4] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... [5] https://fred.stlouisfed.org/series/W270RE1A156NBEA https://fred.stlouisfed.org/series/W270RE1A156NBEA [6] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V [7] https://www.bloomberg.com/news/articles/2019-11-09/one-percenters-close-to-surpassing-wealth-of-u-s-middle-class https://www.bloomberg.com/news/articles/2019-11-09/one-perce...
volak 6y ago
Banks make somewhere around 450 billion in revenue each year. https://www.statista.com/forecasts/409713/banking-revenue-in-the-us https://www.statista.com/forecasts/409713/banking-revenue-in... This program made them 1/3 of 1 month's normal revenue
- megous 6y ago
  That also means that they could have easily waived the fees without taking much of a hit, just out of solidarity.
  - volak 6y ago
    Businesses are not a charity - according to reported Q1 earnings last week they're losing million of dollars everyday just keeping the lights on. They've lost far more even with the fees they collected from this program. As someone said above - doctors are not working for free, why should bank employees?
    - viklove 6y ago
      So businesses are not a charity, but the US taxpayer is? Why do we keep sending money into the banking system with no strings attached? In 2008 as well as now, banks have collected billions of dollars with no strings attached, and engaged in fraud and corruption with no consequences. Doctors are not working for free, no, but they also didn't just vacuum up 10B of cash meant for patients either. Only the banking system has the tenacity and lack of shame to do such a thing. > why should bank employees I don't think anyone in this thread is talking about bank employees.
      - volak 6y ago
        This program is vastly different from the 2008 bailouts. The banks collected a modest fee for doing work spreading money around to people who need to pay employees and rent. In this situation the banks are simply a truck driver and small businesses are your local grocery store. Im not going to fault the truck driver for asking to be paid to do work. The 10B they collected was not from the government - it was paid by businesses applying for loans.
tempsy 6y ago
The thing here is the bank isn’t taking any risk here. All the loans are guaranteed by the government. So banks are really just a middle man that is transferring money from the SBA to a small business’s bank account and taking on zero credit risk. The government has the ability to send funds directly to people obviously...that’s how they are sending the stimulus checks and send tax refunds. Banks are basically being compensated for doing paperwork.
- agilebyte 6y ago
  Paperwork AND doing due diligence on the companies more effectively than the government can right now.
  - tempsy 6y ago
    The point is the amount they are earning is overly generous for the work completed. Most banks are only working with existing customers, so the DD is 99% complete. Few are reviewing applications from brand new clients.
    - _curious_ 6y ago
      Not to mention that the banks are biased and giving no risk handouts to their most valuable clients (those at greatest risk of defaulting on obligations to the bank).
    - asah 6y ago
      "existing customer" due diligence seems like fair profit...
    - cm2187 6y ago
      Even then, SME clients don't do operations (like loan applications) with their banks every month, so that doesn't mean the DD is up to date (bank regulations change almost on a weekly basis).
    - agilebyte 6y ago
      Yes, but the point is DD was done (last year or today). Effectively the government is paying the banks for the work they've done creating a relationship with the clients, which includes DD.
brenden2 6y ago
We live in a world where there are huge rewards for anyone with the right connections. Banks provide very little value, they are basically a glorified SQL database at this point. They're not taking any risk, they're not really creating any economic value, and yet the rewards they receive are enormous. Watching all this going on makes me feel so disillusioned, and I don't want to participate in society anymore.
- specialist 6y ago
  I oppose the financialization, not the banking.
erikig 6y ago
Some quick numbers: - 10bn in Fees - 4975 Lenders - $2m per Lender I think this number doesn't seem unreasonable given the fact that the banks themselves are businesses - they have employees, training, technology, risks etc.
- deleted 6y ago
  [deleted]
- triceratops 6y ago
  Is it a ton of extra work for them (the banks) though? With the way things are banks are no longer doing much of other things they normally would - business loans, mortgages, auto loans etc. This program would merely occupy those otherwise-would-be-idle employees' time. And the banks aren't loaning out their own money either, so where's the risk?
  - heartbreak 6y ago
    > Is it a ton of extra work for them though? Anyone who attempted to obtain a PPP loan from their local bank knows that yes, it was a ton of extra work for them.
    - triceratops 6y ago
      For the bank or the applicants? And was it on top of work that the bank was already doing? Because as I argued, many of the bank's normal functions were effectively turned off so it's not extra work for the bank. It replaces the other work they'd be doing.
hateMyIdeas 6y ago
The money ran out before our company could get 1k. Another example how the 10% is taxed to pay for the 0.1%.
antoncohen 6y ago
Lawsuits claim banks prioritized loans to large businesses. JPMorgan disputes those allegations, claiming it processed loans fairly. By fairly it means it put all the small business loans in one large FIFO queue, and all the large business loans in a separate much shorter FIFO queue. Effectively prioritizing large business loans.
- _curious_ 6y ago
  Interesting...what are your sources here?
  - antoncohen 6y ago
    This article and the Bloomberg article[1] that is currently on the front page. From this NPR article: > We funded more than twice as many loans for smaller businesses than the rest of the firm's clients combined," the bank said in a statement to clients. "Each business worked separately on loans for its customers. Business Banking, Chase's bank for our smaller business customers, processed loan applications generally sequentially" Note "Each business worked separately on loans" and "processed loan applications generally sequentially". They divide their consumers up into large business and small business groups, assigning dedicated staff to each group. There are far more small businesses, making the queue for small businesses much deeper. Even though there were more workers (staff) pulling from the small business queue, there weren't enough to make up for the discrepancy in queue depth. From the Bloomberg article: > More than 300,000 customers of JPMorgan’s business banking unit, which serves smaller firms, applied for loans through the Paycheck Protection Program > By comparison, about 5,500 larger, and sometimes more sophisticated, customers of the commercial banking business applied for funding. > The data reveal that, in the race to get a loan in the first-come, first-served program, larger businesses had a leg up over smaller ones -- even when applying through the same bank. > its commercial bank, with fewer clients, was able to process applications faster, said a person familiar with the matter. [1] https://outline.com/HacVTV https://outline.com/HacVTV
jhwang5 6y ago
Bank charging 2% on this flow is criminal, in the sense that interest rates are nearly negative, so 2% is practically 10, 100X the rates banks can earn otherwise. It's basically free money shoveled into banks, a massive boon.
- RubenvanE 6y ago
  While I agree that the fee might be high, the comparison between the two is is a false equivalency.[1] A transaction fee is something completely different from an interest fee. The first is a one time fee while the other is continues over time. [1] https://en.wikipedia.org/wiki/False_equivalence https://en.wikipedia.org/wiki/False_equivalence
  - jhwang5 6y ago
    No. whether I charge you a fee through an explicit transaction cost, or I charge you based on a hidden spread to some rate, it’s still revenue from the perspective of banks. It’s a common trick used by consumer banks (to masquerade interest based spreads as no fee loans).
- wutbrodo 6y ago
  Why would annual interest rates be a relevant baseline for a transaction fee?
  - jhwang5 6y ago
    Because banks borrow short, lend long. This is an exogenous fee generating bonanza for banks. It’s not that much different from someone selling you masks at a steep price. issuing these loans do not cost banks anywhere even close to what they charged.
- the_watcher 6y ago
  If they're charging interest, their fees would be a lot higher than 2%.
- refurb 6y ago
ackbar03 6y ago
Why am I not surprised
exabrial 6y ago
Side Note: NPR's journalism of late has been refreshingly non-political. Every article on CNN right now for me is a click bait headline with some weird mention of Trump like it's some sort of requirement to get it to go to press.
- Spellman 6y ago
  I thought that's the norm for NPR?
  - clairity 6y ago
    npr has never been apolitical and has gotten more political over time, through editorial choices like what stories they pursue/ignore, what angles they take, what guests they invite, the amount of airtime given to stories/guests, etc. they were overtly pro-clinton and anti-trump (as was i) during the 2016 election cycle, and lamented the election results for weeks afterwards. you see it with this election cycle and the covid coverage too.
  - exabrial 6y ago
    I guess I haven't spend a lot of time with them. But they earned a reader today by stating their findings and labeling their opinions correctly.
mihaaly 6y ago
I hope they will start some ad campaign soon with pretty words about how sensitive they are for the troubles of the society and how much they support all the efforts in these troubled times! Not controversial making profit on emergency measures, not at all! :/
1123581321 6y ago
We did our PPP loan for our agency through a small regional bank that bent over backwards to help local businesses understand the legislation and apply on time. The bank paid a bunch of salaries to be able to do this. It’s completely reasonable that they earned a small, disclosed-in-advance fee from our loan to pay for those operations.
- alistairSH 6y ago
  Banks took almost 3% of the total bailout funds for loans that have almost zero risk (government backed and almost exclusively made to existing customers). On a $350k loan, the fee was 5%, or $17.5k. On a larger loan, the fee as a % goes down, but the total value goes up. These larger loans, to my knowledge, carry no more risk, nor any more work by the bank. Yes, the banks should earn a minimal (and probably fixed) filing fee. No, they should not receive 3% of the amount set aside for small-business assistance.
  - 1123581321 6y ago
    I agree those numbers are accurate. If I understand correctly, you intend for $17.5k to be a shockingly high number, but smaller banks already receive percentage origination fees on large loans that cover fixed operation costs and are not overly profitable.
kqvamxurcagg 6y ago
Larger customers will have relationship managers at the bank who guide them through the process step by step. Their customers likely even have their cell phone number so communication is good and low friction. With the support of accountants and lawyers who will have all information available to hand, I'm sure the application was a breeze. The current crisis has been a real eye opener. Our entire government and economic system is bailing out corporations and preserving the wealth of asset owners at the expense of taxpayers and society. This should be a perfect opportunity for smaller companies to step in and win business from corporates who have engaged in monopolistic practices for years and engaged in excess risk taking. But that isn't being allowed to happen because corporates are judged as too big to fail. I find this whole system intolerable. It feels like we need to add more restrictions against corporates. Restrict their ability grow via M&A, restrict executive compensation to a multiple of median income and stop them growing too large. I say this as a capitalist.
brentm 6y ago
Not a popular opinion but considering the effort involved, should they not have earned fees? Should they have donated their time and resources? I'm sure it took a monumental effort to pull it together with the lack of clarity being handed down and the volume of loans to process in a short period of time. If the government wanted to do for $0 fees they would have figured out how to do it themselves. If a private business has to do it then they should be paid. If we are complaining about this what about 3M and everyone else making tons of money off of PPE? Obviously it isn't very palatable to hear about others making money off of this kind of thing but we need incentives for people to step up and help.
- celticninja 6y ago
  could they have done it at cost? Yes. Did they need to make a profit off this? Probably not. Are they relatively unaffected (due to prevalance of online banking and also reduced costs due to physical banks being closed)? Yes.
  - krustyburger 6y ago
    The banking industry is highly affected by the economic conditions that currently obtain. Default rates for all kinds of loans are skyrocketing, and this may just be the beginning of an extended period of turmoil that will rock the balance sheets of banks around the world. I don’t think they deserve undue sympathy, but they are far from unaffected.
  - joncrane 6y ago
    Are physical banks closed? Wouldn't banks be an essential service?
  - pathseeker 6y ago
    Banks don't make money from "online banking". They make their money from issuing loans. A ton of those loans are going to go into default so banking is going to be hit just as hard as other businesses, it's just going to happen in 3 months instead of today.
  - deleted 6y ago
ss7pro 6y ago
Problem with the banks (and many other huger corporations in US ie: airlines) is that during prosperity all the profits are going to narrow set of people (board and investors) but during the crisis there's always bailout using taxpayers money to save them. It essentially means that profits stay with the wealthy while losses are being spread across the poor. This is no longer capitalism but communism where they ruling party (boards and investors) are getting richer without the risk.
- volak 6y ago
  The best analogy I use for logical errors such as this is - If you have a dependent - ie a child - whom you are a primary source of care. Should you qualify for a bigger helping hand than say, the 25 year old with no children? If you agree - then now imagine you have 500 dependents. Or in the case of some corps 500,000. You have half a million dependents who rely on you every other week for a paycheck. Do you qualify for a larger helping hand than the 25 year old who lives alone?
  - ss7pro 6y ago
    I'm not saying bailout is wrong, but taxpayers should be handsomely rewarded for those bailouts (at least 20% APR) as those bailout companies were making a lot of money on taxpayers and never shared any profits with them (they even avoid paying taxes though various financial means).
    - volak 6y ago
      Agreed - which is why I strongly support the administration demanding equity in the companies that are receiving money. And I only support money given as loans which must be paid back. Any kind of grant money must be exclusively used for payroll or other qualifying operating expenses. The current stimulus is not perfect but its pretty good and FAR better than 2008
  - viklove 6y ago
    It's not a "logical error," it's an "ideological error," at least from your perspective. Banks are not parents, and small businesses are not "dependent children," so I'd say you're making a bigger logical fallacy called a false equivalence. > Do you qualify for a larger helping hand than the 25 year old who lives alone? No, because the "helping hand" you're getting is not helping the "children" eat in this situation. None of this $10B is going to small businesses, is it? It's literally just a payday for the bank. If you give a parent $400 extra a month, that is going towards daycare, food, etc. for their child. Your metaphor misses the mark completely.
ksj2114 6y ago
This fee doesn't seem that unreasonable, but I do think best solution is for businesses / people to have deposit accounts at the fed
carapace 6y ago
Seems unnecessarily divisive at a time when we need to pull together.
chris_va 6y ago
Maybe this is an unpopular opinion amidst the pitchforks, but do we not have better things to worry about at the moment? The system is inefficient and unfair, great lets put it on the list of things to fix, but a ~3% fee is not world ending (unlike some other things) and seems like a low priority.
- vharuck 6y ago
  We'll likely need to pipe more money into the system in the near future, so it makes sense to identify and plug some of the leaks.
- JSavageOne 6y ago
  How is a 3% fee not outrageous when there is no work being done? If 3% of the $1,200 stimulus checks owed to individual citizens went to private banks, would you say it's not a big deal? (if so I hope you're not running for Congress)
  - chris_va 6y ago
    Apparently not, though given our current congressional representatives, are you sure that is a good metric to judge rational decision making? 3% is 3%. It's nonzero, so that's unfortunate. It's not a large fraction, so it's just not a time sensitive problem. Is it worth tying up media, political and financial resources in blaming+lawsuits over the optics of a 3% fee, instead of just waiting to deal with it next year? Your question implies that 3% of loan applicants get nothing because of this fee (which is inaccurate, since congress will just authorize more loans as long as it's politically convenient). As I said, it's unfortunate, but it's not world ending.
    - JSavageOne 6y ago
      I never said it's "world ending", it's a problem, and we need to fix it. What a moronic thing to say "let's just deal with it next year". If the mafia was extracting 3% of federally guaranteed loan money, your response would be "it's not a big deal, let's just deal with it next year because we can just authorize more loans?" I hope you're never elected to public office.
GoodJokes 6y ago
Just Wikipedia rentier capitalism. Banks are a scam. News at 11
tmaly 6y ago
This is all on Congress. They wrote this law that created these incentives for the banks.
bcx 6y ago
I'd like to see a version of this article and headline that figures out the effort required by the banks to administer a program like this. Quick read looks like 2.8% off the top, for 0 risk (10/349). Total businesses receiving loans was 1.6M (https://www.pymnts.com/loans/2020/sba-lenders-approval-ppp-loans/ https://www.pymnts.com/loans/2020/sba-lenders-approval-ppp-l...) Average money a bank made per loan was 10,000,000,000/1,600,000 (assuming all banks made an equal distribution of loans) Or $6250 per loan. Given that all loans ran out about 1 week after the program was started. I imagine the person effort per loan was pretty variable, but that's some pretty crazy capture by the banks. (Banking sector employs almost 1.5M people), So even if every employee working at all banks, was allocated to work on one loan each for a week. (HINT THIS DIDN'T HAPPEN) the annualized salary for each of these people would have to be 6250*52, or 325K, which it's not). I guess my question, is how was the decision made to offer banks such a big kicker for administrating loans with nonzero, but practically 0 risk? (of note, theoretically banks are going to need to do some serving of the loan over it's lifetime, and deal with this loan forgiveness program, etc.. so if that's the case and it's more like 2-3 weeks of person work per loan, you still get some pretty big numbers, but they feel a bit more sane)
- javagram 6y ago
  FWIW, the banks didn’t feel like it was 0 risk, many of them were doing a lot of due diligence, document checking, etc. because they were worried about it. I’ve seen stories of small business owners talking about how difficult it was to get the loan through due to having to go back and forth with documents etc. although I’m sure it varied per bank. 2.8% doesn’t seem like that much for me, especially considering the goal was to get the money out the door as fast as possible due to the emergency, and setting up and hiring a government bureaucracy to administer and give the loans would have cost far more in time than the solution of giving it through the banks.
  - dylan604 6y ago
    Why did it need to be a bank to begin with? Are banks involved when the government hands out low interest loans for natural disasters. Do they take cuts from that money? If so, I've never heard of it before. What about the 9/11 fund? Did banks get a cut of that money as well? Why is this situation different?
A4ET8a8uTh0 6y ago
I will admit that I am mildly aggravated by the roll out of CARES act for several different reasons. This is just a topping on the cake really. Yesterday, my wife told me that her doctor's office is furloughing 7 people ( not her, but I am sure next move will include her too ) so I do get a little sour when I find out that companies with built-in access to financing ( publicly traded companies ) got approximately surprisingly high chunk of those funds(1). Needless to say, I am not unbiased, because of this. It is however a little aggravating and a little reminiscent of 2008, where well connected get rescued, where the rest is left to fend for themselves. That is a recipe for pitchforks. 1. https://www.marketwatch.com/story/here-are-the-public-companies-that-got-coronavirus-aid-meant-for-small-businesses-2020-04-22?mod=home-page https://www.marketwatch.com/story/here-are-the-public-compan...

490 points by gnrlbzik 6y ago

No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years.

gnrlbzik 6y ago
I hope so too, so at least it is in the limelight of what the heck goes on.
Ididntdothis 6y ago
There will be plenty reporting about corruption and nothing will happen. This is just a continuation of 2008. People have accepted this corruption as normal.
- seph-reed 6y ago
  I solemnly swear to stand by those who fight corruption, even when they go too far I will recognize and respect their intent, I will remember them as heroes, and I will do everything I can to make their sacrifice not be in vain.
  - covidacct 6y ago
    Xi Jingping consolidated power by rallying people around the flag of anti-corruption. Same with Putin. Obviously, neither of those people is anywhere close to non-corrupt. Don't rally around anti-corruption. Rally around accountability, oversight, openness, and balances of power. Doing things right is harder than calling out others for doing things wrong, and plenty of horrible corrupt people are all too happy to call out wrong-doers. Support people who do things right, not people who complain about others doing things wrong.
    - Ididntdothis 6y ago
      “Xi Jingping consolidated power by rallying people around the flag of anti-corruption. Same with Putin. Obviously, neither of those people is anywhere close to non-corrupt.“ So did trump with the talk of “deep state” and the “swamp”. It’s always the same playbook.
  - silverreads 6y ago
    Stand with whistle blowers, and stand against anyone who seeks to punish them. The correct way to blow a whistle is as loudly as possible for all to hear. Anyone who says otherwise is driven by profit, and profits being wiped out IS the most appropriate punishment for corruption.
- drawkbox 6y ago
  Every decade this will playout now. If recessions actually helped reduce income inequality and directly triggered UBI or some other system, more like the types of policies that were enacted after the Great Depression, you can bet there would be many less recessions. As of right now, it is an every decade, or maybe less now, wealth extraction market raider party. Why wouldn't there be as nothing in the market or policy pushes back on it. We need a new Teddy Roosevelt or FDR, someone from wealth that will shake it up, break up companies at the top, bring back to markets for all again, FDR's moves (SEC, FDIC, Social Security which buys half of all treasuries) made the most investable market in the world for nearly a century. The market raiders are back. What made the Roosevelt's unique was that they were from mega wealth, but they created a market and system that all classes benefitted from. Other wealth hated them [1]. FDR/Teddy put in more safety nets and the market made a great investable area for the investor class. To this day Social Security and the SEC still stand and they were just that, investments in the country and part of fair capitalism instead of Gilded Age type predatory capitalism. > As the New Deal took hold, and as FDR prepared to run for re-election in 1936, the Liberty League launched a major effort to unseat him. In the end, however, the wealth behind the Liberty League sealed its fate. Never one to shy away from “a good fight”, FDR took on the forces wealth behind the Liberty League and other like-minded groups in a devastating full frontal attack. Characterizing the League as a tool of what he called “selfish big business,” FDR would go on to remind the public that the wealthy interests behind such groups tended “to consider the Government of the United States as a mere appendage to their own affairs.” Indeed, based on the experience of the late 20s and early 30s, he continued, we “know now that Government by organized money is just as dangerous as Government by organized mob.” He then fully acknowledged their contempt, when he famously said: > Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master. > FDR won the 1936 election in an unprecedented landslide, taking 46 states and more than 60% of the popular vote. The American Liberty League never recovered; and as for fascism, the United States would go on to destroy it, not only through the military might we unleashed during the Second World War, but also through the effective regulation of capitalism that was established in the New Deal. Social Security buys half of all t-bills while it is regressive so that it flew under the radar more from being cut by wealth but allows many people to have good retirements or people without parents or disabled that need assistance, highly underrated program that Republicans want to get rid of. Social Security is an investment so that the low end is brought up and not a crisis. SEC made our markets trustable unlike overseas for a long time and even now, who trusts China's market? SEC made US an investable market for the world and all classes. Private equity is killing that off and the public markets are constantly under attack. Wall Street forgot that the SEC is here to make investments sound, which leads to more investment. We need another FDR or Teddy Roosevelt badly. Teddy would definitely round house kick many 'representatives'. FDR would call us fearful as we vote and do policy based on fear not opportunity anymore. We need a Newer Deal to defeat fascism and Gilded Age resurgence, like they said it was a national security issue then as it is now "and as for fascism, the United States would go on to destroy it, not only through the military might we unleashed during the Second World War, but also through the effective regulation of capitalism that was established in the New Deal. Time for a Newer Deal is overdue. [1] https://rooseveltinstitute.org/how-fdr-took-forces-wealth-and-power/ https://rooseveltinstitute.org/how-fdr-took-forces-wealth-an...
kitotik 6y ago
It’s a shame that finding the corruption in a few years is generally the best case scenario in these type of situations. Long after the public has any real memory or care to actually do anything about it. A handful of scapegoats get prosecuted and the world continues on as normal.
- solarhoma 6y ago
  Nail on the head with that comment. The scapegoats are usually the ones who committed gross amounts of fraud or they are not influential/connected enough to avoid prosecution.
chosenbreed37 6y ago
> No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years. I find this perspective interesting. Presumably the fees charged by the banks form part of their revenue and their profits. I would have thought that this funds the salaries and bonuses from the CEO to the janitor and everyone else in between. The bottom line is the people "getting their cut first" could potentially include many people commenting on this thread. Disclosure: I have worked for one or two banks directly or otherwise. I'm not disputing that there may be corruption/fraud going on. But I see that as a separate issue.
Aunche 6y ago
> But, the rich need their cut first. Everyone needs their cut to do work...

lordnacho 6y ago

Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank to decide this with its own money. - Part of it is regulatory. We don't want money laundering. Have to ask whether this really ought to be up to law enforcement to do, or as it is now a massive burden on the banks, which also have bad incentives. What if we had the central bank give everyone an account that was interoperable with the rest of the banking system? Then if you want to hand out money, you just do it. If you want to borrow money, find a lender.

theplague42 6y ago
There have been suggestions over the years for the post office to offer banking services. They have branches literally everywhere, they're independent yet still a government agency, and have no profit motive.
- alexpetralia 6y ago
  I could not imagine the amount of financial, operational, technological and regulatory infrastructure that would need to be ported over, however.
  - toomuchtodo 6y ago
    We have the US Digital Service [1] and 18F [2]. We (US citizens) should demand Congress to provide them the authority to deliver the modernization required to implement such infrastructure. Use Login.gov [3] to provide for digital identity management of these accounts. Perform in person KYC using USPS and DHS/CBP branches, and identity proofing online using traditional service providers (IRS already does this for your IRS account, SSA might, I haven't checked recently). The path to success is straightforward. EDIT: So I did some digging, and it appears that the US Treasury has partnered with Comerica Bank in Texas to provide this sort of service to Social Security benefit recipients [4] (because the Treasury requires electronic payment of social security benefits, and you can't leave seniors unbanked). The challenge is going to be to find Congressional reps supportive of bringing this functionality in house, which isn't unreasonable IMHO, to provide this as a utility to all US citizens. I have already fired off a FOIA request to get details on the contract between Treasury and Comerica. [1] https://www.usds.gov/ https://www.usds.gov/ | [2] https://18f.gsa.gov/ https://18f.gsa.gov/ | [3] https://login.gov/ https://login.gov/ [4] https://www.usdirectexpress.com/ https://www.usdirectexpress.com/

_iyig 6y ago

Wish I lived in a world where $10 billion in graft got someone arrested. Jailed, if I’m recklessly ambitious.

deleted 6y ago
[deleted]

eezurr 6y ago

That's about a 2% fee which doesn't seem out of line with other transaction processing fees that are out there. That fee probably has built in insurance for fraud and other failures. And also the cost of the transaction. I bet that fee is the same fee as a year ago?

AndrewKemendo 6y ago
That's exactly it. In effect it cost 2% to use the banking system to complete this transaction. With these kinds of insane numbers ($350B!) even tiny percentages are huge.
solarhoma 6y ago
Yes but these fees are huge with larger loans. Why are the fees percent based rather then flat rate? The banks giving out these loans are not taking on any risk with the loan. So how are they getting away with large fees associated with the loans?
- eezurr 6y ago
  Because successful fraud takes everything.
  - ric2b 6y ago
    Not from the bank, they just roll back the transaction. Some merchant might end up on the hook, though.
  - burmer 6y ago
    If the money is to mitigate risk, then why can't the fee be (mostly) refundable? The bank takes on the risk of processing some enormous transaction and takes a percentages of the transaction as insurance in case of fraud. Then after a period of time with no issues, the money flows back, less some nominal amount for the actual work involved processing the transaction.
gadders 6y ago
Doctors aren't working for free, so I'm not sure why bank employees are expected to.

lonelappde 6y ago

The headline misses the point. The total means nothing out of context. What's the fee per loan? >Loans worth less than $350,000 brought in 5% in fees while loans worth anywhere from $2 million to $10 million brought in 1% in fees. I've read that the average loan is $50K, so that's $2500 per loan, which seems high, And 1% of a $1millio loan is ridiculous, as it's not subsidizing the smaller loans, AND these loans are scaled to #employees, so the size of the loan is proportional to the #people benefited and so the fees should be per loan (cost based), not per $ lent.

lmeyerov 6y ago
The root problem was Trump team didn't put in enough money, included too many rich businesses, and didn't require a fair order. Banks knew they didn't have enough meat yet were feeding a frenzy: of course the big dogs pushed through to the front. So now we blame Banks instead of Trump. Yet if Trump repeats the plan without prioritizing actual small businesses, the co's big enough for in-house accountants and big loan relationships will keep getting the lion's share.
- beervirus 6y ago
  > Trump team didn't put in enough money You know, the president doesn't write legislation or appropriate money. That's on Congress.
  - lmeyerov 6y ago
    Yes, because we know exactly where the buck doesn't stop. They're getting ready for round 2, and if the rule setters do the same thing, we'll get the same result. People want to blame the banks -- and banks share the blame -- but they are not the root cause. The legislated rules are like physics, you don't get mad at the water flowing wrong but at the people who planned the river. The planning committee is doing all sorts of weird stuff, but the people with the most control is republicans, and via veto etc, the president. Those are the people deciding to whom the river flows and with how much water. They knew there would be more applicants than money, and the bigger applicants would have accountants and bank managers ready to leap, yet they still didn't put any priority order in for small businesses. Instead, they spent that time putting in carveouts for big hotel owners. If you think they didn't make it fair, it's their blame. I don't even know why we're doing this via banks to beginwith, that just adds a massive & confusing middle layer of uninvolved for-profit companies. Feels like not knowing how to use the system, or corruption... which is again, a problem upstream.

drawkbox 6y ago

Anytime needed stimulus goes through banks, don't be surprised if it never makes it out of said bank or to the intended locations as they are self-preservation first as expected. Banks should help the river and get access to the flow, they shouldn't be a dam that holds back the flow, filtering only for their customers or large companies masquerading as "small business". Had policy sent the money directly to companies from the SBA/IRS, customers then would choose the banks to service that guaranteed government grant/loan essentially. Much like the FAFSA system for student loans, you get your amount, then a servicer handles the actual loan but there is literally no risk to them as it is guaranteed. Why we sent guaranteed money to be held up in banks and did information and credit checks, on already known information from the IRS, well we know why, to pilfer it. Had they ran it a better way, using the actual market, directly to businesses/individuals, that is lots of money out there for banks to go get and the market knows it is out there as well. Markets like knowing hundreds of billions and trillions are out there to go get. Make them earn the fees if they must. Instead, it was a direct transfer from the Fed and treasury to QE that was pilfered by the usual suspects: hedge funds, market makers, foreign funds, oligarchs, wealth/value extraction ops, naked short selling, short and distort and more. The SBA money was pilfered by banks and large companies. The 'stimulus' for the economy, routed around the entire actual economy, never reaching individuals or true small business. Companies that received SBA funding many are listed on the public markets. I doubt most people would call "small business" companies that have IPOed and been on the market for years. These companies have other access to funds, they just wanted the 1% loans and took from hundreds and thousands of small businesses that supply them, subscribe to their services, buy their software, consume their products, feed them and other services. Examples of companies that got SBA PPP and other [1]: - Drive Shack Inc. (DS) $5,276,742 - Golf company like TopGolf... wow. That would have funded many, many small businesses. - New Age Beverages Corp. (NBEV) $6,868,400 - Revenues 250~ million... Isn't it safe to say if you have a stock ticker and one of 3812~ companies on the public markets that you aren't "small business"? How to fix it... We need a micro small business emergency stimulus. - Less than 50 employees across ALL locations, less than 2-3 million revenues and sole proprietors. - There can be no gaps to allow this to go to the already serviced. - Include sole proprietors and really small companies (< 10 employees) with priority that matches their numbers in the market. The current "small business" designation is really small to medium to large businesses. However, sole proprietors are 73% of all small business. America is mostly small businesses. SBA/Chamber of Commerce has 30.2 million for companies under 500 people. [2] Lots are sole proprietors or very small companies with < 5 people. 22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner. 99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer. Small business is the engine of America. Small businesses comprise what share of the U.S. economy? Small businesses make up [3]: - 99.7 percent of U.S. employer firms, - 64 percent of net new private-sector jobs, - 49.2 percent of private-sector employment, - 42.9 percent of private-sector payroll, - 46 percent of private-sector output, - 43 percent of high-tech employment, - 98 percent of firms exporting goods, - 33 percent of exporting value. It is time to help the lower/middle, sole-proprietors and small business or America as we know it is much much different after this. About 8 trillion in 'stimulus' and QE, at a cost of 20k to every citizen, for that individuals got $1200 many haven't got yet and small businesses finding out how small of fish they a really are. The banks helped the big fish, but the big fish need the small fish to survive. Money trickles up and down and all around, but money only trickles where other money is found. This market is broken for lower/middle and people or small business. It is gangbusters for wealth and value extraction ops. How long can this go on? The stimulus for individuals, families and small business is vaporware, time for some vaporwave as we fade away into the ether. Good luck wealth and big business with no one to skim from and no small business to use as research and development or suppliers. Maybe it needs to be framed in the way that it is an additional bailout for their own companies and interests. Most of that money makes it back into banks, larger companies, wealth, top end etc. If consumers have purchasing power and small companies buy up their services, supply them, and are where they make their money broadly, maybe their self-interest will align with the actual market. Our policies already downplay the importance of wages, consumer base purchasing power and just keep piling on the backs of a finite resource. How long do can the wealth extraction keep happening before there is none left and stagnation takes over in a big way? Rich people and large companies can only buy so much, the long tail of small businesses and consumer purchasing power is America, it is under attack. Real wages and purchasing power have barely budged in 40 years [4]. Worker share of GDP being on a long dwindle down [5] and velocity of money is off a cliff [6], that is why we are so stagnant. Richest 1% of Americans Close to Surpassing Wealth of Middle Class [7] Money trickles up and down and all around, but money only trickles where other money is found. If there isn't purchasing power or demand, that is hard to create. Why are we widdling it down day by day, year by year, decade by decade? What happens when The Giving Tree is a stump? [1] https://www.wsj.com/articles/these-are-the-public-companies-that-got-small-business-loans-11587493742 https://www.wsj.com/articles/these-are-the-public-companies-... [2] https://www.chamberofcommerce.org/small-business-statistics/ https://www.chamberofcommerce.org/small-business-statistics/ [3] https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371. [4] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... [5] https://fred.stlouisfed.org/series/W270RE1A156NBEA https://fred.stlouisfed.org/series/W270RE1A156NBEA [6] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V [7] https://www.bloomberg.com/news/articles/2019-11-09/one-percenters-close-to-surpassing-wealth-of-u-s-middle-class https://www.bloomberg.com/news/articles/2019-11-09/one-perce...

volak 6y ago

Banks make somewhere around 450 billion in revenue each year. https://www.statista.com/forecasts/409713/banking-revenue-in-the-us https://www.statista.com/forecasts/409713/banking-revenue-in... This program made them 1/3 of 1 month's normal revenue

megous 6y ago
That also means that they could have easily waived the fees without taking much of a hit, just out of solidarity.
- volak 6y ago
  Businesses are not a charity - according to reported Q1 earnings last week they're losing million of dollars everyday just keeping the lights on. They've lost far more even with the fees they collected from this program. As someone said above - doctors are not working for free, why should bank employees?
  - viklove 6y ago
    So businesses are not a charity, but the US taxpayer is? Why do we keep sending money into the banking system with no strings attached? In 2008 as well as now, banks have collected billions of dollars with no strings attached, and engaged in fraud and corruption with no consequences. Doctors are not working for free, no, but they also didn't just vacuum up 10B of cash meant for patients either. Only the banking system has the tenacity and lack of shame to do such a thing. > why should bank employees I don't think anyone in this thread is talking about bank employees.
    - volak 6y ago
      This program is vastly different from the 2008 bailouts. The banks collected a modest fee for doing work spreading money around to people who need to pay employees and rent. In this situation the banks are simply a truck driver and small businesses are your local grocery store. Im not going to fault the truck driver for asking to be paid to do work. The 10B they collected was not from the government - it was paid by businesses applying for loans.

tempsy 6y ago

The thing here is the bank isn’t taking any risk here. All the loans are guaranteed by the government. So banks are really just a middle man that is transferring money from the SBA to a small business’s bank account and taking on zero credit risk. The government has the ability to send funds directly to people obviously...that’s how they are sending the stimulus checks and send tax refunds. Banks are basically being compensated for doing paperwork.

agilebyte 6y ago
Paperwork AND doing due diligence on the companies more effectively than the government can right now.
- tempsy 6y ago
  The point is the amount they are earning is overly generous for the work completed. Most banks are only working with existing customers, so the DD is 99% complete. Few are reviewing applications from brand new clients.
  - _curious_ 6y ago
    Not to mention that the banks are biased and giving no risk handouts to their most valuable clients (those at greatest risk of defaulting on obligations to the bank).
  - asah 6y ago
    "existing customer" due diligence seems like fair profit...
  - cm2187 6y ago
    Even then, SME clients don't do operations (like loan applications) with their banks every month, so that doesn't mean the DD is up to date (bank regulations change almost on a weekly basis).
  - agilebyte 6y ago
    Yes, but the point is DD was done (last year or today). Effectively the government is paying the banks for the work they've done creating a relationship with the clients, which includes DD.

brenden2 6y ago

We live in a world where there are huge rewards for anyone with the right connections. Banks provide very little value, they are basically a glorified SQL database at this point. They're not taking any risk, they're not really creating any economic value, and yet the rewards they receive are enormous. Watching all this going on makes me feel so disillusioned, and I don't want to participate in society anymore.

specialist 6y ago
I oppose the financialization, not the banking.

erikig 6y ago

Some quick numbers: - 10bn in Fees - 4975 Lenders - $2m per Lender I think this number doesn't seem unreasonable given the fact that the banks themselves are businesses - they have employees, training, technology, risks etc.

deleted 6y ago
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triceratops 6y ago
Is it a ton of extra work for them (the banks) though? With the way things are banks are no longer doing much of other things they normally would - business loans, mortgages, auto loans etc. This program would merely occupy those otherwise-would-be-idle employees' time. And the banks aren't loaning out their own money either, so where's the risk?
- heartbreak 6y ago
  > Is it a ton of extra work for them though? Anyone who attempted to obtain a PPP loan from their local bank knows that yes, it was a ton of extra work for them.
  - triceratops 6y ago
    For the bank or the applicants? And was it on top of work that the bank was already doing? Because as I argued, many of the bank's normal functions were effectively turned off so it's not extra work for the bank. It replaces the other work they'd be doing.

hateMyIdeas 6y ago

The money ran out before our company could get 1k. Another example how the 10% is taxed to pay for the 0.1%.

antoncohen 6y ago

Lawsuits claim banks prioritized loans to large businesses. JPMorgan disputes those allegations, claiming it processed loans fairly. By fairly it means it put all the small business loans in one large FIFO queue, and all the large business loans in a separate much shorter FIFO queue. Effectively prioritizing large business loans.

_curious_ 6y ago
Interesting...what are your sources here?
- antoncohen 6y ago
  This article and the Bloomberg article[1] that is currently on the front page. From this NPR article: > We funded more than twice as many loans for smaller businesses than the rest of the firm's clients combined," the bank said in a statement to clients. "Each business worked separately on loans for its customers. Business Banking, Chase's bank for our smaller business customers, processed loan applications generally sequentially" Note "Each business worked separately on loans" and "processed loan applications generally sequentially". They divide their consumers up into large business and small business groups, assigning dedicated staff to each group. There are far more small businesses, making the queue for small businesses much deeper. Even though there were more workers (staff) pulling from the small business queue, there weren't enough to make up for the discrepancy in queue depth. From the Bloomberg article: > More than 300,000 customers of JPMorgan’s business banking unit, which serves smaller firms, applied for loans through the Paycheck Protection Program > By comparison, about 5,500 larger, and sometimes more sophisticated, customers of the commercial banking business applied for funding. > The data reveal that, in the race to get a loan in the first-come, first-served program, larger businesses had a leg up over smaller ones -- even when applying through the same bank. > its commercial bank, with fewer clients, was able to process applications faster, said a person familiar with the matter. [1] https://outline.com/HacVTV https://outline.com/HacVTV

jhwang5 6y ago

Bank charging 2% on this flow is criminal, in the sense that interest rates are nearly negative, so 2% is practically 10, 100X the rates banks can earn otherwise. It's basically free money shoveled into banks, a massive boon.

RubenvanE 6y ago
While I agree that the fee might be high, the comparison between the two is is a false equivalency.[1] A transaction fee is something completely different from an interest fee. The first is a one time fee while the other is continues over time. [1] https://en.wikipedia.org/wiki/False_equivalence https://en.wikipedia.org/wiki/False_equivalence
- jhwang5 6y ago
  No. whether I charge you a fee through an explicit transaction cost, or I charge you based on a hidden spread to some rate, it’s still revenue from the perspective of banks. It’s a common trick used by consumer banks (to masquerade interest based spreads as no fee loans).
wutbrodo 6y ago
Why would annual interest rates be a relevant baseline for a transaction fee?
- jhwang5 6y ago
  Because banks borrow short, lend long. This is an exogenous fee generating bonanza for banks. It’s not that much different from someone selling you masks at a steep price. issuing these loans do not cost banks anywhere even close to what they charged.
the_watcher 6y ago
If they're charging interest, their fees would be a lot higher than 2%.
refurb 6y ago

ackbar03 6y ago

Why am I not surprised

exabrial 6y ago

Side Note: NPR's journalism of late has been refreshingly non-political. Every article on CNN right now for me is a click bait headline with some weird mention of Trump like it's some sort of requirement to get it to go to press.

Spellman 6y ago
I thought that's the norm for NPR?
- clairity 6y ago
  npr has never been apolitical and has gotten more political over time, through editorial choices like what stories they pursue/ignore, what angles they take, what guests they invite, the amount of airtime given to stories/guests, etc. they were overtly pro-clinton and anti-trump (as was i) during the 2016 election cycle, and lamented the election results for weeks afterwards. you see it with this election cycle and the covid coverage too.
- exabrial 6y ago
  I guess I haven't spend a lot of time with them. But they earned a reader today by stating their findings and labeling their opinions correctly.

mihaaly 6y ago

I hope they will start some ad campaign soon with pretty words about how sensitive they are for the troubles of the society and how much they support all the efforts in these troubled times! Not controversial making profit on emergency measures, not at all! :/

1123581321 6y ago

We did our PPP loan for our agency through a small regional bank that bent over backwards to help local businesses understand the legislation and apply on time. The bank paid a bunch of salaries to be able to do this. It’s completely reasonable that they earned a small, disclosed-in-advance fee from our loan to pay for those operations.

alistairSH 6y ago
Banks took almost 3% of the total bailout funds for loans that have almost zero risk (government backed and almost exclusively made to existing customers). On a $350k loan, the fee was 5%, or $17.5k. On a larger loan, the fee as a % goes down, but the total value goes up. These larger loans, to my knowledge, carry no more risk, nor any more work by the bank. Yes, the banks should earn a minimal (and probably fixed) filing fee. No, they should not receive 3% of the amount set aside for small-business assistance.
- 1123581321 6y ago
  I agree those numbers are accurate. If I understand correctly, you intend for $17.5k to be a shockingly high number, but smaller banks already receive percentage origination fees on large loans that cover fixed operation costs and are not overly profitable.

kqvamxurcagg 6y ago

Larger customers will have relationship managers at the bank who guide them through the process step by step. Their customers likely even have their cell phone number so communication is good and low friction. With the support of accountants and lawyers who will have all information available to hand, I'm sure the application was a breeze. The current crisis has been a real eye opener. Our entire government and economic system is bailing out corporations and preserving the wealth of asset owners at the expense of taxpayers and society. This should be a perfect opportunity for smaller companies to step in and win business from corporates who have engaged in monopolistic practices for years and engaged in excess risk taking. But that isn't being allowed to happen because corporates are judged as too big to fail. I find this whole system intolerable. It feels like we need to add more restrictions against corporates. Restrict their ability grow via M&A, restrict executive compensation to a multiple of median income and stop them growing too large. I say this as a capitalist.

brentm 6y ago

Not a popular opinion but considering the effort involved, should they not have earned fees? Should they have donated their time and resources? I'm sure it took a monumental effort to pull it together with the lack of clarity being handed down and the volume of loans to process in a short period of time. If the government wanted to do for $0 fees they would have figured out how to do it themselves. If a private business has to do it then they should be paid. If we are complaining about this what about 3M and everyone else making tons of money off of PPE? Obviously it isn't very palatable to hear about others making money off of this kind of thing but we need incentives for people to step up and help.

celticninja 6y ago
could they have done it at cost? Yes. Did they need to make a profit off this? Probably not. Are they relatively unaffected (due to prevalance of online banking and also reduced costs due to physical banks being closed)? Yes.
- krustyburger 6y ago
  The banking industry is highly affected by the economic conditions that currently obtain. Default rates for all kinds of loans are skyrocketing, and this may just be the beginning of an extended period of turmoil that will rock the balance sheets of banks around the world. I don’t think they deserve undue sympathy, but they are far from unaffected.
- joncrane 6y ago
  Are physical banks closed? Wouldn't banks be an essential service?
- pathseeker 6y ago
  Banks don't make money from "online banking". They make their money from issuing loans. A ton of those loans are going to go into default so banking is going to be hit just as hard as other businesses, it's just going to happen in 3 months instead of today.
- deleted 6y ago

ss7pro 6y ago

Problem with the banks (and many other huger corporations in US ie: airlines) is that during prosperity all the profits are going to narrow set of people (board and investors) but during the crisis there's always bailout using taxpayers money to save them. It essentially means that profits stay with the wealthy while losses are being spread across the poor. This is no longer capitalism but communism where they ruling party (boards and investors) are getting richer without the risk.

volak 6y ago
The best analogy I use for logical errors such as this is - If you have a dependent - ie a child - whom you are a primary source of care. Should you qualify for a bigger helping hand than say, the 25 year old with no children? If you agree - then now imagine you have 500 dependents. Or in the case of some corps 500,000. You have half a million dependents who rely on you every other week for a paycheck. Do you qualify for a larger helping hand than the 25 year old who lives alone?
- ss7pro 6y ago
  I'm not saying bailout is wrong, but taxpayers should be handsomely rewarded for those bailouts (at least 20% APR) as those bailout companies were making a lot of money on taxpayers and never shared any profits with them (they even avoid paying taxes though various financial means).
  - volak 6y ago
    Agreed - which is why I strongly support the administration demanding equity in the companies that are receiving money. And I only support money given as loans which must be paid back. Any kind of grant money must be exclusively used for payroll or other qualifying operating expenses. The current stimulus is not perfect but its pretty good and FAR better than 2008
- viklove 6y ago
  It's not a "logical error," it's an "ideological error," at least from your perspective. Banks are not parents, and small businesses are not "dependent children," so I'd say you're making a bigger logical fallacy called a false equivalence. > Do you qualify for a larger helping hand than the 25 year old who lives alone? No, because the "helping hand" you're getting is not helping the "children" eat in this situation. None of this $10B is going to small businesses, is it? It's literally just a payday for the bank. If you give a parent $400 extra a month, that is going towards daycare, food, etc. for their child. Your metaphor misses the mark completely.

ksj2114 6y ago

This fee doesn't seem that unreasonable, but I do think best solution is for businesses / people to have deposit accounts at the fed

carapace 6y ago

Seems unnecessarily divisive at a time when we need to pull together.

chris_va 6y ago

Maybe this is an unpopular opinion amidst the pitchforks, but do we not have better things to worry about at the moment? The system is inefficient and unfair, great lets put it on the list of things to fix, but a ~3% fee is not world ending (unlike some other things) and seems like a low priority.

vharuck 6y ago
We'll likely need to pipe more money into the system in the near future, so it makes sense to identify and plug some of the leaks.
JSavageOne 6y ago
How is a 3% fee not outrageous when there is no work being done? If 3% of the $1,200 stimulus checks owed to individual citizens went to private banks, would you say it's not a big deal? (if so I hope you're not running for Congress)
- chris_va 6y ago
  Apparently not, though given our current congressional representatives, are you sure that is a good metric to judge rational decision making? 3% is 3%. It's nonzero, so that's unfortunate. It's not a large fraction, so it's just not a time sensitive problem. Is it worth tying up media, political and financial resources in blaming+lawsuits over the optics of a 3% fee, instead of just waiting to deal with it next year? Your question implies that 3% of loan applicants get nothing because of this fee (which is inaccurate, since congress will just authorize more loans as long as it's politically convenient). As I said, it's unfortunate, but it's not world ending.
  - JSavageOne 6y ago
    I never said it's "world ending", it's a problem, and we need to fix it. What a moronic thing to say "let's just deal with it next year". If the mafia was extracting 3% of federally guaranteed loan money, your response would be "it's not a big deal, let's just deal with it next year because we can just authorize more loans?" I hope you're never elected to public office.

GoodJokes 6y ago

Just Wikipedia rentier capitalism. Banks are a scam. News at 11

tmaly 6y ago

This is all on Congress. They wrote this law that created these incentives for the banks.

bcx 6y ago

I'd like to see a version of this article and headline that figures out the effort required by the banks to administer a program like this. Quick read looks like 2.8% off the top, for 0 risk (10/349). Total businesses receiving loans was 1.6M (https://www.pymnts.com/loans/2020/sba-lenders-approval-ppp-loans/ https://www.pymnts.com/loans/2020/sba-lenders-approval-ppp-l...) Average money a bank made per loan was 10,000,000,000/1,600,000 (assuming all banks made an equal distribution of loans) Or $6250 per loan. Given that all loans ran out about 1 week after the program was started. I imagine the person effort per loan was pretty variable, but that's some pretty crazy capture by the banks. (Banking sector employs almost 1.5M people), So even if every employee working at all banks, was allocated to work on one loan each for a week. (HINT THIS DIDN'T HAPPEN) the annualized salary for each of these people would have to be 6250*52, or 325K, which it's not). I guess my question, is how was the decision made to offer banks such a big kicker for administrating loans with nonzero, but practically 0 risk? (of note, theoretically banks are going to need to do some serving of the loan over it's lifetime, and deal with this loan forgiveness program, etc.. so if that's the case and it's more like 2-3 weeks of person work per loan, you still get some pretty big numbers, but they feel a bit more sane)

javagram 6y ago
FWIW, the banks didn’t feel like it was 0 risk, many of them were doing a lot of due diligence, document checking, etc. because they were worried about it. I’ve seen stories of small business owners talking about how difficult it was to get the loan through due to having to go back and forth with documents etc. although I’m sure it varied per bank. 2.8% doesn’t seem like that much for me, especially considering the goal was to get the money out the door as fast as possible due to the emergency, and setting up and hiring a government bureaucracy to administer and give the loans would have cost far more in time than the solution of giving it through the banks.
- dylan604 6y ago
  Why did it need to be a bank to begin with? Are banks involved when the government hands out low interest loans for natural disasters. Do they take cuts from that money? If so, I've never heard of it before. What about the 9/11 fund? Did banks get a cut of that money as well? Why is this situation different?

A4ET8a8uTh0 6y ago

I will admit that I am mildly aggravated by the roll out of CARES act for several different reasons. This is just a topping on the cake really. Yesterday, my wife told me that her doctor's office is furloughing 7 people ( not her, but I am sure next move will include her too ) so I do get a little sour when I find out that companies with built-in access to financing ( publicly traded companies ) got approximately surprisingly high chunk of those funds(1). Needless to say, I am not unbiased, because of this. It is however a little aggravating and a little reminiscent of 2008, where well connected get rescued, where the rest is left to fend for themselves. That is a recipe for pitchforks. 1. https://www.marketwatch.com/story/here-are-the-public-companies-that-got-coronavirus-aid-meant-for-small-businesses-2020-04-22?mod=home-page https://www.marketwatch.com/story/here-are-the-public-compan...