JPMorgan, Wells Fargo and Others Under Probe for PPP Procedure
An investigation is being conducted on several big banks — namely JPMorgan Chase JPM, Wells Fargo WFC, Citigroup C, U.S. Bancorp USB, Bank of America BAC, Truist Financial TFC and PNC Financial PNC — regarding their role in the Paycheck Protection Program (“PPP”). The news was reported by Bloomberg.
A House panel responsible for overseeing the coronavirus pandemic response has accused banks to have preferred larger, well-funded companies over the smaller ones from rural or minority communities, while approving loans under PPP. The program was designed to support small business owners, who were facing the risk of shutting down due to the economic fallout.
Per the committee, lenders created a two-tier system for processing PPP loan applications, which gave wealthiest clients access to a personalized application process that ensured their applications were processed first, while the small firms had to use poor-performing electronic portals, which faced significant processing delays.
The Democratic members have also roped in the Treasury Department and Small Business Administration (“SBA”) into the investigation. The move came post Treasury Secretary Steven Mnuchin’s comment that the names of loan recipients and the amounts distributed as part of the $600 billion-plus program is “proprietary information” and is not required to be made publicly available.
In a letter sent to banks, the panel is asking them to submit documents and information that reveal guidance received from SBA and Treasury regarding PPP requirements, all internal and outside communications with SBA and Treasury about the prioritization or exclusion of applicants, and internal policies and training materials regarding procedures for processing or expediting PPP loans.
Further, they have also requested a list of all the PPP applications received by banks and details on efforts taken to give loans to underserved and rural markets. All the details are required to be submitted by Jun 29.
Notably, as of Jun 16, 2020, the SBA disclosed that loans for 4.6 million small businesses totaling $513 billion have been approved, with about 5,457 participating lenders.
We cannot state for sure that the aforesaid investigation against major Wall Street banks will lead to any enforcement actions. However, even if no actions are taken, we believe that this probe will make them cautious about complying with the rules and revealing all necessary disclosures to investors.
All the above-mentioned stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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JPMorgan Chase Co. (JPM) : Free Stock Analysis Report
U.S. Bancorp (USB) : Free Stock Analysis Report
Bank of America Corporation (BAC) : Free Stock Analysis Report
Citigroup Inc. (C) : Free Stock Analysis Report
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
Wells Fargo Company (WFC) : Free Stock Analysis Report
Truist Financial Corporation (TFC) : Free Stock Analysis Report
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