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RPT: Banks prioritized PPP loans to wealthy clients

A new House report says that big banks prioritized wealthy clients for PPP loans during the coronavirus outbreak which left behind struggling small businesses. Yahoo Finance’s Jessica Smith joins The Final Round to discuss the details of the report.

Video Transcript

- Jess I also want to ask you about this report that we got out this morning. A new report from the House panel saying that the Treasury Department basically encouraged their existing clients, or encourage banks to prioritize their existing clients. And therefore left down some of the neediest small businesses. This comes after a months long investigation. What are the details of this?

JESSICA SMITH: This new report is from a House panel that's tasked with overseeing the Coronavirus response. It is led by Democrats. They have been investigating the PPP implementation for months now. And they found that, as you mentioned Treasury encouraged lenders to prioritize their existing clients. The report said, "small businesses that were truly in need of financial support during the economic crisis often faced longer waits and more obstacles to receiving PPP funding than larger, wealthier companies." The report says that wealthier clients got their loans faster. JP Morgan, for example, processed loans above $5 million more than four times faster than loans under $1 million.

The report highlights that this was most harmful to minority and women business owners. It says the SBA and Treasury did not issue meaningful guidance on how to prioritize those businesses. Now Republicans on this subcommittee have defended the program throughout this investigation. A spokesperson for the committee sent a statement to me. They didn't really address the contents of this report, but they criticize Democrats for not extending the Paycheck Protection Program. So they're again, not really commenting on the substance of this issue.

But we did hear from the American Bankers Association, who was named in this report. And they said "thousands of small businesses from every region of the country were able to keep their businesses open and continue paying their employees over time as Treasury and SBA provided more clarity it became easier to gather information to process new customers in this new program." So he's making the case that banks were encouraged to do this quickly. And their existing clients were easier to process, it was faster to process, because they already had all the borrower information they needed. I did reach out to the Treasury Department for a statement, but we have not yet heard back.