Denver, Washington Bank of America was the first major bank to implement government regulations. The staff worked through the night to launch an app for small and medium-sized businesses on Friday morning who want to apply for government aid loans. On Thursday evening there were still important guidelines from Washington that could still be entered at the last moment.
Other banks weren’t that quick. Wells Fargo, the battered San Francisco institute that has a particularly large number of medium-sized customers, refused to accept applications on Friday, like Citigroup and many other banks. Industry leader JP Morgan Chase only started in the afternoon at 9 a.m. instead of as originally planned.
Since then, America’s mid-sized companies have been trying to get the much-needed aid. Just one hour after the program started, Bank of America counted 10,000 applications. Ideally, loans should be approved on the day of application, but only in a fraction of the cases. By Friday afternoon, around 13,700 applications worth $ 4.3 billion had been approved, according to the head of the SME agency SBA Jovita Carranza on Twitter.
$ 350 billion is earmarked as part of the $ 2.2 trillion small and medium-sized enterprise relief package. However, given the great need, Treasury Secretary Stephen Mnuchin has already signaled that he is ready to ask Congress for additional funds. “First come, first serve” is the principle according to which the loans are granted. Anyone who is late is therefore left empty-handed. It is all the more frustrating for companies if the house bank is not yet ready for the applications.
Meanwhile, many could not wait for the money from Washington, as a look at the labor market statistics shows. Last week, 6.6 million Americans filed for unemployment benefits. The week before, there were 3.3 million. This caused the unemployment rate for March, which was also published on Friday, to skyrocket from 3.5 to 4.4 percent. That is the highest value since 2017.
State loan guarantee
The program, which is entitled “Paycheck Protection Program” (PPP), provides that companies can get the loans waived if they use the money for wages, rent payments and the like. The state guarantees 100 percent of the loans.
Many banks were still unclear on Thursday evening as to who qualified for the program and who did not and how the submitted documents should be checked. The rate at which banks can charge loans was also changed at the last minute. At first it was said that banks could charge up to four percent, then there was still 0.5 percent under discussion, now it is one percent.
New tensions are already emerging between Wall Street and Washington. Brian Moynihan, head of Bank of America, said on CNBC that his institution treats clients who have a business account with the bank and who have taken out loans. “This speeds up the process,” says Moynihan.
Republican Florida Senator Marco Rubio, on the other hand, condemned this preference. “It is not part of the legislative package and should be abolished,” he commented on Twitter.
Small and medium-sized companies make up the major part of the American economy, they account for a good 80 percent of all jobs, according to analyzes by Deutsche Bank.
Lenders’ hotlines are overloaded
Elsewhere, Americans also encounter chaotic conditions. The aid package also provides that homeowners can suspend their mortgage payments so people can stay in their homes. But the lenders’ hotlines are overloaded. Homeowners complain that they are on hold for hours and are unable to get a contact person.
The US Federal Reserve criticized this action on Friday and, together with other major regulators, specifically called on mortgage service providers to help their customers. In return, regulatory requirements for institutions should be relaxed.
In the meantime, an unusual coalition is forming in Washington to help the US economy with another stimulus package beyond the corona crisis. Donald Trump and Nancy Pelosi are usually in deep dislike. But on this issue, the Republican US President and the Democratic majority leader in the House of Representatives are pulling together. Both are in favor of another corona package, which would be the fourth since the pandemic broke out in the United States.
Trump’s and Pelosi’s opponent is Mitch McConnell and is the majority leader of the Republicans in the Senate, alongside the House of Representatives the other chamber of the US Parliament. McConnell and most of his group are currently opposed to such a package, which both chambers of parliament and the president would have to agree to. McConnell wants to wait and see whether further programs are really necessary and, above all, “to ensure that every further measure is actually related to the current health crisis”.
According to Trump and the Democrats, the fourth corona package should not focus on fighting the corona pandemic directly, but rather on investments in the infrastructure of the United States, for example in roads and telecommunications networks. A classic economic stimulus program that is primarily intended to create jobs.
Democrats want more money for poor households
On Twitter, Trump suggested a volume of $ 2 trillion for the package. It would also be the late implementation of one of his election promises from 2016. At that time, Trump had pledged to invest up to a trillion dollars in the US infrastructure. However, after the election, the idea spread in constant dispute with the Democrats.
The Democrats want to add further spending on social policy and climate protection to the package. For example, poor households are to receive grants to pay their water bills during the health crisis. According to the will of the Democrats, the ramshackle rail network in the USA is also to be renovated. Remote regions are also to be given better broadband access.
The Republican majority in the Senate can only get used to a much more modest infrastructure program that plans to spend $ 287 billion over five years, mostly on better roads. But with every week that unemployment rises in the United States, the pressure on Republican senators to give up their aversion to a new, large stimulus package increases.
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