Yesterday I asked Why Does Trump Want to Hide Who Took Small Business Loans?
In addition to members of Congress wanting to hide loans they received, Wall Street on Parade has uncovered more sleazy details.
Even though the loans are guaranteed against losses by the SBA, the Federal Reserve launched its own program, called the Paycheck Protection Program Liquidity Facility, to reimburse lenders who make these loans. So far, the Fed has reimbursed $57 billion of these loans as of June 10, out of total loans approved by the SBA of more than $500 billion.
The odd thing about those Fed reimbursements is that a stunning $5.3 billion in reimbursements, or 9 percent of the $57 reimbursed by the Fed, have gone to a tiny New Jersey bank, Cross River Bank. According to the SBA, as of May 30, there were 5,454 lenders that had made loans in the PPP program. Cross River Bank is just one of those 5,454 lenders and yet it received 9 percent of the Fed’s reimbursements. How does that make any sense?
According to the FDIC, Cross River Bank has only one branch office and has been around for just 12 years. The $5.3 billion that the Fed has reimbursed to Cross River Bank is more than twice its total assets of $2.5 billion as of March 30. Cross River Bank has made more than 50 percent of the dollar amount that Wells Fargo has made in PPP loans but it has only 250 employees rather than the 250,000 employees working for Wells Fargo to review and process these PPP loans.
The Secret Bank Behind The Fintech Boom
On December 31, a Forbes investigation revealed The Secret Bank Behind The Fintech Boom.
Cross River is not a typical community bank. There are no tellers here, or ATMs or safe deposit boxes. There are startup touches—a kitchenette stocked with LaCroix sparkling water, gourmet coffee and a game room.
Unlike in banks of yesteryear, virtually all Cross River’s lending officers aren’t human beings. They are apps. Cross River’s loans originate mostly from 15 or so buzzy venture-capital-backed financial technology startups, so-called fintechs, that go by names like Affirm, Best Egg, Upgrade, Upstart and LendingUSA. The fintechs provide the customers; Cross River provides the licenses and infrastructure. It holds 10% to 20% of each loan it issues, and the massive volume of fintech loans has propelled Cross River to $2 billion in assets, up from $100 million a decade ago.
Once you get beyond the slick iPhone apps and inflated tales of big-data mining and AI-generated lending decisions, you realize that many fintechs are nothing more than aggressive lending outfits for little-known FDIC-insured banks.
Wall Street on Parade discusses more Dirty Details.
Despite originally promising transparency, U.S. Treasury Secretary Steve Mnuchin is now stonewalling Congress on releasing a list of the recipients.
Congress sold the plan to the public on the basis that the loans would go to small businesses with less than 500 employees. The funds were to be predominantly used to keep workers employed and allow the businesses to survive the coronavirus shutdowns.
Instead, our search of filings at the Securities and Exchange Commission reveals that dozens of debt zombie companies that trade on Nasdaq got the loans. Dozens of publicly-traded companies with large credit lines from banks got the loans. Dozens of companies with a lot more than 500 employees got the loans. It’s beginning to look like tens of billions of dollars in PPP loans were simply funneled out the door rapidly with little oversight into who was getting the loans.
Meanwhile, Back in Ohio
Meanwhile, back in Ohio, Nearly 24,000 Ohioans Told to Repay Unemployment Checks.
Marnie Behan got a surprising message last month from Ohio’s Department of Job and Family Services about her ongoing unemployment payments. Instead of sending her next unemployment payment, they said she needed to pay the state back.
The bill was almost $3,000. She had 45 days to repay the money, or the case would be sent to the Ohio Attorney General.
There are 24,000 accounts like that of Marnie Behan, just in the state of Ohio.
Taxpayers funded this $500 billion slush fund. We have a right to know how the money was spent.
Moreover, Treasury Secretary Steve Mnuchin and promised transparency.
Slush Fund Rules
There are rules for the small fry, determined in arrears, and rules for the big tuna also determined in arrears.
Whereas the new rules for the little guys demand repayment for $3,000, the new rules for the big tuna will hide who got hundreds of billion of dollars.
Now for obvious reasons, the Trump administration wants to sweep this all under the rug and hide it.
Mike "Mish" Shedlock