Lawmakers including Rep. Adam Schiff (D-Calif.) urged the Fed this week to offer flexibility to the bank to participate in the government’s efforts to aid struggling businesses. The central bank’s move today will also make room for Wells Fargo to provide loans under the Fed’s forthcoming “Main Street” lending facility, which will be aimed at medium-sized businesses with more than 500 employees.
The Fed emphasized in a press release that the growth restriction already doesn’t prevent Wells from engaging in any activity — the bank simply cannot increase the net amount of assets it holds. However, business loans issued in relation to the government’s emergency programs now won’t count against that growth cap.
“The change today provides additional support to small businesses hurt by the economic effects of the coronavirus,” it said.
The largest banks have been slow to offer the loans. Bank of America was the first of the biggest banks to take applications Friday morning when the program launched, though it limited the number of applications it would accept from customers, sparking a backlash. JPMorgan Chase and Citigroup took more time to begin taking applications.
Banks have strained to offer the loans after the Trump administration took until the evening before the program’s start to provide the guidance they needed. Banks have been cautious about which customers they will offer the loans to because of vetting requirements.
The lenders have also faced problems with a malfunctioning Small Business Administration system needed to authorize the loans and as of Tuesday said they still lacked the needed SBA documentation to close out loans and issue money to borrowers.
Source: politico.com
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