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Americans hit by economic shocks as confusion, stumbles undermine Trump’s stimulus effort

jpn

jpn

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The Trump administration has stumbled in its initial push to implement the $2 trillion coronavirus aid package, with confusion and fear mounting among small businesses, workers and the newly unemployed since the bill was signed into law late last month.

Small-business owners have reported delays in getting approved for loans without which they will close their doors, while others say they have been denied altogether by their lenders and do not understand why. The law’s provision to boost unemployment benefits has become tangled in dated and overwhelmed state bureaucracies, as an unprecedented avalanche of jobless Americans seeks aid.
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Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.

“Banks are ready and willing to lend, but they need clear rules of the road and a streamlined process to be able to get funding into the hands of small business owners in the coming days,” said Greg Baer, president and CEO of the Bank Policy Institute, which represents the nation's biggest lenders.
"Taking all of the above concerns into consideration, many banks have already indicated that they will not be able to use the program under the current terms," the group's president, Rebeca Romero Rainey, said in the letter. "Others will only use it for current customers, greatly limiting the purpose and potential of the Program. This would be an unacceptable lost opportunity at a time when we can least afford it."
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And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
 
jpn said:
Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.



And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
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So...the money lenders now WANT the government to tell them how to do their jobs?

I suggest they go pitch a fit at Congress for not writing the kind of law they want.
 
Mycroft said:
So...the money lenders now WANT the government to tell them how to do their jobs?

I suggest they go pitch a fit at Congress for not writing the kind of law they want.
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It's more likely a case of banks not wanting to lend to folks who appear unable to repay loans unless they are assured of federal repayment. Do you have any idea exactly what is required for that to happen? From my understanding it depends on what happens later whether the loan will be "forgiven" (repaid by) by the federal government.
 
ttwtt78640 said:
It's more likely a case of banks not wanting to lend to folks who appear unable to repay loans unless they are assured of federal repayment. Do you have any idea exactly what is required for that to happen? From my understanding it depends on what happens later whether the loan will be "forgiven" (repaid by) by the federal government.
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The way I understand it, if the company getting the loan uses a certain amount of the money for payroll, then they can use the rest for other business expenses...and the government will pay back the loan to the lender.

But it's up to the lender to keep track of the borrower to make sure they use the money properly. If they don't, then the company has to pay off the loan.

But then the lenders say this...

“Banks are ready and willing to lend, but they need clear rules of the road and a streamlined process to be able to get funding into the hands of small business owners in the coming days,” said Greg Baer, president and CEO of the Bank Policy Institute, which represents the nation's biggest lenders.
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Well, the rules have been established by the law. The "streamlined process" is up to the lender. After all, it's the lender who has the money. But like I said...is sounds like the lender wants the government to tell them how to do their jobs.

It's up to the lender to determine if the borrower will...number one, use the money properly and...number two, is using the money properly. This is really no different than what they do with ANYONE who comes to them to borrow money.
 
jpn said:
Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.



And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
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The IRS doesn't lend money.
 
jpn said:
Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.



And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
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A small business cannot just show up at a bank asking for a loan without providing documentation (as the Trump Administration has suggested they can), because those banks have no way of doing their mandated due diligence to verify against fraud or money laundering.

That said, I am not sure how the Trump Admin could roll this out fast.
 
Mycroft said:
The way I understand it, if the company getting the loan uses a certain amount of the money for payroll, then they can use the rest for other business expenses...and the government will pay back the loan to the lender.

But it's up to the lender to keep track of the borrower to make sure they use the money properly. If they don't, then the company has to pay off the loan.

But then the lenders say this...



Well, the rules have been established by the law. The "streamlined process" is up to the lender. After all, it's the lender who has the money. But like I said...is sounds like the lender wants the government to tell them how to do their jobs.
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It's that (bolded above) part that puts the ball squarely in the lenders court. How, exactly, is the lender supposed to know what future actions a specific borrower (keeping in mind they are likely currently closed businesses) is going to take?

Like you said, if the business meets certain future conditions the federal government will repay the bank in full, but failing to meet those future conditions, the lender must rely on a currently closed business to repay them.
 
ttwtt78640 said:
It's that (bolded above) part that puts the ball squarely in the lenders court. How, exactly, is the lender supposed to know what future actions a specific borrower (keeping in mind they are likely currently closed businesses) is going to take?

Like you said, if the business meets certain future conditions the federal government will repay the bank in full, but failing to meet those future conditions, the lender must rely on a currently closed business to repay them.
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It's no different than any other loan a lender makes.

If a business comes to a lender asking for money for capital improvements to their business, the lender has to decide if that borrower is actually going to use the money for what they say they'll use it for. If the borrower doesn't, then the lender executes contingency language in the contract.

The lender will do the same thing here. They'll decide if they can trust the borrower to use the money for employee payroll and either lend the money or not. Then, they'll keep track of what the company does with the money. If the company doesn't use the money for payroll, then lender can then execute contingency language in the contract.

I really don't see why any lender is making a big deal about this. If they make a good loan, the government pays it off. If they make a bad loan, then they have other legal steps to take.

Seriously...the lender doesn't need the government to tell them how to do their jobs.
 
Mycroft said:
It's no different than any other loan a lender makes.

If a business comes to a lender asking for money for capital improvements to their business, the lender has to decide if that borrower is actually going to use the money for what they say they'll use it for. If the borrower doesn't, then the lender executes contingency language in the contract.

The lender will do the same thing here. They'll decide if they can trust the borrower to use the money for employee payroll and either lend the money or not. Then, they'll keep track of what the company does with the money. If the company doesn't use the money for payroll, then lender can then execute contingency language in the contract.

I really don't see why any lender is making a big deal about this. If they make a good loan, the government pays it off. If they make a bad loan, then they have other legal steps to take.

Seriously...the lender doesn't need the government to tell them how to do their jobs.
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Exactly, that decision is not going to be made instantly by a single bank employee with no idea how reliable the information supplied by (only?) the potential borrower might turn out to be. Those legal steps add to the cost of making that loan and may or may not result in getting it repaid any faster, if at all. It's not as if we are talking about a secured loan - these are unsecured loans being made to currently closed businesses.
 
jpn said:
Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.
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Because the ****ing IRS doesn't lend money, they only take it.



And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
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And Trump has no power to tell that Governor how unemployment is reported in his state.

Last, I do think pushing the SBA loans through the FHA or maybe Commerce would have been a better solution to this problem but I don't know what red tape that would have created.
 
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ttwtt78640 said:
Exactly, that decision is not going to be made instantly by a single bank employee with no idea how reliable the information supplied by (only?) the potential borrower might turn out to be. Those legal steps add to the cost of making that loan and may or may not result in getting it repaid any faster, if at all. It's not as if we are talking about a secured loan - these are unsecured loans being made to currently closed businesses.
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I don't think anyone has told the lenders to make unsecured loans. And a business that is currently closed is not without assets that can secure a loan.

But that's the job of the lender do deal with. The only thing the government is involved in is paying off the loan after the borrower has upheld their part of the agreement.
 
Mycroft said:
I don't think anyone has told the lenders to make unsecured loans. And a business that is currently closed is not without assets that can secure a loan.

But that's the job of the lender do deal with. The only thing the government is involved in is paying off the loan after the borrower has upheld their part of the agreement.
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Replace "after" (bolded above) with "if" and you should see my point more clearly. The lender takes 100% of the risk unless the borrower either repays the loan or has the government do so for them.

Once you take what the government might do (based only on the future "proper" actions of the borrower) out of the picture then you are left with the lender having a high risk loan for low reward (since interest rates now suck). It's a great deal for the lender if the government fully repays them in 8 weeks, but the longer it takes for that loan to be repaid then the worse of a deal for the lender it becomes.
 
aren't the banks receiving 1% of the loan amount for their efforts? (increased from 0.5% until the banking lobby spoke with ivanka)

these SBA loans are UNsecured

but if the bank processes - and services - the loan in a way different than what SBA/treasury intended, then this becomes a bank loan without the government guaranty to make the bank whole plus 1%

a hell of a lot of risk for a tiny reward. which is why the banks' due diligence to assure their process conforms to the government's expectations is not unreasonable

only the SBA/federal government can poorly market and administer a $349 Billion gift to small businesses. how hard is it to dispense free money?

already, businesses that applied prior to friday had to resubmit another application because the process had already changed
 
So. Trump ****ed this up, too.

I'm shocked.
 
ttwtt78640 said:
Replace "after" (bolded above) with "if" and you should see my point more clearly. The lender takes 100% of the risk unless the borrower either repays the loan or has the government do so for them.

Once you take what the government might do (based only on the future "proper" actions of the borrower) out of the picture then you are left with the lender having a high risk loan for low reward (since interest rates now suck). It's a great deal for the lender if the government fully repays them in 8 weeks, but the longer it takes for that loan to be repaid then the worse of a deal for the lender it becomes.
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A lender ALWAYS takes 100% of the risk. That's how their business works. If a lender considers a particular business to be too great a risk, they simply refuse to make the loan.
 
An adage which I heard yesterday and, shamefully, cannot provide attribution for, goes like this:

"There are no capitalists in depressions."

It was probably triggered by the better-known adage relating atheists to foxholes.
 
Hamish Howl said:
So. Trump ****ed this up, too.

I'm shocked.
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I completed my application online yesterday. It wasnt really a big deal if you have your payroll documents handy. Not sure what happens next, but so far so good.
 
jpn said:
Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.



And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
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the rules that were laid out were crap originally from the law

the banks wanted a few changes...and got them

i deal with a small bank here in Georgia...community bank but has its own SBA department....

my loan package was finished yesterday at the bank....they emailed me....and should be finalized today

banks wanted clarification on a number of items....and wanted the interest rate raised to 1% so they wouldnt lose money

no way in hell the IRS could have handled the MILLIONS of applications in the time needed
 
Mycroft said:
A lender ALWAYS takes 100% of the risk. That's how their business works. If a lender considers a particular business to be too great a risk, they simply refuse to make the loan.
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Not exactly, thus why we have this thread. Unlike FHA mortgages, which are insured by a government agency in advance this PPP deal leaves it unknown whether a loan will or will not become government insured.
 
ttwtt78640 said:
Not exactly, thus why we have this thread. Unlike FHA mortgages, which are insured by a government agency in advance this PPP deal leaves it unknown whether a loan will or will not become government insured.
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That's not true. The law clearly lays out the conditions for the government to pay off the loan.

Furthermore, this isn't a "government insured" loan at all. The government is telling the borrower that, if they meet certain conditions, the government will "forgive" the loan and pay it off for the borrower. If the borrower doesn't want to meet those conditions, then the borrower must pay off the loan.
 
Mycroft said:
That's not true. The law clearly lays out the conditions for the government to pay off the loan.

Furthermore, this isn't a "government insured" loan at all. The government is telling the borrower that, if they meet certain conditions, the government will "forgive" the loan and pay it off for the borrower. If the borrower doesn't want to meet those conditions, then the borrower must pay off the loan.
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the guaranty is from the federal government to the lenders
the guaranty is voided if the lenders process or service the loan in a way that varies from the SBA's established expectations
it is those established expectations the lenders needed to know before processing these unique federal guaranty loans

in less than three hours a few months before retiring from sba, i terminated the guaranties of a batch of loans that were out of compliance. that reduced exposure to sba covered my entire federal career's payroll - my expense to sba - seven-fold. hell, that one sitting's effort covered the entire federal career payroll of over one-fourth of my office. i share this to illustrate how expensive it can be for the lender to fail to comply with sba's established standard operating procedures. a 1% processing and servicing fee is not going to go very far to cover the lender's losses if the sba coronavirus ppp loans are made without compliance. THAT is why the banks are hesitating to initiate these loans until they fully understand sba's expectations. and sba/treasury are winging it ... resulting in the delay
 
jpn said:
Why did the Trump Administration decide to channel small-business lending through private banks instead of lending it directly through the IRS? The banks are complaining that they have yet to receive crucial guidelines and that the administration is setting*unworkable requirements.



And then there is this example of a Republican governor intentionally booby-trapping essential services like unemployment compensation in Florida because he wanted to brag about how he reduced the numbers on unemployment: ‘It's a sh-- sandwich': Republicans rage as Florida becomes a nightmare for Trump

It turns out that competence and expertise really does have a role to play in government. Voting for the party that hates and ridicules government and then expecting that party to govern competently in a crisis is illogical. As we can see.
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FYI A small business is any business with 500 or fewer employees. There are exemptions; in agri-business 1500 employees is small business. In the cookie and cracker business it's 750 or fewer employees. The SBA loans included in the stimulus package will go to big corporations with personnel and lawyers to navigate the complex loan applications. The small local business struggling to keep out of bankruptcy will see only a tiny % of that stimulus money.
 
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