A top federal official blasts big banks that took bailout money in 2008 for being 'resistant' to help struggling small businesses
- A top federal official in the Small Business Administration blasted big banks that took bailout money in 2008 for not quickly loaning money to struggling small businesses weathering the fallout from coronavirus.
- SBA official Joseph Amato's comments reflect concerns that banks aren't moving fast enough to deepen their involvement in a new small business aid program.
- "Some of the big banks … and this is just editorial … that had no problem taking billions of dollars of free money as bailout in 2008 are now the biggest banks that are resistant to helping small businesses," Amato said.
- Visit Business Insider's homepage for more stories.
A top federal official blasted large banks for not lending to small businesses quickly enough to help them weather the economic fallout from the coronavirus, The Washington Post first reported.
Joseph Amato, the Nevada district director for the Small Business Administration, made the blunt comments in a recorded Zoom teleconference call about the Paycheck Protection Program - a $350 billion initiative that's serving as a critical lifeline to small businesses within the $2 trillion economic stimulus President Trump signed into law.
The SBA official said he believed financial institutions that accepted bailout money during the financial crisis a decade ago were turning their backs on small businesses now.
"Some of the big banks … and this is just editorial … that had no problem taking billions of dollars of free money as bailout in 2008 are now the biggest banks that are resistant to helping small businesses," Amato said.
The critical comments from Amato underscore frustration that large banks are not moving fast enough to lend to small businesses. He said the agency was instead trying to build new relationships with "non-bank lenders."
"We are trying to work quickly with national non-bank lenders and other sources that may make up the difference for the companies like, sadly, BofA, Wells Fargo and Chase that haven't really stepped up to the plate to take on all the small businesses they can," Amato said.
The Small Business Administration did not immediately respond to a request for comment.
Under the program, federal money is used to guarantee private bank loans for businesses with fewer than 500 employees and cover eight weeks of expenses. The loan is forgiven if those companies keep workers on payrolls and avoid laying them off.
The window for loan applications opened on Friday, though it was a bumpy start as many major lenders reported they weren't ready to process them, The Wall Street Journal reported.
Bank of America started processing them last week, according to The Post. JPMorgan has taken 375,000 applications for loans of $40 billion so far, and Citigroup has not accepted any yet.
Large banks have complained the PPP has been hobbled by a confusing knot of rules and unclear instructions from federal officials.
Amato sought to address those criticisms in the call.
"There is really no risk to the bank," Amato said. "It just comes down to … the same banks that literally took billions of dollars with one page from [former Treasury Secretary Henry Paulson] are the ones saying the documentation isn't clear enough for them."
Former Federal Reserve Chair Janet Yellen told House Democrats in a call that banks would move more quickly if they were freed of liability from possible instances of fraud, The Post reported.
And get the latest coronavirus analysis and research from Business Insider Intelligence on how COVID-19 is impacting businesses.