Fed eases Wells Fargo asset cap for small business loans

New York (AFP) – The US Federal Reserve permitted Wells Fargo to boost loans to small businesses harmed by coronavirus shutdowns Wednesday amid fresh signs of trouble in the rollout of a massive aid program.

The Fed said it would “temporarily and narrowly” lift punitive restrictions on Wells Fargo imposed after a fake accounts scandal in light of the crisis facing small businesses.

Wells Fargo, the nation’s third-largest bank by assets, had previously said it was limited to lending $10 billion under the new Paycheck Protection Program (PPP) because the Fed in February 2018 imposed an asset cap on it following a series of compliance problems.

The Fed will only allow the bank to make additional loans under the PPP and a forthcoming “Main Street” lending program, and any profits will have to go to the US Treasury or “to non-profit organizations approved by the Federal Reserve that support small businesses,” the central bank said.

The Fed’s easing of the restriction came as US media reports spotlighted troubles in the launching of the $350 billion Small Business Administration program, which officially opened on Friday as part of a $2 trillion US relief bill approved by Congress last month.

Trump administration officials have pointed to tens of billions of dollars in loans processed by the SBA, but US media reports have said the funds are still not reaching many small businesses.

On Tuesday, The Washington Post released video of SBA Nevada District Director Joseph Amato lambasting large banks for dragging their feet on the PPP after accepting federal bailout money during the 2008 financial crisis.

“Some of the big banks — and this is just editorial — some of the big banks that had no trouble taking billions of dollars of free money as bailouts in 2008, they are now the biggest banks that are resisting small business funding,” Amato said on the video.

A report in the New York Times pointed to limited staffing and antiquated technology at the SBA that left it ill-prepared for the deluge of applications.