The Federal Reserve on Wednesday temporarily lifted a limit on Wells Fargo & Co.'s ability to provide coronavirus relief loans to small businesses through the new Paycheck Protection Program.
As a result, the bank said it will expand its participation in the $349 billion program, which provides small businesses with loans that can be forgiven if employers maintain their employee headcounts and payrolls at pre-pandemic levels.
“In the first two days alone, we received more than 170,000 indications of interest from our customers, and know there is much more need,” Wells Fargo chief executive officer Charlie Scharf said in an announcement of the change.
Within days of the Paycheck Protection Program launching on Friday, Wells Fargo said it would not be able to lend more than $10 billion because of the cap on the growth of its assets. Federal regulators imposed the cap in 2018 after a scandal in which Wells Fargo employees opened millions of unauthorized customer accounts to meet aggressive sales targets.
The bank’s announcement about the cap added to small businesses’ anxiety about applying to the program, which was rushed out in just one week without many of the rules and guidelines that might be expected to accompany a third of a trillion dollars’ worth of federal spending.
Different banks have required different information from applicants, and Bank of America initially said it was taking applications from customers who had borrowed money from it in the past. In addition, with 30 million small businesses nationwide, there is widespread concern that the program would run out of money, something congressional leaders have said they plan to address by appropriating another $250 billion.
“It’s been a complete disaster so far,” said Mike Cherry, a Wells Fargo banking customer who owns Hayes Florist in Pinellas Park with his wife Diane and has four full-time employees.
Cherry said he watched the Wells Fargo web site closely since before the program launched so that he would be ready to apply as soon as he could. He provided the bank with his contact information and interest in applying but never saw an application or got a response and thus had not been able to apply. So he’s baffled at the bank saying the money had been fully committed when customers didn’t have a chance to apply.
“I don’t understand how, because I was literally monitoring Wells Fargo for every half hour for the application,” he said.
Bank spokesman Jacob Jordan said in an email to the Tampa Bay Times that it’s too soon to say how much more than $10 billion the bank would lend as a result of the Fed’s action. Asked about Cherry’s question — how could the money be committed when customers couldn’t apply? — Jordan said, “only thing I could say about that is the strong interest we received in just two days — 170K small businesses, and at that time we were limited to $10 billion.”
Late Wednesday afternoon, “if you go on the web site, it still says you cannot apply," Cherry said. "Nothing has changed.”
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