© Reuters. FILE PHOTO: US Secretary of the Treasury Mnuchin visits meeting for coronavirus relief package in Washington
By Pete Schroeder and David Henry
WASHINGTON (Reuters) – Major US banks have threatened to let the federal government’s small business rescue program fail to fear taking too much financial and legal risk, five people who have first-hand knowledge of the talks told Reuters industry.
Seeking to help millions of small businesses whose operations have shut down or have been significantly reduced by the coronavirus pandemic, Congress last week adopted a $ 2 trillion stimulus package, including $ 349 billion for small enterprises.
Borrowers can apply for loans from participating banks from Friday until June 30. Trump administration officials have said they want the loans disbursed in a few days.
But representatives of some major lenders, on a conference call with the industry on Wednesday, expressed serious concerns about their participation in the program in its current form.
Their main concern is that the Treasury Department has said it expects lenders to check borrowers’ eligibility and take steps to prevent fraud, money laundering and protect customer information under of the bank secrecy law, sources said. Banks worried about facing regulatory sanctions or legal fees if things go wrong in a hurry to withdraw money, or if they’re accused of not moving funds fast enough if they do their due diligence as they would in ordinary times, the sources said.
After hearing the concerns, Treasury officials plan to withdraw the instructions asking lenders to verify that borrowers have the specified number of employees on their books and that their other costs are legitimate, two sources said.
Reuters was unable to find out which specific banks are planning to boycott the program. The Bank Policy Institute (BPI), which hosted the call on Wednesday, has lenders including JPMorgan Chase & Co (N :), Bank of America Corp (N :), Wells fargo & Co (N ? and Citigroup Inc (N ? as members.
A BPI spokesperson declined to comment. The US Department of the Treasury and the Small Business Administration, which jointly administer the loan program, did not immediately respond to requests for comment.
Banks want a document that customers can sign attesting to their eligibility and other requirements, thereby relieving the industry of responsibility for potential misconduct.
A source said the banks are also asking the government for written assurance regarding their legal responsibilities and obligations before agreeing to participate in the program.
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