Fed Releases Wells Fargo From PPP Loan Cap

  • Fed Releases Wells Fargo From PPP Loan Cap

Fed Releases Wells Fargo From PPP Loan Cap

The government program is created to limit the swelling number of workers applying for unemployment, with Congress aiming to distribute as much as $349 billion in aid through the small business initiative.

Before the Fed made the change, small businesses who banked with Wells Fargo reported that, because of the structure of the program, they were having difficultly getting the loans at other banks in the midst of the novel coronavirus pandemic.

Details: Wells Fargo can now expand assets beyond $1.95 trillion for the first time since the 2018 penalty - but only for the goal of issuing loans via the Paycheck Protection Program (PPP), as well as another small business program that will be announced by the Fed. The bank announced late Sunday that it would no longer accept new loan applications under the government's Paycheck Protection Program, which launched last week as part of Washington's $2.2 trillion economic relief package. Many bankers blamed the hitch on the U.S. Treasury Department not finalizing rules for the program until less than a day before it was due to kick off.

As markets swooned and commerce slowed this year, Wells Fargo's representatives privately broached the idea of at least temporarily lifting the restriction so it could help more customers.

"Today, the company continues to operate in compliance with an asset cap imposed by its regulator due to actions of past leadership", Wells Fargo CEO Charlie Scharf said in a statement Sunday.

The federal program, which went live only on Friday, earmarks $349 billion for businesses with 500 employees or less, which are supposed to be able to apply for forgivable loans of up to $10 million to be spent on payroll and other qualifying expenses.

When Wells Fargo rolled out the program this weekend, it quickly hit a self-imposed $10 billion cap.

But the Fed indicated Wells Fargo has more work to do before it's removed permanently. Until the bank fixed its issues and proved it to the Fed, the cap was going to stay in place. The bank started 2020 with roughly $20 billion of room under the cap, according to filings. He's now awaiting word from Wells Fargo on the status of his loan application.

The Fed was clear to say that this doesn't mean it's easing up on the bank: outside of the two federal stimulus programs, all the prior restrictions it put on the bank stay in place.

The Federal Reserve announced Wednesday it will temporarily relax growth restrictions placed on Wells Fargo to bolster small business lending amid the coronavirus shutdown.

The bottom line: Wells Fargo has a ton of demand from small business customers that need the aid to pay employees and their bills while the economy is shut. Sherrod Brown of OH, the top Democrat on the Senate Banking Committee.

Wells Fargo opened its portal on Saturday. That is a legacy of its 2008 acquisition of Wachovia. He previously covered financial regulation for Bloomberg News.