The launch Monday morning of the second round of the US “small business” Paycheck Protection Program (PPP) was a debacle. Millions of family-owned entities, desperate for credit and tottering on the brink of permanent closure, were once again shut out from applying for, let alone receiving, government-backed forgivable loans.
As soon as the $310 billion program administered by the Small Business Administration (SBA) began taking loan applications at 10:30 am, its computer system, overwhelmed by the volume of requests, crashed.
Cynthia Blankenship, vice chair of Texas-based lender Bank of the West, told the Financial Times, “First the page would not load, and then it just showed us an error message.” The problems continued throughout the day. Blankenship said her bank was able to process only 15 applications.
TAB Bank in Ogden, Utah had prepared loan applications from 1,100 customers. Five hours after the start on Monday, the bank had gotten only seven loans processed.
The Washington Post quoted Paul Merski of the Independent Community Bankers of America as saying, “All of the reports I have around the country is that it’s been a disaster.”
The big Wall Street banks, which are making a killing off of the government loan program, having taken in $10 billion in fees in the first round, had warned the Treasury Department and the SBA that they had to prepare for a massive flood of loan requests, but nothing was done to avoid the logjam. The SBA said later on Monday that there were double the number of users accessing the system than one any day during the initial round of the program.
The banks have warned, moreover, that the $310 billion allotted for the restart of the program will likely be exhausted in less than a week.
The abortive start of the second round of the program immediately demonstrated that, like the first installment, part of the $2.2 trillion corporate bailout enacted in March, the vast majority of small businesses and their employees will receive little or nothing in relief from the economic collapse triggered by the coronavirus outbreak.
Big businesses were given top priority by the Wall Street banks administering program until the first allotment of funds ran out in less than two weeks.