Feds, states investigating Wells Fargo for its handling of PPP loans amid coronavirus
Wells Fargo has received formal and informal inquiries from federal and state agencies regarding its handling of Paycheck Protection Program loans, the bank disclosed Tuesday.
A bank spokesman wouldn’t elaborate on the disclosure, which came in a securities filing for its quarterly earnings. The probes come after the bank, along with three other major banks, was sued for allegedly shuffling program loans to maximize the bank’s profit. The bank denies the allegations.
Wells was initially unable to participate fully in the $660 billion federal program because it would encroach on the growth cap it’s operated under since 2018, a consequence of the bank’s fake-account scandal.
The Federal Reserve lifted the cap for the program’s loans in April, with the condition that it had to send the fees it makes on the loans to either the U.S. Treasury or certain nonprofits.
Many, if not most, large banks could have their involvement in the PPP probed. Congress prioritized speed over precision in creating the program, leading many federal officials to warn about misconduct in the program.
Assistant Attorney General Brian Benczkowski told Bloomberg News in April that the Department of Justice has contacted 15 to 20 of the largest loan processors to police the trillions in stimulus funds that Congress authorized to deal with the ongoing coronavirus pandemic. Issues were found in both approved and rejected applications, he said.
Officials are already cracking down: two businessmen were the first in the country to be charged with fraudulently seeking PPP funds Tuesday, the Justice Department announced.
PPP participation
As of April 27, Wells Fargo has sent more than 100,000 PPP applications to the Small Business Administration, which oversees the program aimed to help businesses suffering financially during the novel coronavirus pandemic. Some 75% of Wells’ applications are from companies with fewer than 10 employees.
Wells’ total applications is far behind those of crosstown rival Bank of America, which has had 265,500 loans totaling $24.9 billion approved by the SBA as of Monday. Much of that is attributable to Wells Fargo’s issues with its asset cap.
The PPP offers emergency loans to small businesses, which are designed to be forgiven if they’re spent primarily on payroll.
The initiative, part of the federal stimulus package passed in March has been plagued by participation issues, technical glitches, and limited funding. The program is current in its second round for loans, after an initial round of $349 billion in funding was quickly exhausted.
Wells Fargo, based in San Francisco, employs 27,000 in Charlotte, a legacy of the firm’s 2008 purchase of Wachovia.
