Of all the pieces of the $2.2 trillion COVID-19 recovery package passed by Congress, the one I was most impressed with was the Paycheck Protection Program.
It was an elegant solution to get money to the parts of the economy in most dire need. Employers could go to their bank and get a loan from the Small Business Administration. If they use the money to pay employee salaries and keep them on after things return to normal, they don’t have to pay the money back.
But as you might have heard, the $350 billion PPP went KaPPPut, leaving thousands upon thousands of Utah business owners frustrated and angry — not to mention frightened for their future.
“They were relying on this to stay in business,” said Jonathan Tichy, a lawyer who tried to apply for funds for himself and a few of his clients.
One energy company that is among the largest employers in the Uinta Basin was forced to lay off all of its workers because the aid didn’t come through.
Tichy is particularly upset with Zions Bank, which he said wasted days developing a glitchy online application — it launched April 7 — while other banks processed loans manually. Days later, Zions resent many of the same documents to be filled out again.
“It’s clear there wasn’t enough [money]. Everyone got that,” Tichy said. “The real thing is, it just didn’t seem there was an effort.”
I asked Zions to respond and instead of getting a spokesman, I got a call from Harris Simmons, chairman of Zions Bancorp., who acknowledged there were challenges all lenders faced, but defended what his personnel were able to accomplish.
Simmons said the bank was able to get $4.4 billion in PPP loans approved, the ninth most in the country, more than comparably sized banks. Zions operates in 10 states.
In total, Utah businesses received 21,257 loans worth a combined $3.6 billion, according to the most recent SBA numbers.
Zions initially tried to process loans manually through an electronic document, but after a few thousand, it became clear things would move faster if it was automated. So they created an online application to upload documents and, in some instances, he said, that meant people who already had applied had to reapply or sign additional documents.
(Editors tell me The Salt Lake Tribune is among those that have been approved for a PPP loan through Zions Bank. The Tribune hasn’t been told the amount or when it would receive the funds.)
“Everyone was scrambling because what we saw coming at us was this tsunami,” Simmons said. “We were experiencing volume that was about 80 times what we are [normally] doing on a given day.”
Many of the problems originated upstream, starting with a federal government that created unrealistic expectations. Treasury Secretary Stephen Mnuchin was telling businesses they would be able to get their money when the program launched on April 3.
But up until 10:44 p.m. on April 2, bankers and credit unions were still waiting for guidance from the SBA and the loan applications that customers, in mere hours, would be lining up to sign. The closing documents to complete the loans didn’t arrive until several days later.
Then there was the SBA portal, which was not equipped to handle essentially 14 years’ worth of loans in a few days. It was like trying to drive a Plymouth through a dog door.
“Banks and credit unions were working 24/7 … literally 24/7 trying to process and get one approval at a time through this archaic system,” said Scott Simpson, president of the Utah Credit Union Association.
Independent contractors and sole proprietors weren’t even eligible to apply until April 10 and by then the money was essentially gone.
By last Thursday, all $350 billion was committed and the program was frozen with an untold number of applications in the pipeline, thousands more sitting on bankers’ desks, and all of those business owners who were counting on being rescued left to fend for themselves.
“There are thousands and thousands of loan applications sitting on desks that just couldn’t get through the chokepoint,” Simpson said.
Howard Headlee, president of the Utah Bankers Association, said that right now banks can’t even submit new applications for when the program gets more money.
“This stoppage is very unfair to the businesses that are waiting in line,” he told me. “We could be catching up right now and they won’t even let us in the system. … It’s really maddening.”
Simmons said Zions Bank stopped taking new applications until it could get the ones that had been started ready to go when the program reopens.
Congress should have seen this collapse coming and pushed more money to the program, but that would require a functional Congress. Instead they are wrangling over whether to allocate more money to local governments and community banks, although a funding measure may pass Sunday evening.
Even with another $300 billion, Headlee estimates the applications in the pipeline would swallow that up within five days. At that point, lenders will again be the ones who will take the blame.
“You’ve got people yelling at lenders who have been breaking their pickax off for the last two-and-a-half weeks trying to solve problems they didn’t create,” Simpson said.
Nobody expects a program with this size and scope to be created magically overnight and for money to miraculously appear. But it’s wrong for the federal government to try to take all the credit and none of the blame for over-promising and under-delivering.
And it’s time for Congress to do more than throw a 2-foot-long lifeline to businesses that are 10 feet away and sinking fast.