The takeaway from the PPP rollout is that bankers must protect their reputations and limit their risk appetites as they participate in further government-backed rescue programs.
As soon as the program was announced, I not only advised my small business clients to apply; I also tried to figure out how to take advantage of it myself.
The Main Street Lending Program, announced on April 9 as an option to help U.S. businesses weather the coronavirus outbreak, will be available to a wider array of companies than previously planned.
Fintechs in the payments industry saw problems coming when the CARES Act’s SBA Paycheck Protection Program opened the floodgates for millions of coronavirus-stricken small businesses to apply for loans.
Accommodations for borrowers affected by the coronavirus pandemic, such as payment delays and fee waivers, are "positive and proactive actions that can manage or mitigate adverse impacts," the regulators said.
The Federal Reserve's support for the commercial paper market made clear that it was willing to go beyond cutting interest rates, but the central bank may feel pressure to do even more as the crisis worsens.
The central bank said it was establishing the Commercial Paper Funding Facility to "support the flow of credit to households and businesses."
There may only be so much institutions can do if the outbreak affects borrowers' ability to repay credit.