Banks Have Made $18 Billion From ‘Paycheck Protection Program’ Processing Fees

Fees paid to banks eclipse funding allocated to develop vaccines, provide medical supplies and feed children.

Whether or not a sin­gle job or com­pa­ny is saved through the CARES Act’s Pay­check Pro­tec­tion Pro­gram (PPP), lenders will be paid hun­dreds of mil­lions of dol­lars in tax­pay­er mon­ey. As of mid-July, PPP lenders, includ­ing JPMor­gan Chase Bank, Bank of Amer­i­ca and Wells Far­go, had racked up $18 bil­lion in fees—more than was allo­cat­ed to oth­er pro­grams to devel­op vac­cines, pro­vide med­ical sup­plies and health ser­vices, and feed chil­dren. Near­ly $130 bil­lion in PPP funds have gone untapped, yet both the HEROES Act passed by the House of Rep­re­sen­ta­tives in May and the HEALS Act intro­duced by the Sen­ate in late July call for the program’s exten­sion while remov­ing require­ments that most of its fund­ing be spent on payroll.

The Pay­check Pro­tec­tion Pro­gram was designed to pro­vide a direct incen­tive for small busi­ness­es to keep their work­ers on the pay­roll,” accord­ing to the Small Busi­ness Admin­is­tra­tion (SBA). Issued by lend­ing insti­tu­tions and guar­an­teed by the SBA, PPP loans cov­er up to eight weeks of aver­age month­ly pay­roll costs between $1,000 and $10 mil­lion, and may be used for pay­roll, mort­gage, rent and util­i­ty pay­ments, along with own­er com­pen­sa­tion. The pro­gram calls for the SBA to for­give a loan if all employ­ee reten­tion cri­te­ria are met and at least 60% of the funds are used for pay­roll costs. Should the bor­row­er default, the admin­is­tra­tion will refund the lender.

Nor­mal­ly, bor­row­ers pay a guar­an­tee fee to the SBA and any required pro­cess­ing fees to the lender that pro­vid­ed the loan. Under the Pay­check Pro­tec­tion Pro­gram, how­ev­er, all fees for bor­row­ers have been waived, and the SBA is pay­ing lenders a pro­cess­ing fee of between 1 and 5% when each loan is ful­ly dis­bursed. The SBA does not pay lenders under any oth­er program.

This com­po­nent of the Pay­check Pro­tec­tion Pro­gram has result­ed in major finan­cial insti­tu­tions pock­et­ing hun­dreds of mil­lions sim­ply for act­ing as a con­duit for tax­pay­er dol­lars. Below are the 10 finan­cial insti­tu­tions that had prof­it­ed the most from PPP pro­cess­ing fees as of July 7, 2020, accord­ing to data released by the SBA. These 10 firms will earn more than $3.6 bil­lion com­bined; JPMor­gan Chase and Bank of Amer­i­ca togeth­er account­ed for near­ly $1.6 bil­lion.

Lender Total Fees Earned
JPMor­gan Chase Bank, Nation­al Association $823,297,941
Bank of Amer­i­ca, Nation­al Association $770,493,577
Wells Far­go Bank, Nation­al Association $362,959,963
Tru­ist Bank d/​b/​a Branch Bank­ing & Trust Co $317,538,597
PNC Bank, Nation­al Association $303,210,598
TD Bank, Nation­al Association $238,436,086
U.S. Bank, Nation­al Association $236,130,803
Cross Riv­er Bank $215,875,654
Key­Bank Nation­al Association $182,159,042
Zions Bank, a Divi­sion of Zions Ban­cor­po­ra­tion, N.A. $168,530,745

While $18 bil­lion in fees may seem triv­ial com­pared to the $2 tril­lion in total spend­ing autho­rized by the CARES Act, it is more than the $1.3 bil­lion in fund­ing allo­cat­ed for com­mu­ni­ty health cen­ters cur­rent­ly ser­vic­ing 28 mil­lion peo­ple; the $3 and $4 bil­lion ear­marked for air­line con­trac­tors and car­go air car­ri­ers respec­tive­ly; the $4.3 bil­lion allot­ted to the Cen­ters for Dis­ease Con­trol and Pre­ven­tion; the $8.8 bil­lion for schools to pro­vide meals to stu­dents; the $450 mil­lion for food banks and com­mu­ni­ty food dis­tri­b­u­tion pro­grams; the $10 bil­lion in Eco­nom­ic Injury Dis­as­ter loans for small busi­ness­es to cov­er imme­di­ate oper­at­ing costs; the $11 bil­lion for Covid-19 drug diag­nos­tics, treat­ments and vac­cines; the $15.3 bil­lion that the state of Cal­i­for­nia received under the Coro­n­avirus Relief Fund; the more than $15.5 bil­lion to cov­er expect­ed increas­es in Sup­ple­men­tal Nutri­tion Assis­tance Pro­gram (SNAP) appli­cants; and the $16 bil­lion for the Strate­gic Nation­al Stock­pile to increase the avail­abil­i­ty of essen­tial sup­plies like masks and ventilators.

What’s more, we may nev­er know how many jobs the pro­gram has actu­al­ly saved. The SBA announced that it will only auto­mat­i­cal­ly review loans larg­er than $2 mil­lion and only after the bor­row­er sub­mits the loan for­give­ness appli­ca­tion. Less than one per­cent of PPP loans meet that qual­i­fi­ca­tion.

On July 17, Trea­sury Sec­re­tary Steven Mnuchin tes­ti­fied to the House Com­mit­tee on Small Busi­ness that the five mil­lion PPP loans that have been issued will keep over 50 mil­lion peo­ple employed. But an ini­tial analy­sis of the program’s impact on the U.S. jobs mar­ket led by the MIT Depart­ment of Eco­nom­ics puts that num­ber between 1.4 mil­lion to 3.2 mil­lion. Dur­ing the week of July 13, more than 31 mil­lion peo­ple
received some form of unem­ploy­ment benefits.

The PPP may have kept some busi­ness­es afloat in April and May, but as the pan­dem­ic enters its sixth month with no clear end in sight, it’s fair to ques­tion whether the pro­gram has out­lived its use­ful­ness. What Amer­i­cans need now more than any­thing is a direct infu­sion of cash — to pre­serve their pay­rolls, yes, but also to pay rent and mort­gages, buy food and toi­let paper, and keep their fam­i­lies safe from Covid-19. Dur­ing the Great Reces­sion of 2008, the banks used gov­ern­ment bailouts to enrich them­selves to the tune of bil­lions. Trag­i­cal­ly, his­to­ry appears to be repeat­ing itself.

Collen Boyle is a union researcher and organizer.