Trump is Hiding a $5 Billion Paycheck Protection Slush Fund

Mish

More sleazy details have emerged in regards to why the Trump administration wants to hide small business loan details.

Yesterday I asked Why Does Trump Want to Hide Who Took Small Business Loans?

In addition to members of Congress wanting to hide loans they received, Wall Street on Parade has uncovered more sleazy details.

Even though the loans are guaranteed against losses by the SBA, the Federal Reserve launched its own program, called the Paycheck Protection Program Liquidity Facility, to reimburse lenders who make these loans. So far, the Fed has reimbursed $57 billion of these loans as of June 10, out of total loans approved by the SBA of more than $500 billion.

The odd thing about those Fed reimbursements is that a stunning $5.3 billion in reimbursements, or 9 percent of the $57 reimbursed by the Fed, have gone to a tiny New Jersey bank, Cross River Bank. According to the SBA, as of May 30, there were 5,454 lenders that had made loans in the PPP program. Cross River Bank is just one of those 5,454 lenders and yet it received 9 percent of the Fed’s reimbursements. How does that make any sense?

According to the FDIC, Cross River Bank has only one branch office and has been around for just 12 years. The $5.3 billion that the Fed has reimbursed to Cross River Bank is more than twice its total assets of $2.5 billion as of March 30. Cross River Bank has made more than 50 percent of the dollar amount that Wells Fargo has made in PPP loans but it has only 250 employees rather than the 250,000 employees working for Wells Fargo to review and process these PPP loans.

The Secret Bank Behind The Fintech Boom

On December 31, a Forbes investigation revealed The Secret Bank Behind The Fintech Boom.

Cross River is not a typical community bank. There are no tellers here, or ATMs or safe deposit boxes. There are startup touches—a kitchenette stocked with LaCroix sparkling water, gourmet coffee and a game room. 

Unlike in banks of yesteryear, virtually all Cross River’s lending officers aren’t human beings. They are apps. Cross River’s loans originate mostly from 15 or so buzzy venture-capital-backed financial technology startups, so-called fintechs, that go by names like Affirm, Best Egg, Upgrade, Upstart and LendingUSA. The fintechs provide the customers; Cross River provides the licenses and infrastructure. It holds 10% to 20% of each loan it issues, and the massive volume of fintech loans has propelled Cross River to $2 billion in assets, up from $100 million a decade ago. 

Once you get beyond the slick iPhone apps and inflated tales of big-data mining and AI-generated lending decisions, you realize that many fintechs are nothing more than aggressive lending outfits for little-known FDIC-insured banks. 

Dirty Details

Wall Street on Parade discusses more Dirty Details.

Despite originally promising transparency, U.S. Treasury Secretary Steve Mnuchin is now stonewalling Congress on releasing a list of the recipients.

Congress sold the plan to the public on the basis that the loans would go to small businesses with less than 500 employees. The funds were to be predominantly used to keep workers employed and allow the businesses to survive the coronavirus shutdowns. 

Instead, our search of filings at the Securities and Exchange Commission reveals that dozens of debt zombie companies that trade on Nasdaq got the loans. Dozens of publicly-traded companies with large credit lines from banks got the loans. Dozens of companies with a lot more than 500 employees got the loans. It’s beginning to look like tens of billions of dollars in PPP loans were simply funneled out the door rapidly with little oversight into who was getting the loans.

Meanwhile, Back in Ohio

Meanwhile, back in Ohio, Nearly 24,000 Ohioans Told to Repay Unemployment Checks.

Marnie Behan got a surprising message last month from Ohio’s Department of Job and Family Services about her ongoing unemployment payments. Instead of sending her next unemployment payment, they said she needed to pay the state back. 

The bill was almost $3,000. She had 45 days to repay the money, or the case would be sent to the Ohio Attorney General.

There are 24,000 accounts like that of Marnie Behan, just in the state of Ohio. 

Transparency? Ha!

Taxpayers funded this $500 billion slush fund. We have a right to know how the money was spent.

Moreover, Treasury Secretary Steve Mnuchin and promised transparency.

Slush Fund Rules

There are rules for the small fry, determined in arrears, and rules for the big tuna also determined in arrears.

Whereas the new rules for the little guys demand repayment for $3,000, the new rules for the big tuna will hide who got hundreds of billion of dollars. 

Now for obvious reasons, the Trump administration wants to sweep this all under the rug and hide it.

Mike "Mish" Shedlock

Comments (63)
No. 1-24
Tengen
Tengen

Those paying attention saw through the Trump when he made Mnuchin his first (and probably worst) cabinet selection. Despite all the turmoil in the administration, Mnuchin has never been in danger and operates with impunity.

I hope people are starting to realize that the path to riches is no longer hard work and ingenuity, but access to Fed largesse.

njbr
njbr

"Cross River"? Which river? Across the Hudson River from Trump Tower?

Sechel
Sechel

I can't find any news articles on this....

Zardoz
Zardoz

This is where the real looting is happening... under cover of police brutality protests and riots and covid, oh my!

numike
numike

We Can Protect the Economy From Pandemics. Why Didn't We?
A virologist helped crack an impossible problem: how to insure against the economic fallout from devastating viral outbreaks. The plan was ingenious. Yet we're still in this mess. https://www.wired.com/story/nathan-wolfe-global-economic-fallout-pandemic-insurance/

CautiousObserver
CautiousObserver

President Trump's Watergate?

(He may not have had a hand in distributing public funds to companies that should not have received them, but as head of the executive branch he will be held responsible if there is an intentional cover-up). If there is anything to this, the Democratic Party will have wall-to-wall coverage of it come September.

channelstuffing
channelstuffing

That $5 billion is DC's cut,the politicians divi the cash up between them.Trump clears 50-60 million,Nancy a cool 12-13 mil.Obama did the same thing.DC always skims 10% off the top,that automatically goes to the House (of Representatives)Edge!

DBG8489
DBG8489

Why would anyone be shocked or even mildly surprised by this?

All politicians make their money by graft and corruption (including their salaries). Check the net worth of nearly all of the bigwigs and you will find individuals who have either never had a real job or at best worked at a job that can't even come close to explaining the amounts of money and valuable properties and holdings they possess.

Do you think it's magic? Does money and property just fall into their laps while they are sitting there innocently?

They're thieves; no better than common criminals.

And before anyone says anything about voting them out - please! Voting is a fool's errand. I want to throw up every time there's an election and everyone walks around showing off their "I Voted" stickers. Voting legitimizes a rotting corpse of a system - cloaking it in a fake silk blanket of freedom and democratic values.

The best statement our society could make as a whole would be for them to hold an election and have less than 2% of the people show up to vote.

Casual_Observer
Casual_Observer

Taxpayers didn't fund anything. This is money created out of thin air by treasury and the Fed. So this is more impetus for MMT for all. They should just start a fund named the Human Fund - Money For People.

Felix_Mish
Felix_Mish

"Where are the indictments?" Sound familiar?

Casual_Observer
Casual_Observer

The reason this administration may be doing is they know their time is up this year. They are trying pay back as many of their donors as possible. Trump is going to have to flee the United States to a country with no extradition with anyone.

amigator
amigator

And all this surprises you?
C'mon Mish!

This is big money the big fish...but don't worry they have us distracted on other things that are so much more important than a few bucks here and there.

Augustthegreat
Augustthegreat

trump: Make Assholes Great Again!

Anda
Anda

The Spanish government is hiding ncov fatalities according to

wmjack
wmjack

Mish you are working hard for the Democrats How about putting up some of Biden's lies and plagiarisms from the 80's when he could put two sentences together

Sechel
Sechel

On this one I"m thinking Trump's just holding a grudge against Democrats and has decided he doesn't have to be accountable to anyone. He's already fired several IG's, refuses to talk to Pelosi and has fired just about everyone involved in trying to stop the Ukraine gambit

Tony Bennett
Tony Bennett

"It’s beginning to look like tens of billions of dollars in PPP loans were simply funneled out the door rapidly with little oversight into who was getting the loans."

...

As was the plan.

The whole thing from start to finish took only a week. Bill several hundred pages. A lot of it written prior by lobbyists just waiting for an "emergency" bill that was going to be shoved thru with little / no debate.

As usual, the format:

A Lot For Us (Insiders) and A Little For You (Main Street).

awc13
awc13

trump is amazing. where does he find the time to hide something like this when he is so busy building ventilators, making medical masks and creating a vaccine?

Stuki
Stuki

"Once you get beyond the slick iPhone apps and inflated tales of big-data mining and AI-generated lending decisions, you realize that many fintechs are nothing more than aggressive lending outfits for little-known FDIC-insured banks. "

That's the sole and only story of all, 100%, of everything passed off as "financial innovation" since the ATM.

The "financial industry" has never been an industry at all. Just a simple theft and welfare racket. A bunch of absolute mediocrities at everything, being handed other people's money by the Fed and junta. In exchange for doing nothing whatsoever of value.

While uncritical idiots are being told, and many are seemingly stupid enough to fall for it even, that the utter mediocrities which is all every single Wall Street institution has ever employed, "make money" because they are somehow "smart." And that "we" "need" money center banks to "allocate capital" blah, blah. As if handing welfare recipients "capital" stolen from productive people to "allocate," can ever, even in theory and much less practice, result in it being efficiently allocated.

The entirety of "Investors" and the useless middle men feeding off them, make money 100% exactly the same way anyone else on public welfare does: They have it handed to them by the government. Who, in order to have something to hand the pure parasites, first have to tax/steal it from those sentient and competent enough to actually make any of it.

That's all "finance" is. Absolutely all "finance" is. It's all contemporary "investing" is. It's all "the ownership society" is. Without even a single exception whatsoever.

WildBull
WildBull

That this was another boon for the banks was obvious from the start. Any prudent small business man would NOT keep employees on for an indeterminate period and rack up debt on the promise of maybe having them forgiven. Just a way to write another few hundred billion in loans that Uncle would guarantee. No different from the home loans 2005 through 2009. Makes me sick.

Ken Kam
Ken Kam

Mish are you censoring comments or are they just getting lost in the ether?

Montana33
Montana33

Really disturbing. So much corruption in this administration.


Global Economics

FEATURED
COMMUNITY