“The loans are risk free. Why aren’t the banks more interested?!?” They’re not risk-free. The government may write a put option on some of the loans. Credit risk is far from the only risk, as the banks are keenly aware of.
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Also note a little bit of rational “Hey, remember what happened the last time we were told ‘It is the public policy of the United States that traditional underwriting standards do not conform to our policy preferences. Adjust yours. We’ll guarantee the loans. Totes risk free.’ ?”
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“Hey are we going to get backstabbed if this goes pear shaped?” “Has any American administration, much less this administration, ever blamed its failures on in someone else? Come on, where’s your patriotism.”
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Unsurprisingly, Matt Levine smashed nail on head regarding reputational risk: https://www.bloomberg.com/opinion/articles/2020-04-03/small-business-bailout-makes-banks-nervous?utm_source=url_link …pic.twitter.com/UXC13Fqvig
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Single digits weeks? Feels more like single digits *days*, if we talking about the PPP loans. It's nuts that banks got final guidance late Thursday and the admin thought they would be giving out loans Friday morning.
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As someone who spent almost as much time as Trevor on CARES - hell yes it should have been a grant.
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Forcing their underwriting departments to figure out how to administer loans that are too small to be profitable is not playing to their strengths, but to established weakness. Banks don't do small biz loans for a reason. Everyone knows that but the clowns in DC.
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(Or for any system — guidance Thursday to rolling out on Friday is insane. As is funds disbursement on the same day, like was suggested...)
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