Banks Have Made $18 Billion From "Paycheck Protection Program" Processing Fees Alone

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

Colleen Boyle August 20, 2020

The JPMorgan Chase building in midtown Manhattan is seen January 16, 2008 in New York City. Chris Hondros/Getty Images

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.

LenderTotal 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.

Colleen Boyle is a union researcher and organizer.
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