PPP IS FUNDED AGAIN – EXPECT THE FUNDS TO LAST APPROXIMATELY SEVEN BUSINESS DAYS

The second round of PPP funding is now in place. New PPP applications can be submitted to SBA for the guarantee approval beginning today.

All indications are that the process for approval will not be as quick as it was for the first round of $349 billion in PPP funds. The pushback that both lenders (mostly focused on the larger banks who dominated the initial lending) and borrowers (including NBA teams, Ruth’s Chris Steakhouse Chain and over one hundred publicly traded companies) received from the apparent “favored” treatment of both in PPP1 is going to – rightly, we believe – force SBA to slow down and take more time to delineate those businesses that truly should qualify and those that are simply taking advantage of the program.

Expect a slower approval process. Or at least that is the indication we are receiving from our credit union clients and sources at SBA.

The projections that we see, however, are that the $310 billion allocated for PPP2 will take approximately seven days to exhaust. Therefore, we encourage you to get as many applications into the SBA queue as early as possible.

For those that do not make it with a PPP loan guarantee under the second round, the odds are now tougher that there will be a PPP3. While it could happen, it is not as assured as was the almost certainty that a PPP2 was coming.

There was enough political wrangling between the House and Senate, the Democrats and Republicans, the White House and the interest groups wanting “carve outs” within the program to lead us to believe that a PPP3 is not a sure thing.

With the re-opening of many sectors of the economy, the pressure for a PPP3 will be less strong as it was for PPP2. And the concerns over the impact on the federal debt is beginning to be heard more so than was the case with the first two congressional approvals of PPP.

We will continue to follow this issue for you. We try not to just parrot something that you have already heard on the news. That is of no value to you.

FEDERAL RESERVE, AFTER DECADES AND DECADES, HAS LIFTED THE SIX TRANSACTION MONTHLY REG D LIMITS

You have likely already heard this news. But, in case you have not, the Federal Reserve has finally – after literally decades and decades – enacted an interim final rule that will eliminate the longstanding six transaction Reg D limit for savings accounts.

This rule has always been somewhat problematic for credit unions whose base account for membership is a share (savings) account. Since only about 50% of credit union members have a share draft (checking) that is their primary transactional checking account, the six transactions per month limit has been something that many credit unions have had to manage around.

We have had numerous strategy sessions with our credit union clients about ways to structure checking and savings accounts to get around the Reg D limits or to calculate whether it is worth putting forth the reserves for allowing members to go beyond six transactions monthly.

Since the Fed changed its reserve requirements recently to zero, this distinction between transaction accounts and non-transaction savings accounts was truly an anachronism crying for update.

Kudos to the Fed for making this move, although it took the need for increased access to a consumer’s savings accounts during the coronavirus uncertainty and economic disruption to give them the incentive to move on the change now.

Regardless, this change does bring Reg D into the 2020s. Or maybe the 2000s.

Credit unions should be pleased.

 

Until next time.