As banks stumble to divvy up aid, other ways mulled
Options include IRS records, payroll processing companies
When the federal government agreed to funnel $2.2 trillion in emergency aid to Americans devastated by the economic shutdown, the nation’s banks were given a central role.
There were three main prongs of relief for taxpayers and American businesses, all routed through the banks in various ways: stimulus checks, a $660 billion package for small businesses and unemployment benefits. Confronted with an unprecedented crush of need as millions of Americans lost their livelihoods, the banks stumbled in ways big and small.
The small-business aid, the Paycheck Protection Program, had a chaotic introduction and ran dry within days. Some banks withheld stimulus cash from people with overdrawn accounts. Some banks’ debit cards, used to distribute unemployment benefits, didn’t work properly.
Several lawmakers have begun exploring ways to sidestep banks to deliver aid.
Among the proposals, mainly from Democrats: using IRS records and payroll processing companies, as well as the Federal Reserve, to help distribute money.
Democrats are also pushing for additional stimulus funds, but it’s not clear that more aid will win approval, especially with top Republicans urging restraint. Top Democrats in the House, who are working on their own coronavirus legislation, want to expand the existing programs, including a provision for lending exclusively through nonprofits or mission-focused lenders known as Community Development Financial Institutions, which lend to poor communities not served by banks.
Sen. Doug Jones, D-Ala., is pushing a plan to give small businesses another round of help in paying employees by using the services of payroll processors, which already distribute wages for close to 40% of U.S. businesses. And companies that don’t use payroll processors could get payouts directly from the IRS.
“Another option makes it easier and takes a little pressure off the banks,” Jones said. “They’ve been overwhelmed.”
The Paycheck Protection Program was a highlight of the CARES Act, but its image suffered after several publicly traded companies exploited loopholes to gain access to funds — partly because of their close ties to big banks. Many of those companies, including restaurant operator Ruth’s Chris Steak House, have since returned the money.
There is also growing support among Democrats for a plan put forward by Rep. Pramila Jayapal, D-Wash., that would have the federal government directly pay 100% of weekly wages for workers making up to $100,000 and their benefits.
Although the architects of the CARES Act acknowledge the early missteps, particularly with the start of the paycheck program, some lawmakers say they would prefer to work within the confines of what they have already created.
“We need to look at the programs that are out there, and tweak them to get them to work better,” said Sen. Rob Portman, R-Ohio. “I would hate to take it away from banks and try something else that we haven’t tried yet.”