P.P.P. loan forgiveness portal opens, but big banks opt out.
19 min readDaily Business Briefing
Aug. 4, 2021, 5:07 p.m. ET
Aug. 4, 2021, 5:07 p.m. ET
In an effort to speed forgiveness of Paycheck Protection Program loans, the government on Wednesday opened an online portal through which small businesses that borrowed up to $150,000 can apply to have their loans eliminated.
The Small Business Administration, which administers the program, hopes the new system will streamline the process both for borrowers and for the program’s nearly 5,500 lenders, which collectively made 11.8 million government-backed loans totaling $800 billion between April 2020 and May 2021. Until now, each lender had to set up its own process for collecting loan forgiveness applications and sending them to the S.B.A. for approval.
The new system “will simplify forgiveness for millions of our smallest businesses,” said Isabel Casillas Guzman, the agency’s administrator. About 92 percent of the program’s loans fall under the portal’s $150,000 cap.
But there’s a sticking point: Lenders also have to agree to use the portal, otherwise the service won’t work for the borrower. So far, about 900 lenders have signed on, but many of the program’s largest lenders, especially big banks, are not on board.
Several lenders said they preferred to stick with their own processes out of concern that steering customers to the S.B.A.’s portal would create confusion. Banks are also leery of relying on an agency that has struggled throughout the pandemic with buggy and overloaded technology systems.
Many lenders “tested the portal’s capabilities during its early launch period and provided positive feedback,” said Matthew Coleman, an agency spokesman.
JPMorgan Chase, the program’s largest lender, said it was “too early to say” whether it would participate in the portal. “We’re evaluating all aspects of the process and meanwhile continue to encourage our customers to apply for forgiveness through our platform,” said Elizabeth Seymour, a bank spokeswoman. Bank of America is also not participating at this time, a bank spokesman said.
A few large lenders, though, are enthusiastic. Adam Seery, the chief operating officer of Harvest Small Business Finance, said his company hopes to use the new portal to process forgiveness applications for most of the 430,000 loans it made this year.
“So far it’s a big success and will save months in processing times,” he said of the testing Harvest did over the last few weeks. Harvest submitted its first batch of around 30 applications this week and hopes to have those loans discharged soon.
Nearly 80 percent of the 5 million P.P.P. loans given out last year have been fully or partially forgiven, according to the latest agency data, but very few of this year’s borrowers have begun the process. Most have until next year to seek forgiveness before they will be required to start making payments on their loans.
Uber is recovering from the pandemic and the driver shortages that followed, the company said on Wednesday. The company’s revenue in the second quarter grew 105 percent from the same period last year, to $3.9 billion, slightly higher than analysts expected. Uber also recorded a rare profit of $1.1 billion, thanks to the initial public offering of the Chinese ride-hailing company Didi, of which Uber owns an 11 percent stake.
Excluding that one-time gain, Uber said its adjusted losses were $509 million. Uber last recorded a profit in the first quarter of 2018, when it sold off parts of its businesses in overseas markets where it faced challenges. The company remains on track to reach its goal of adjusted profitability in the last three months of 2021, Nelson Chai, its chief financial officer, said in a statement.
Uber’s stock price fell about 8 percent in after hours trading, a result of the declining value of its Didi stake as that company faces regulatory pressure in China.
Uber and other ride-hailing companies still face uncertainty as the Delta variant causes a surge of Covid-19 cases in the United States and elsewhere. Uber’s food delivery business, Uber Eats, provided a lifeline to the company during earlier lockdowns, when customers stopped taking rides but started ordering more food.
Riders returned to Uber this spring more quickly than drivers, causing long wait times and higher prices. To tempt drivers back to the platform, Uber increased incentives and bonuses. Uber also said it temporarily had lowered the amount it takes from ride hail fares to 18.7 percent, from its usual rate of roughly 20 to 25 percent.
The move worked, according to Uber’s chief executive, Dara Khosrowshahi. “We invested in recovery by investing in drivers, and we made strong progress, with monthly active drivers and couriers in the U.S. increasing by nearly 420,000 from February to July,” Mr. Khosrowshahi said in a statement.
Uber said it attracted 101 million monthly active consumers.
On Tuesday, Lyft, Uber’s largest competitor in the United States, said it had revenue of $765 million in the second quarter, a 125 percent increase from the previous year. The company narrowed its losses to $251.9 million from $437.1 million and attracted 17 million active riders, a nearly 97 percent increase from the same period a year ago.
Lyft attributed the growth to its recovery from the peak of the pandemic and said that it had reached its goal of adjusted profitability.
-
The American drugmaker Pfizer, which developed a coronavirus vaccine with its German partner BioNTech, said Wednesday that it was requiring all of its U.S. workers and contractors to be vaccinated or get a weekly coronavirus test. Vaccinations are encouraged for those outside the United States, and accommodations will be made for those with medical conditions or religious objections, the company said.
-
The New York auto show, scheduled to run Aug. 20-29 at Jacob K. Javits Convention Center in Manhattan, has been canceled because of the rise of the Delta variant and state and local efforts to stop its spread, organizers said in statement Wednesday posted on the show’s website. “Over the past few weeks, and especially within the last few days, circumstances have changed making it more difficult to create an event at the high standard that we and our clients expect,” Mark Schienberg, president of the show, said in the statement, adding that the show will return in April.
-
Vanguard, the investment giant, is offering a $1,000 reward to fully inoculated employees, a spokesman for the company told The New York Times. With about 17,300 employees, that could equate to a check of roughly $17.3 million. “The incentive recognizes crew who have taken the time to protect themselves, each other, and our communities by being vaccinated,” the spokesman said.
-
The Washington Post pushed back its office return to Oct. 18 from Sept. 13, according to a memo sent to staff on Tuesday that was viewed by The New York Times. The Post said last week that it would require all workers to provide vaccination proof as a requirement of employment once the company returns to the office.
-
Politico’s publisher, Robert Allbritton, told employees in an email viewed by The New York Times on Wednesday that the company was pausing its plans for an office return, which originally had been set for Sept. 7, and did not have a new target date “given the fluidity of the situation.”
-
All autoworkers will be required to wear masks at unionized plants, offices and warehouses, the United Automobile Workers union, General Motors, Ford Motor and Stellantis said on Tuesday. The requirement will apply regardless of whether workers are vaccinated and is in response to the latest guidance from the Centers for Disease Control and Prevention. The union and automakers said they would not require workers to be vaccinated but were “strongly encouraging” vaccinations.
-
Tyson Foods, one of the nation’s largest meat processors, said on Tuesday that it would require vaccines for its U.S. workers — about half of whom remain unvaccinated. Vaccinations will be a condition of employment for all U.S. workers, and any new employees must be vaccinated before they start work, the company said. Tyson is offering $200 to frontline workers who verify that they are fully vaccinated. The company already offered employees up to four hours of pay if they are vaccinated outside of their normal shift.
-
Microsoft will require proof of vaccination for all employees, vendors and guests to gain access to its U.S. offices, the tech giant said Tuesday in an email to employees, adding that it will push back its return-to-office date by a month, to no earlier than Oct. 4. Parents with children who are too young to be vaccinated will be able to work from home until January. The company employs roughly 100,000 people in the United States and had previously planned to return to office in early September, though with flexibility for employees to work up to half of their time from home.
A coalition of gig economy companies that includes Uber, Lyft, DoorDash and Instacart said on Wednesday that it had filed a ballot proposal in Massachusetts that could create a new class of workers in the commonwealth. If the coalition is successful, Massachusetts voters will decide next year whether gig workers should be considered independent contractors.
The employment classification of gig workers has been the subject of legal battles in several states. Labor activists argue that companies like Uber do not pay fair wages to their workers and shortchange them on expenses, health care and unemployment benefits. The companies say their workers enjoy too much flexibility to be considered employees. Last year, Massachusetts sued Uber and Lyft, claiming they misclassified drivers as independent contractors. That litigation is ongoing.
The group of gig companies, called the Massachusetts Coalition for Independent Work, proposes exempting gig workers from being classified as employees but offering them some limited benefits, including minimum pay of $18 per hour spent transporting a rider or delivering food.
“This is the best of both worlds,” Pam Bennett, a DoorDash courier, said in a statement provided by the coalition. “This measure will help every driver by preserving our ability to work whenever and however we want, and also give us access to brand-new benefits that will really help.”
The ballot proposal mirrors an initiative that the companies proposed last year in California. The companies poured $200 million into the California ballot initiative, making it the most expensive effort in state history, and ultimately prevailed in exempting their workers from a California law that would have effectively classified them as employees.
“They are going to try to get this ballot measure by deceiving the public into thinking that this is somehow for the benefit of the workers,” said Shannon Liss-Riordan, a labor attorney who represents gig workers in Massachusetts. “It’s going to take away their responsibilities under Massachusetts law and substitute these fake benefits.”
The effort in Massachusetts comes as Uber and other companies that rely on gig workers face increased scrutiny from the Biden administration, which earlier this year rolled back a Trump-era rule that would likely have classified gig workers as independent contractors.
Robinhood, meme thyself.
The stock trading app that helped fuel a frenzy by small investors earlier this year soared on Wednesday in trading that had all the hallmarks of the “meme-stock mania” that drove up prices of companies like AMC Entertainment and GameStop.
Robinhood’s shares rose as much as 65 percent to $77, double their price at the end of last week, and trading was briefly paused by the Nasdaq stock exchange. They ended the day up 50.4 percent. It was a second day of sharp gains after jumping 24 percent on Tuesday.
Robinhood became a publicly traded company only last week. It priced its initial public offering at $38 a share, but the stock stumbled in its first day of trading on Thursday, finishing down more than 8 percent.
Since then, however, buyers have emerged, especially among the ranks of individual investors that the company caters to. On Wednesday, the stock shot to the top of Fidelity’s list of orders from the traders at its brokerage unit, suggesting that demand from day traders is driving the surge in the shares.
Ark Invest, the money management firm run by the social media-savvy stock picker Cathie Wood, has also been buying shares of Robinhood for the exchange-traded funds that serve as her investment vehicles. Daily disclosures of her holdings — which are closely followed and sometimes mimicked by day traders — have shown her buying more than 1.5 million shares of Robinhood, giving her a stake worth over $100 million at the peak of Wednesday morning’s surge.
Here’s what else is happening in markets today:
-
The S&P 500 fell 0.5 percent on Wednesday. The Nasdaq composite ticked up 0.1 percent.
-
The Stoxx Europe 600 closed with a 0.6 percent gain.
-
Oil prices continued to fall, with West Texas Intermediate, the U.S. crude benchmark, down as much as 3.8 percent to $67.91 a barrel.
-
Spirit Airlines said it expected flight cancellations to ease by Thursday. The airline canceled more than 60 percent of flights on Tuesday and had scrapped about 60 percent of Wednesday’s flights as of late afternoon, according to the flight-tracking website FlightAware. Spirit said in a statement that it had done a “thorough reboot of the network” and blamed the disruption, which began over the weekend and has affected hundreds of flights each day, on “overlapping operational challenges including weather, system outages and staffing shortages.” The airline’s shares fell about 3.8 percent.
-
Lyft fell 10.6 percent on Wednesday. Despite reporting strong growth for the second quarter on Tuesday, it lost $251.9 million.
-
Uber fell 5.6 percent in after-hours trading after it published its company results. It made a profit of $1.1 billion in the last quarter, but after adjusting for a one-time gain its losses were $509 million.
-
Shares of General Motors fell 9 percent. The company reported a jump in profit in the second quarter, but G.M.’s chief executive, Mary T. Barra, said a global shortage of computer chips would continue to be a problem until next year.
Richard H. Clarida, the Federal Reserve’s vice chair, said in speech on Wednesday that if the economy meets his expectations, he thinks it will be healed enough by the end of next year for the Fed to start raising rates in 2023 — a meaningful statement coming from one of the highest-ranking members of the policy-setting committee.
Mr. Clarida said he expected inflation to moderate but remain slightly above the Fed’s 2 percent target — which the central bank would like to hit and be on track to exceed for a time — with unemployment dropping sharply toward the Fed’s full employment goal.
“I believe that these three necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022,” Mr. Clarida said.
Mr. Clarida said the unemployment rate “will have reached my assessment of maximum employment” if it drops to around 3.8 percent by the end of next year. That is the level most Fed officials projected in June. The jobless rate stands at 5.9 percent, up from 3.5 percent before the pandemic but much lower than the 14.8 percent at its 2020 peak.
“Commencing policy normalization in 2023 would, under these conditions, be entirely consistent with our new flexible average inflation targeting framework,” Mr. Clarida said. He noted that the government’s big spending response to the pandemic downturn had offset some of the limitations the Fed had faced in returning the economy to full health, and said the central bank’s approach “must — and certainly can — incorporate this reality.”
The median Fed projection in June suggested that the central bank would not lift interest rates until 2023. Because Fed officials give their estimates for the final quarter of each year, it is difficult to tell whether Mr. Clarida’s judgment — which seems to argue for an early-2023 rate increase — is more aggressive than that of most of his colleagues.
Mr. Clarida’s influence is tempered by the reality that his term on the Fed board expires early next year, and he was nominated by the Trump administration, so there is a good chance he will not be reappointed to the post. But he is the highest-ranking official yet to set out a possible timeline for lifting interest rates, since the Fed chair, Jerome H. Powell, has repeatedly said it is not yet time to discuss raising the federal funds rate.
Mr. Clarida was also a chief architect of the Fed’s new policy framework, which was adopted last year and calls for periods of inflation above the Fed’s 2 percent target to offset periods of weak price gains. By laying out the conditions under which the economy would satisfy that approach, his comments served to more clearly define that new — and, to date, somewhat amorphous — policy standard.
Rate increases are a question for next year, but the Fed is more immediately considering when and how to change its approach to its other monetary policy tool: big bond purchases. Officials are discussing slowing down their $120 billion in monthly purchases now.
“In coming meetings, the committee will again assess the economy’s progress toward our goals,” Mr. Clarida said, suggesting through his use of the plural “meetings” that no decision is coming at the September gathering.
“As we have said, we will provide advance notice before making any changes to our purchases,” he added.
General Motors said on Wednesday that it had made $2.8 billion in the second quarter and increased its profit forecast for the full year, suggesting the largest U.S. automaker was faring a lot better than expected.
G.M. and other car companies have been forced to idle factories periodically this year because of a global shortage of computer chips. The production slowdown has kept a lid on sales, but it has created shortages of new and used cars, increasing selling prices.
The industry, like others, is also growing more concerned about what the spread of the Delta variant of the coronavirus will mean for their business. The United Automobile Workers union, G.M., Ford Motor and Stellantis, formerly Fiat Chrysler, said this week that they would go back to requiring all workers to wear masks because of the variant, though they would not mandate vaccinations.
“G.M. had a very strong second quarter and first half of the year,” G.M.’s chief executive, Mary T. Barra, said in a conference call to discuss the results. “Of course, we will continue to monitor Covid very closely.”
Three months ago, G.M. indicated it would make about $500 million from April to June, after earning $3 billion in the first three months of the year. The second-quarter results account for $1.3 billion in warranty and recall costs, including $800 million for fixes to Chevrolet Bolt electric cars whose batteries can overheat and catch fire.
Last month, G.M. recalled 51,000 Bolts in the United States to fix manufacturing defects that can lead to fire. G.M. said the defects were rare, but the recall is still a big headache for the automaker, which plans to do away with the internal combustion engine in its cars and trucks by 2035.
The company reported revenue of $34.2 billion in the second quarter, up from $16.8 billion a year earlier, when the pandemic crushed sales. In the first quarter, G.M. had revenue of $32.5 billion.
G.M. now expects a profit of $11.5 billion to $13.5 billion before interest and tax in 2021, up from a previous estimate of $10 billion to $11 billion.
Last month, Tesla also reported strong earnings for the second quarter despite the chip shortage. Ford, which had been hurt by the shortage more than some other manufacturers, said its profit had fallen by half, to $561 million, in the second quarter.
Ms. Barra said G.M. had managed the chip shortage by allocating electronic components in short supply to the plants making its most profitable and popular models. She added that the shortage would continue to be a problem until next year.
Because of the chip shortage, G.M. has about 200,000 cars and light trucks on dealer lots in the United States, about a quarter of what was previously considered normal. Although bad for sales, the limited supply has meant that dealers and the companies no longer have to offer discounts or haggle over prices with customers.
Passing the CFA exam, in the best of times, is tough. The test, which confers chartered financial analyst status, has three levels, and study times average 300 hours per level. CFA status is a résumé booster that can open doors and fetch a higher salary in the financial services industry.
Last week, the CFA Institute reported that the Level I pass rate dropped to 25 percent for exams taken in May, the lowest since testing began in the 1960s. On Tuesday, the institute announced that the latest Level II success rate fell to 40 percent, the third-lowest rate on record.
What happened? Theories abound, including that a popular prep website had technical issues, that it was the first time some tests were administered via computer and that Covid protocols delayed some test takers from starting the test on time.
The CFA Institute denies all of those. Instead, it said pandemic-related test delays had disrupted study plans.
The DealBook newsletter notes another potential factor: Achieving CFA status may not seem as essential right now, given the complications of pandemic restrictions and the desperation of financial firms to hire workers with deal flow so high and morale so low. This week, Goldman Sachs joined its Wall Street rivals in increasing pay for junior bankers across the board. This could be why fewer people recently sat for the CFA exams and, when they did, may not have put in their best performance.
A water-recycling effort is gaining traction as a severe drought punishes industries in states like California, Montana, New Mexico and Utah.
The concept of filtering the dirty water generated by daily operations for use in toilets and drip irrigation isn’t new, but it’s increasingly seen as a promising sustainability push, especially as more cities and states enact measures to limit water use, and as a smart hedge against rising water costs and future shortages, Patrick Sisson reports for The New York Times.
Water-conservation advocates say such technology is where solar and renewable power were a decade ago: technologically feasible, with pioneering projects starting to bend the cost curve and push the concept toward wider accessibility.
“Ten or 15 years ago, a green building was a ‘nice to have,’ whereas now it’s driven by regulations and the market,” said Aaron Tartakovsky, a co-founder and the chief executive of Epic Cleantec, a wastewater tech start-up in San Francisco. “It’s undeniable that the drought has accelerated conversations many were already having.”
Increasingly, developers see value in so-called black-water systems, especially at scale, to provide water for irrigation and cooling towers. Even the cost to retrofit a building, long considered infeasible because of the need to add so many pipes for recycled water, is now more viable, Mr. Tartakovsky said.
Mission Rock, a 28-acre, $2.5 billion multiuse waterfront project led by the San Francisco Giants and developed by Tishman Speyer, will use a black-water system. Every building on the site, which broke ground this year, will tie into it over time. A new nonprofit utility, Mission Rock Utilities, will build and manage both it and a central thermal energy system.
Water reuse isn’t being embraced just in drought-stricken Western states. On the Brooklyn waterfront, the 11-acre, roughly $3 billion Domino Sugar Refinery redevelopment will feature a more than $10 million black-water system designed not only to cut water use but to reduce pressure on storm-water systems.
Residents are acutely aware of water quality. “It’s pretty obvious when there’s a storm and the East River smells like poop,” said one developer.
The reinstatement of the federal eviction moratorium on Tuesday came as a relief for progressives, but for White House officials it was just the starting gun of a 60-day sprint to distribute billions in rental aid, in a nerve-rattling race that could be stopped by the courts at any moment.
President Biden’s decision to implement a new freeze to replace the moratorium that expired on Saturday was a risky strategy intended to reset the legal clock by creating a new initiative that has not yet been subject to a court challenge from landlords.
But while most key administration players signed off on the tactic after legislative efforts to extend the freeze failed, some in the administration believed such an effort might jeopardize the administration’s authority to take action during future health emergencies.
On Wednesday, the White House press secretary, Jen Psaki, acknowledged the legal fragility of the new extension, which came after a June Supreme Court ruling in which Justice Brett M. Kavanaugh issued an explicit warning to the administration not to extend the moratorium beyond July 31 without congressional approval.
“We don’t control the courts, we don’t know what they will do,” Ms. Psaki told reporters at the White House.
But the decision, she added, was necessary — and represented Mr. Biden’s message to tenants “that he shares their concern” and “wants renters to be able to stay in their homes.”
The new evictions ban signed by the Centers for Disease Control and Prevention is scheduled to expire on Oct. 3, and is more narrowly targeted than the first, limited to areas facing significant threats from the Delta variant of the coronavirus.
But it will still cover about 90 percent of renters nationwide. And one of its main aims is to buy more time to stand up the troubled Emergency Rental Assistance program — which has thus far allocated just $3 billion of $47 billion slated by Congress to pay for back rent accrued during the pandemic.
But the effectiveness of the massive program, which is intended to keep millions of tenants from being evicted, ultimately rests on the efforts of local officials and the removal of bureaucratic impediments that often come down to details, like making sure state aid applications are easy to fill out.
On Wednesday, the Treasury Department posted a series of sample application forms, based on streamlined paperwork used in Virginia and other states, intended to quicken the pace of payments.
Landlords and conservatives opposed the decision to extend the ban, arguing that it violated constitutional property rights and denied owners access to their main mechanism for dealing with tenants who will not pay rent or follow the rules.
“The sad reality for many smaller landlords whose obligations continued throughout the pandemic as rents went uncollected is that they may never collect the overdue amounts from judgment-proof tenants,” Joel Zinberg, a senior fellow with the Competitive Enterprise Institute, a conservative Washington think tank, said in an email.
