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Citi plans to buy PPP loans from minority-owned lenders

Justin Ho May 21, 2020
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Citi says it will purchase $50 million in loans from minority-owned lenders. Bruce Bennett/Getty Images
COVID-19

Citi plans to buy PPP loans from minority-owned lenders

Justin Ho May 21, 2020
Heard on:
Citi says it will purchase $50 million in loans from minority-owned lenders. Bruce Bennett/Getty Images
HTML EMBED:
COPY

This week, banking giant Citi announced it will purchase Paycheck Protection Program loans from a number of smaller institutions. Citi says it will purchase $50 million in loans from minority-owned lenders.

Minority-owned banks tend to serve people in communities where jobs have been hit hard by the pandemic, says banking consultant Mayra Rodriguez Valladares at MRV Associates.

“And so they’re withdrawing deposits from the banks. And so what that means is that the banks don’t have enough money to lend,” she said.

By purchasing a loan from a bank’s balance sheet, Citi is giving the minority-owned lender capital in return. Valladares says that can help those lenders issue more loans than they otherwise could with their own deposits.

“And really, right now, it’s critical to be making loans to as many people as possible,” she said.

The PPP loans Citi’s taking on are low risk since the loans are guaranteed by the Small Business Administration.

Kent Belasco, director of the commercial banking program at Marquette University, says there’s another benefit for Citi. Banks want to be viewed as a go-to place for pandemic relief.

“That bodes well from a reputation standpoint,” Belasco said.

Citi says it doesn’t anticipate making any profits from the loans it takes on.

COVID-19 Economy FAQs

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It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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