Citi plans to buy PPP loans from minority-owned lenders
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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
When does the expanded COVID-19 unemployment insurance run out?
The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.
Which states are reopening?
Many states have started to relax the restrictions put in place in order to slow the spread of COVID-19. Although social-distancing measures still hold virtually everywhere in the country, more than half of states have started to phase out stay-at-home orders and phase in business reopenings. Others, like New York, are on slower timelines.
Is it worth applying for a job right now?
It never hurts to look, but as unemployment reaches levels last seen during the Great Depression and most available jobs are in places that carry risks like the supermarket or warehouses, it isn’t a bad idea to sit tight either, if you can.
You can find answers to more questions here.
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