Banks' $19 Billion Fee Haul from Paycheck Protection Program

Strategic Insights -

Researchers at the University of Massachusetts Amherst have found that through the end of June, the American banking sector collected approximately $19 billion in fees from processing Small Business Paycheck Protection Program loans. The report, published in a research brief by the university's Political Economy Research Institute, notes that for their minimal role in verifying application paperwork, banks collect a fee based on loan value, ranging from 5% to 1% of the loan amount.

Key Takeaways:

  • The banking sector collected approximately $19 billion in fees from processing PPP loans, with loans up to $350,000 generating a 5% fee, loans of $350,000 to $1,000,000 generating a 3% fee, and loans between $1,000,000 and $10,000,000 generating a 1% fee.
  • The total bank haul on the $565 billion disbursed in PPP awards as of June 30 is estimated to be $19 billion, with the banks earning a tidy profit for zero-risk lending.
  • The Economic Impact Payments and the Federal Pandemic Unemployment Compensation benefit did more to keep American households and the U.S. economy afloat than the PPP, which was wastefully administered with minimal accountability.
  • The banking industry's net haul of $21.6 billion places it behind only professional services, doctors' offices and clinics, building trades, food services and drinking places, and administrative services in terms of total PPP support.
  • JP Morgan Chase and Bank of America committed to donate their fees after expenses, but no accountability exists for these pledges, and other lenders made no such pledge.

Statistics:

  • $19 billion: the estimated total bank haul on the $565 billion disbursed in PPP awards as of June 30
  • $21.6 billion: the banking industry's net haul of PPP funds
  • 5%: the fee collected by banks on loans up to $350,000
  • 3%: the fee collected by banks on loans of $350,000 to $1,000,000
  • 1%: the fee collected by banks on loans between $1,000,000 and $10,000,000
  • $31.9 billion: the total amount disbursed by JP Morgan Chase in PPP loans
  • 2,760,000: the number of jobs preserved by JP Morgan Chase's PPP loans
  • 123,000: the number of additional jobs that could have been saved if the fees paid to JP Morgan Chase were instead disbursed as PPP loans

Sources:

  • Political Economy Research Institute, University of Massachusetts Amherst. (No date).
  • COVID Stimulus Watch (No date).
  • Michael Ash, Zeke Ash, and Rich Puchalsky. (No date). "The Banks' Share of the Paycheck Protection Program."