The response of US banks to the economic challenges from the COVID-19 crisis show that being big does not mean being best. Whilst many community banks (see previous post) are actively finding ways to help their customers, the largest banks seem to be wrapped up in internal bureaucracy or using the crisis to resolve other regulatory challenges they face.
Bank of America seems to be restricting access to the relief program for small businesses to existing lending clients – as if being a deposit client does not make you a good client of a bank. This approach appears to be especially detrimental to black owned businesses as noted in a New York Times article. This result is one reason why future expansions of the relief program need to ensure access to credit for all small businesses and especially those minority owned.
On the other hand, Wells Fargo has seen the temporary challenge as an opportunity to lift regulatory restrictions resulting from its misbehaviour with clients in the past. Wells faces a limit on its growth and successfully requested permission from the Federal Reserve to not be subject to that limit during the crisis. However, as noted in a Financial Times article, Sherrod Brown (Democratic Senator from Ohio) correctly stated: “If the Fed wants Wells to focus on community lending, and if Wells is truly committed to its communities and customers, the bank could instead have given up other risky lines of business in order to serve small businesses.” But of course Wells Fargo was unwilling to make that choice.
So once again in a time of crisis, the largest banks in the US are looking out for themselves and not their clients or society.
