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Montana bankers grow nervous as Congress stalls on stimulus

Montana bankers grow nervous as Congress stalls on stimulus

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From left, Sen. Jon Tester, Sen. Steve Daines and Rep. Greg Gianforte

From left, Sen. Jon Tester, Sen. Steve Daines, and Rep. Greg Gianforte

Montana’s bankers are warning of businesses closures if Congress continues to stall on a third COVID-19 economic relief bill.

In a survey of bank executives, the Montana Bankers Association found that more than 42% thought that 20% of the businesses they lend to would fail without another round of help from the federal government. A third of the bankers said businesses kept afloat by federal aid from the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act passed by Congress nine months ago, would go out of business in 2021 without additional help.

Roughly $1.8 billion was issued to some 24,000 Montana businesses under the federal Paycheck Protection Program to help businesses cover payroll and other expenses for up to eight weeks. Part of the CARES Act, the program wrapped up Aug. 8, with most of the money issued not having to be repaid. With COVID-19 cases surging and the slowest economic months of the year on the horizon, banks are concerned there's no backstop left for business borrowers.

“We’re hoping the results of the survey might spur our delegation to a little higher call to action,” said Cary Hegreberg, MBA president.

Montana’s congressional delegation hasn’t been able to put a date on when Congress might pass another aid bill, this as the clock runs out on several elements of the CARES Act, including extra weeks of unemployment and a ban on residential evictions. Student loan payments, which have deferred through the end of the year, come due again in January.

Monday, U.S. Sen. Jon Tester wrote Senate leaders Mitch McConnell and Charles Schumer, asking that they bring a COVID-19 bill to the Senate floor for a vote.

“I am hearing directly from Montana families, business owners, school administrators and medical professionals that the devastating effects of this pandemic are getting worse. My state has already suffered nearly 700 COVID-19 deaths, and now our medical community is sounding the alarm that medical facilities are at capacity, the Democrat wrote. “Schools are struggling with the additional costs of a providing quality education to students while also keeping them safe. Businesses are fighting every day to make ends meet but can only do so much with the disruptions to everyday life."

Tester also wrote Treasury Secretary Stephen Mnuchin, requesting that any remaining CARES Act funding be used for COVID-19 relief. Mnuchin has recalled the unspent funds.

Neither Tester nor Montana Republican Sen. Steve Daines could say whether Congress will take up a COVID relief bill before the inauguration of President-Elect Joe Biden on Jan. 20. Rep. Greg Gianforte, Montana's governor-elect, didn't respond to phone calls or texts placed to his office Monday.

Tuesday in the Senate, a small group of lawmakers proposed a $900 billion pandemic response bill to get the country through the next four months. There was no indication Senate Majority Leader McConnell or House Speaker Nancy Pelosi had agreed to allow a vote on the proposed plan. Neither Daines, nor Tester were part of the group proposing relief package.

"It's inexcusable for us to leave town and not have an agreement, and come together and show that we can work together in a bipartisan way," said Democratic Sen. Joe Manchin of West Virginia, speaking during that televised press conference. "It's not time for political brinksmanship."

What the group of 16 senators proposed was considerably smaller than what House Democrats and President Donald Trump were proposing a month ago.

Both House Democrats and Trump have called for a new relief package in excess of $1.5 trillion. Led by Democrats, the House passed a $2.2 trillion stimulus bill Oct. 1. A week after the House passed its bill, Trump tweeted “COVID relief negotiations are moving along. GO BIG!”

The Republican president countered the Democrat’s proposal with a $1.8 trillion offer on Oct. 20. But Senate Republicans weren’t going big, as the president encouraged. The same day as Trump’s $1.8 trillion counter offer, the New York Times reported that McConnell encouraged members of his caucus not to strike a deal with House Democrats.

Instead, Senate Republicans attempted to pass a $500 billion relief bill Oct. 21. The bill, according to the roll call report, expanded unemployment benefits, revived the Paycheck Protection Program, funded a COVID-19 response at K-12 schools, increased COVID-19 testing, aided vaccine development. Senate Democrats called the bill too small. Unlike the House bill, the Senate bill didn't include $1,200 stimulus payments for individuals, rent or mortgage assistance, increased child tax credits, or money for the Postal Service. The House had included money for election security and the 2020 Census, which the Senate Republicans didn't. The Senate bill needed 60 votes to pass, but received 51.

The next big spending bill before the Senate will be one to keep the government running for a few months. It will be the second such bill since the end of September, when lawmakers again ended the fiscal year without passing an annual budget. The new bill to fund the government must be passed by Dec. 11. It’s unclear whether a new COVID-19 relief bill could be logrolled into a continuing resolution to keep the government open.

A spokesman for Daines’ office blamed Democrats for the lack of a COVID-19 relief bill, saying the Democrats had blocked the smaller bills offered by Senate Republicans.

Meanwhile, Montana banks, while concerned about some borrowers going out of business, are financially sound, said state banking Commissioner Melanie Hall. The CARES Act has a lot to do with how well Montana banks are doing. However, bank health could change if the support offered by the CARES Act goes unreplaced.

“Right now, banks are strong. Their balance sheets look good. Their portfolios have been pretty good. We have not seen significant increases in defaults on the business side,’” Hall said. “There absolutely have been some increases on the residential side. At the office we have been following very closely the increases that have been reported nationally in defaults on FHA loans because those are reflective of what’s happening to people living closer to the margins, people who don’t have much of an economic cushion.”

Nationally those defaults on FHA loans have been close to 17%, Hall said. In Montana, the defaults are close to 10%. Looking forward, Hall said there’s concern about those people without a lot of financial cushion to be able to withstand another round of economic challenges, be it a job loss coupled with a loss of workplace-provided health insurance, or unexpected major medical challenges. When Montanans paying a mortgage are undone by a financial crisis, it’s often medical expenses, rather than irresponsible financial management, Hall said.

What the CARES Act did, Hall said, was buy people time, time for businesses to keep people on payroll as the economy shut down, time for suddenly unemployed renters to delay payments without facing eviction, and for borrowers with federal-backed home loans to delay payment without facing foreclosure. There was more time allowed to be on unemployment, up to 39 weeks. Those are the things time is now running out on as the economic recovery slows.

Not all businesses thought to be vulnerable to the recession were. Recreational vehicle sales were thought to be vulnerable; they have instead been robust. Both Hall and Hegreberg commented on this lesson. Construction has been strong, as have other businesses who were represented among the list of PPP recipients before funds expired in early August. Hotels, restaurants, entertainment venues and retail businesses continue to to be challenged. Agriculture businesses, once through to be extremely vulnerable to the recession were not reported by bankers to be a major concern for default.

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