Big Banks Reaping Hefty Fees from U.S. and Canadian Pandemic Programs

Handing government fees to private banks to administer public programs which serve private anti-social aims, in ways similar to the WE Charity scandal, and paying the rich in general from public funds, is yet another example of how private interests have seized control of governments to enrich themselves and their private enterprises. Government resources are used to prop up private business instead of investing in public enterprise for the benefit and stability this brings and for the security and good of all. Canada and the U.S. need a new pro-social direction including public banks under the control of the people and held to account for their actions.

In the present crisis, governments are paying large fees to the big banks to administer public pandemic handouts to private businesses. For the banks, the fees are a blessing as other revenue from investments has shrunk with bankruptcies and bad loans on the increase, especially among smaller businesses. Apart from hefty profits, government fees to administer the payouts allow the private banks to meet their regular expenditures for rent and electricity etc, retain staff and continue their private businesses. These payouts to private enterprises and fees to private banks have become normal practices to prop up an economic system that has run its course and needs a new direction.

Up to $24.6 Billion Paid in Fees So Far

Many Canadian financial institutions operate throughout the United States of North American Oligopolies. Four of the largest Canadian banks are profiting from both U.S. and Canadian government fees paid to administer state pandemic payments to private businesses. The U.S. government has contracted the subsidiaries of Canadian banks among others to administer public loans through the Paycheck Protection Program (PPP) launched by the U.S. Small Business Administration.

The PPP has the authority to hand out $660 billion in loans to private enterprises. Rather than have a public service do the job, including public banks, the U.S. government offers the big private banks processing fees of up to five per cent to administer the loans for two to three years with the fees paid throughout the period. U.S. and Canadian banks have collectively handled $520 billion through the PPP so far both administering the loans and collecting government fees for themselves.

Toronto-Dominion Bank has been the most active Canadian bank. Its U.S. arm, TD Bank, has already racked up processing fees of $238 million to $398 million so far this year. The fees are estimates only as they have not yet been fully acknowledged or made public. TD Bank has administered PPP loans worth at least $8.2 billion and as much as $12.1 billion through its extensive retail banking network across the eastern United States.

BMO Harris Bank, a subsidiary of Bank of Montreal, has collected between $91 million and $175 million in fees.

The Royal Bank of Canada's wholly-owned City National Bank is estimated to have taken in $89 million to $177 million in fees.

CIBC Bank USA, the U.S. arm of the Canadian Imperial Bank of Commerce has collected anywhere from $29 million to $64 million in fees.

When PPP funds are disbursed to businesses, the banks receive a processing fee of five per cent for loans under $350,000, three per cent for loans from $350,000 to $2 million, and one per cent for loans of more than $2 million. The estimates for fees are based on possible ranges for PPP loans as the U.S. government data only provide exact amounts for loans of less than $150,000.

The size of the fees paid to the big U.S. banks handing out funds from the PPP are estimated to be between $14.3 billion and $24.6 billion so far. These billions of dollars in fees have drawn criticism, especially the amounts seized by the three largest U.S. banks -- JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo, although the amount taken by the TD Bank does not lag far behind those big three.

The private banks argue they need the large fees to cover their costs of administration with Bank of Montreal spokesperson Paul Gammal going so far as to say, supposedly with a straight face, that the banks need the fat fees "to help support our increased charitable giving and ongoing commitment to minority-owned businesses and underserved neighbourhoods." The propagation of charities has become a preferred sanctimonious self-serving pursuit of the imperialist oligarchy. They preach the gospel of philanthropy using their own vast private wealth and control of the people's collective wealth to displace all government-run social programs and public services. Charities are both a form and ideology used to block any tendency towards the people's control over the economy and a new pro-social direction to stop paying the rich and increase investments in social programs, public services and public enterprises under the control of the working people.

Fees from the Canadian Government

In Canada, the total fees doled out so far to private banks and credit unions administering the Canada Emergency Business Account (CEBA) are estimated at $110 million. The government through CEBA has to date handed out business loans worth $27.6 billion to thousands of private enterprises. The CEBA program allows businesses to borrow up to $40,000 interest-free until the end of 2022, with one quarter of the loan forgivable. Banks are paid 0.4 per cent of the outstanding balance of each CEBA loan per year. Whatever the private banks receive in administration fees for public programs props up their private enterprises and control of the economy.

(With files from Wall Street Journal.)

This article was published in

Volume 50 Number 27 - July 25, 2020

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Big Banks Reaping Hefty Fees from U.S. and Canadian Pandemic Programs


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