The S.B.A. system crashes as a new round of small-business loans opens.
Less than an hour after the Small Business Administration started taking requests for $310 billion in emergency aid for small businesses on Monday morning, its computer system for processing the loan applications crashed.
“It’s obvious the system is simply flooded right now,” said Craig Street, the chief lending officer at United Midwest Savings Bank in Columbus, Ohio. “It’s been very stop and start, with no real way to know whether it is working other than to keep hitting the submit button.”
Lenders had predicted that demand would be overwhelming for the second round of funding through the Paycheck Protection Program, which began early this month. Its initial round of funding — $342 billion — was depleted in 13 days. Hundreds of thousands of borrowers who sought loans were left out. Congress authorized a new funding round last week, and the government began accepting applications at 10:30 a.m. on Monday.
Borrowers must apply for the money through banks or other lenders, but the S.B.A., which is managing the program, must approve each loan. Because the funds are first-come, first-served, lenders are anxious about getting their loans approved as quickly as possible. Officials from the S.B.A. did not immediately respond to questions about the technical problems lenders were reporting with E-tran, the agency’s computer system for processing loans.
Mr. Street said he had been able to get a few loans submitted and approved, despite the technical challenges. Two loan officers at other banks said they were also struggling to submit applications.
Rob Nichols, president of the American Bankers Association, said banks’ hands were tied: They can’t help small businesses get loans if S.B.A. technology isn’t working. “Our member banks across the country are deeply frustrated at their inability to access @SBAGov’s E-Tran system,” Mr. Nichols said in a tweet on Monday.
The Fed will include smaller cities and counties in its municipal lending program.
The Federal Reserve on Monday said it would substantially expand its municipal lending program, an effort to provide relief to strapped states and cities as coronavirus outbreak drains public coffers.
The Fed had previously announced that it would buy short-term debt from states, cities with populations of more than one million and counties with populations exceeding two million. On Monday, it expanded that to cities with more than 250,000 residents and counties with more than 500,000. It also announced that it would buy slightly longer-term debt: securities that mature in three years will qualify for the program, up from two years previously.
The program, which has yet to start, will operate through the Federal Reserve Bank of New York. It will be backed by $35 billion in Treasury Department funding, and capable of buying up to $500 billion in eligible debt.
A total of 261 states, cities and counties will qualify for the program, the Fed said. So will some multistate issuers, which can include entities like the Port Authority of New York and New Jersey.
The expansion comes as the Fed scrambles to set up new programs to keep markets functioning properly and credit flowing into the economy, pushing its own boundaries and expanding into areas — like municipal debt — that it left untouched even in the depths of the 2008 crisis. Lawmakers from both parties and activists have called on the central bank and Treasury to offer more support for smaller localities.
Stocks climb as investors look toward reopening.
U.S. stocks rose and global markets rallied on Monday as governments around the world discussed when and how to reopen businesses and get their economies back on track.
The S&P 500 rose more than 1 percent. European benchmarks rose 1 to 3 percent after a broadly higher day in Asia.
The clearest signal of this on Monday was a rally in companies that stand to gain from the lifting of restrictions on travel and public gathering. Department store Kohl’s rose nearly 18 percent, while shares of Nordstrom and Gap were also sharply higher, for example.
Hotel operators like Hilton Worldwide and Marriott International also jumped.
Oil prices plunged on Monday, with the American benchmark hurtling toward $10 a barrel, as fears about a global glut in crude continued to weigh on energy markets.
Since last week, investors have been panicked about oil storage facilities running out of capacity as producers continued to pump oil even as demand collapsed. That concern is most acute in the United States, where storage facilities in Cushing, Okla., are expected to reach capacity in May.
It’s one reason the collapse in futures of American crude has been so much sharper than the global benchmark. On Monday, West Texas Intermediate crude, the U.S. benchmark, fell about 24 percent to just below $13 a barrel. At the same time, Brent crude, the global benchmark, was down about 7 percent to just below $20 a barrel.
One factor behind the difference in price is that the Cushing facilities are landlocked, reachable only by pipeline, whereas Brent supplies can be reached by boat and either stored there or placed at facilities around the globe. Investors betting on an eventual rebound in oil prices are filling oil tankers up — with as much as two million barrels per vessel — and parking them out at sea, The New York Times’s Stanley Reed reported.
“I can send a boat to the Brent field; I can’t send a boat to Cushing, “ said Stuart Joyner, an analyst at Redburn, a market research firm.
Analysts say the collapse of American crude prices into negative territory on April 20 spooked investors.
A growing number of companies are returning loans they received from the initial $349 billion Small Business Administration stimulus funds after public outcry over funds that were going to large corporations, including those that had other financing options.
More than $2 billion from the first round has been declined or returned to the program, the head of the S.B.A. said on Twitter on Monday. A spokesman said the canceled loans would go back into the program’s next round, which opened Monday.
Federal officials clarified last week that the loans should not go to large public companies with access to other sources of capital. A New York Times analysis found that roughly a dozen publicly traded companies had previously talked about their access to capital only to apply for loans through the program.
The companies that have returned the money so far range from major chains to lower-profile firms:
Nathan’s Famous said on Monday that it would return the $1.2 million loan it received from the Small Business Administration. And in an example of the rippling effects of coronavirus-related disruptions, it disclosed that Smithfield Foods, the meat processor that has temporarily shut down four facilities, is its primary manufacturer of hot dogs. Nathan’s said three of its company-owned locations are open, and it is seeing higher grocery store sales of hot dogs, but most of its franchised locations are in places that are closed or experiencing significantly less traffic — malls and movie theaters, airports and rest stops.
The Los Angeles Lakers confirmed they had received and repaid a $4.6 million loan. The National Basketball Association team is among the most valuable franchises in all of sports and is said to be worth billions.
Shake Shack, the owner of Ruth’s Chris Steak Houses, the chain Kura Sushi and the restaurant company J. Alexander’s Holdings said they would return roughly $51 million in combined loans. Independent restaurateurs have said that the major chains obtained funding while they were shut out of the program.
IDT Domestic Telecom, a communications and money transfer company, said it would return a $10 million loan.
Ultralife Corporation, which makes batteries and communications equipment, said it would return a roughly $3.5 million loan. BK Technologies, which produces two-way radios, said it was repaying a roughly $2.2 million loan to its bank.
Ballantyne Strong, a North Carolina holding company, said it would repay its $3.1 million loan.
Hallmark Financial Services, a Texas-based insurer, said it was repaying an $8.3 million loan. The company says it “markets, underwrites and services” more than $700 million every year.
Auto dealership operators were among the companies quick to start returning their money. Penske Automotive Group received and returned $66 million, it said. AutoNation, the nation’s largest chain of car dealers, said it gave back $77 million. Group 1 Automotive returned $1 million.
These big companies are reporting their quarterly earnings this week.
A quarter of the companies in the S&P 500 have already reported first-quarter earnings, and it hasn’t been pretty. More companies will open their books this week, revealing the effects of the pandemic on their businesses.
💻 If anything, lockdowns have been good for many tech giants, including Alphabet which reports on Tuesday, Facebook and Microsoft on Wednesday, and Amazon and Apple on Thursday.
🛢 Energy companies, reeling from the crash in oil prices, will unveil an ugly set of results: BP on Tuesday, ConocoPhillips and Shell on Thursday, and Chevron and Exxon Mobil on Friday.
💊 Pharma firms will be closely watched for any news of Covid-19 breakthroughs, including Pfizer, Merck and Novartis on Tuesday, and AstraZeneca and GlaxoSmithKline on Wednesday.
💰 The big European banks, like their American counterparts, are expected to set aside huge amounts as a buffer against bad loans, including HSBC and UBS which report on Tuesday, and Barclays on Wednesday.
👴🏻 Berkshire Hathaway releases its latest earnings on Saturday morning, before its widely followed annual shareholder meeting later in the day. For the first time, the “Woodstock for Capitalists” will feature Warren Buffett, the chairman, holding court virtually instead of in person at an arena in Omaha.
🗣 Other companies of note reporting this week include Boeing, Caterpillar, eBay, General Electric, Kraft Heinz, Mastercard, McDonald’s, PepsiCo, Qualcomm, Southwest Airlines, Samsung, Spotify, Starbucks, Tesla, Twitter, Visa and Yum Brands.
Mercedes is reopening its U.S. plants, with others planning to follow.
The German automaker Mercedes-Benz has resumed U.S. production at two Southern factories — a sport-utility vehicle plant in Alabama and a delivery van plant in South Carolina — as those states begin lifting or loosening orders that have kept residents at home for weeks and most businesses closed.
One plant, in Vance, Ala., employs 3,700 people, and the other, in North Charleston, S.C., employs more than 1,100.
More than a dozen other factories across the South operated by foreign automakers are also set to return to production. Volkswagen plans to reopen its plant in Chattanooga, Tenn., on May 3. A day later, Toyota plants in Kentucky, Alabama, Mississippi, Texas and Indiana and Hyundai-Kia plants in Georgia and Alabama are expected to go back to work. Honda and Volvo expected to resume production May 11. None of the plants are unionized.
General Motors, Ford Motor and Fiat Chrysler are in talks with the United Automobile Workers union about when and how to reopen their plants to ensure workers are safe from the spread of the coronavirus. Most of those automakers’ plants are in Michigan, which has been hit harder by the virus than most other states.
“We are bleeding cash at an unprecedented speed, which may threaten the existence of our company,” Guillaume Faury, the chief executive, wrote in a letter to Airbus’s 134,000 employees. “We face a severe and immediate imbalance between our revenues and costs.”
Before the pandemic hit, Airbus was thriving on demand from customers around the world, while rival Boeing was struggling with the grounding of its most important plane, the 737 Max, following two crashes that killed a total of 346 people.
Now Airbus, too, is paring back output. Airlines, its key customers, are deferring orders as they struggle for survival. Many of their aircraft are sitting on runways unable to fly because of government restrictions and lack of demand.
Earlier this month, Airbus said that it would temporarily halt or slow production at facilities including in Mobile, Ala., as well as in Britain, Spain and Germany. At the time the company said it was responding to high inventories at the sites as well as the need to adopt workplace measures to make production safer during the pandemic.
Catch up: Here’s what else is happening.
Boeing expects it to take two to three years before air travel returns to pre-pandemic levels, said David L. Calhoun, its chief executive, at a shareholder meeting on Monday. He said the aircraft manufacturer expected it to be several years more before the industry’s longer-term growth trend recovers.
General Motors said it was suspending its quarterly dividend and any share buybacks to strengthen its cash position. When it halted North American production a month ago, the automaker said it was laying off 6,500 salaried workers and cutting executive pay. In labor negotiations last year that prompted a six-week strike, the United Automobile Workers union noted that G.M. had spent more than $10 billion on stock buybacks since 2015.
Reporting was contributed by Neal E. Boudette, Jessica Silver-Greenberg, David Enrich, Jesse Drucker, Stacy Cowley, Stanley Reed, Neil Irwin, David McCabe, Niraj Chokshi, Jason Karaian, Kevin McKenna, Liz Alderman, Jack Ewing, Ben Dooley, Jeff Sommer, Ben Casselman, Carlos Tejada, Kevin Granville and Daniel Victor.