The previously unreported subpoenas issued by the department’s Washington fraud division do not necessarily indicate wrongdoing on the part of the banks, but will compound growing worries among lenders
The program allows small businesses hurt by the pandemic to apply with lenders for a government-backed loan which can be forgiven provided at least 75% is spent on payroll costs.Policy-makers worry that the huge pot of cash has been a magnet for fraudsters, and U.S. Treasury Secretary Steven Mnuchin has warned that companies found to have lied to secure loans could face prosecution.
Grand jury subpoenas allow prosecutors to get their hands on a range of private financial and personal records and to hear witness testimony as part of a criminal investigation.“Right now, we don’t think banks are 100% the target,” said one of the sources, but added: “There are concerns that there will be a boomerang effect six months down the road on banks that they didn’t do enough.”
The agencies subsequently agreed that lenders could rely on borrower certifications and specified documents to determine their eligibility and use of the loans. Banks would be “held harmless” if borrowers broke the rules or lied. The third source said Wall Street banks are also worried that a Democratic administration would rip up their agreement with the current administration and launch a crackdown on lenders if they win the presidential election on Nov. 3.
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