Bankers are rarely portrayed as heroes. In popular culture, they are often depicted as greedy, ruthless and aligned with shady interests. Ebenezer Scrooge, the protagonist/antagonist of Charles Dickens’ 1843 novella “A Christmas Carol,” was a lender. He is described as wrenching, grasping, scraping, clutching, and covetous. In “It’s a Wonderful Life,” lender Henry Potter steals money in an attempt to drive the more beneficent Bailey Building and Loan out of business.
But my focus is not on popular depictions and stereotypes. My focus is on what bankers have actually done of late, and what they have done could be considered heroic.
Now before you roll your eyes, hear me out. I think we can agree that at the pandemic’s onset, Maryland’s small businesses faced some serious challenges. Overnight, restaurants lost their patrons. Retailers suffered no shoppers. Those who operated bed-and-breakfasts registered no visitors. Travel agencies, household cleaners, limousine operators, and many others were largely sidelined.
Absent normal cash flow, these businesses faced imminent destruction. Many began to slash staffing levels, with Maryland losing 400,000 jobs during the first two months of the crisis. Most economists predicted matters would continue to deteriorate as COVID-19 lurked behind every door. If portrayals of Mr. Scrooge and Mr. Potter are accurate, bankers would simply have turned their collective backs on these businesses and by implication their remaining employees, clutching their capital and tsk-tsking an unfortunate state of affairs over which they could claim no responsibility and lacked control.
Available statistics indicate that rather than looking away, Maryland’s banking community leaned in. At the heart of the banking community’s efforts were operational partnerships with federal agencies. On March 27, the CARES Act, the first in a wave of stimulus packages was passed, and with it the Paycheck Protection Program (PPP). Federal policymakers purposefully designed the program as a public-private partnership with the banking industry. Effectively, our intrepid deployers of bank loans were put in the position of “flying the PPP airplane while it was being built.”
Early on, there was a question whether our banks would be able to handle responsibilities like information verification, funds transfer and reporting to federal authorities. After all, Maryland’s banks have experienced much upheaval in recent decades, including through consolidation that has brought the likes of Bank of America M&T, and PNC to our state. But at no point did the centuries-old bond between the local banking community and Main Street Maryland fragment. As indicated by writer John Sorensen, if there is one thing that this episode has taught us, it’s that relationships matter. Indeed, they matter most during times of need. As Mr. Sorensen suggests, banks, whether global, national or regional in stature, acted as economic first responders.
Policymakers could not have saved as many businesses as they did without the assistance of banks. The brilliance of the program lay in its ability to tap into branch and digital networks forged by the banking industry over decades. This quickly tied federal funding to individual businesses. Naturally, there were operational and other issues during the initial weeks, but steadily the program began to permeate the nation’s economic fabric, delivering capital when and where it was most needed.
The economic contributions made through this public-private partnership are simply remarkable. As of late May, Maryland’s enterprises had received nearly 176,500 loans translating into $15 billion in funding. The average company that received a loan supports 9 employees. The average loan amount approached $83,400. The average loan to a beauty salon approached $24,000, while those to full-service restaurants approached $134,000. The Paycheck Protection Program Database, which tracks PPP loans to any business that applies for one, indicates that more than 930,000 Maryland jobs have been saved by the program.
These loans were critical in turning the state’s economy around. Maryland has clawed back more than a quarter of a million jobs since April 2020. That month, Maryland’s unemployment rate stood at 9%. A year later, it’s close to 6%.
At the heart of this programmatic success is the fact that Maryland’s banks came into the crisis firmly tied to the state’s citizenry. According to the FDIC, in 2019, only 3.8% of the state’s population remained unbanked, ranking Maryland 15th in the nation. The national unbanked average is 5.4%, an indication that Maryland’s banks have been doing a better job than most at integrating themselves into their communities, which has been especially important during a period when relationships really mattered.
Anirban Basu (firstname.lastname@example.org) is chairman and CEO of Sage Policy Group and chief economist of Maryland Banker’s Association.