The point is the amount they are earning is overly generous for the work completed.

Most banks are only working with existing customers, so the DD is 99% complete. Few are reviewing applications from brand new clients.

Not to mention that the banks are biased and giving no risk handouts to their most valuable clients (those at greatest risk of defaulting on obligations to the bank).

Even then, SME clients don't do operations (like loan applications) with their banks every month, so that doesn't mean the DD is up to date (bank regulations change almost on a weekly basis).

Yes, but the point is DD was done (last year or today). Effectively the government is paying the banks for the work they've done creating a relationship with the clients, which includes DD.

"existing customer" due diligence seems like fair profit...

What incentive does bank have to actually do due diligence, when the loans are all guaranteed by government?

The loans are guaranteed but you can still pay $ sanctions for not doing the work right.

From Matt Levine:

> Big banks that paid billions of dollars in sanctions after the 2008 financial crisis for flaws or omissions in loan applications -- in that case, mortgages -- assumed paperwork submitted to the SBA would need to meet high standards, or they would risk getting in trouble again. Wells Fargo has been under particular pressure to show that it overhauled its internal controls.

Now that wasn't in the end the case as:

> Some were floored when the SBA posted a notice on its website on Tuesday, confirming that’s necessary but saying that “lenders who did not understand that these steps are required” didn’t need to withdraw applications already submitted. That essentially gave an edge to lenders that had skipped that time-intensive step to get their customers’ applications in first.

But that was (some of the) banks' view.

Because they are giving the corporate handouts to customers who are at the greatest risk of defaulting on loans to their own bank - that's their incentive.

Again, since the loans are guaranteed by the government, what risk are the banks taking, exactly?

I don't follow, this seems like even less of an incentive to do due diligence.

Robosigning and NINA loans of the past lead me to be skeptical.

Banks paid sanctions for failing to do due diligence on loan applications, that's what the banks want to avoid this time round.

Wouldn't their value add here be that they can quickly do due diligence and expedite these loans given their expertise in the field?

Seems you're extolling their ability to perform quickly, while also excusing away their inability to perform quickly.

They perform faster than the government and have the expertise to deal with businesses. Compared to 2008, I see their role as "good guys" this time round.