Sidebar: Small Business Funding

As I noted in this week's Sunday School Extra Credit, I was a bit befuddled by a statement Jake Tapper made to Senate Minority Leader Chuck Schumer about the Payroll Protection Program, or PPP, having "run out of funding, as you know, because of provisions Democrats wanted to add" (emphasis mine) and I had to look around a bit - big surprise, right?

Congress crammed through the CARES Act, which included the PPP and nearly $350B for small businesses; the president signed the Act on March 27th, with the Treasury Department declaring that it "provides fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries." (Emphasis theirs.)

The reality was somewhat different. The PPP ran out of money in less than two weeks; the process was fraught with difficulties and unclear guidance; no one knew what they qualified or didn't qualify for; applications were filed and people didn't hear anything back; and there were website issues, too.

That sounds a lot like how Republicans described the Affordable Care Act rollout, doesn't it?

Among the issues with the CARES Act and the PPP that have been identified over the past few days, as negotiations continue on another few hundred billion in funding for the program?

• Financial institutions had less than a week's notice to get up and running to start making loans. Banks and credit unions, acting with only limited guidance from the government, loaned money only to their existing customer, some of which probably could have obtained emergency financial assistance, without the PPP, you know, their banks? And, according to an NPR story  as I write this, banks primarily facilitated new loans to companies to which they had already loaned money, leaving their deposit-account only customers with no help. 

• Only approved institutions - those already licensed as SBA lenders - could participate in the program, meaning small businesses had to shop around to find a lender to help, and banks and credit unions needed to apply to be 'approved' before they could participate. 

• Some 1.6 million companies got loans - about 6% of the qualifying businesses. That means 94% of small businesses were not able to obtain assistance. There were over 67,000 loans of $1,000,000 or more approved, according to the SBA, which accounted for more than 44.5% of the available pool of money.

• Chain restaurants and hotels - some with thousands of employees under the brand umbrella - were able to qualify for the program if they had fewer than 500 employees at each location. One, Shake Shack, with 189 locations and around 8,000 employees, is giving back their $10M loan. Others, like Ruth's Hospitality Group, which owns Ruth's Chris Steak House and received $20M from the PPP by using two separate companies to file and receive the maximum amount, have not offered to return the money. 

• In all, more than 70 publicly-traded companies received PPP loans, totaling around $300M. Included in that mix? Foreign-owned companies; companies that were likely not viable even absent the coronavirus pandemic; and companies that had been fined by the government for bad acts of one sort or another. 

• Colleges and universities qualified for assistance under the CARES Act to help cover expenses, and while they're supposed to agree to certain conditions on how the money is to be used, they can allocate the funds as they choose. Among the recipients are a quartet of Ivy League schools: Harvard, Yale, Columbia and Cornell, which collectively have over $89B in their endowment funds.

• The inspector general and transparency requirements under the CARES Act are going to be ignored by the administration, in a continuation of his assault on oversight in general.

• And, because it's the US, there were tax breaks for millionaires, too: some 43,000 of them could get $70B in savings - around $1.6M each - because of provisions allowing them to take unlimited deductions against non-business income, including capital gains. The biggest beneficiaries? Hedge fund guys, and real estate developers - perhaps even the president.

In the back of my mind, I can hear someone saying "If you like your small business, you can keep your small business" and in the front of my mind, I remember this comment from the president at one of his rallies press conferences, responding to a question about restaurants.

I’ve heard 3 percent could be lost, and you could go as high as 10 or 11 percent, but they’ll all come back in one form of another. Might be a different restaurant. But it’s gonna be a great business for a lot of people. We’re making it easy for people — look, what we’re doing in terms of loans, what we’re doing in terms of salaries, they’ll all come back. It may not be the same restaurant, it may not be the same ownership, but they’ll all be back.

Restaurants and other small businesses won't "all come back" if the financial assistance we're trying to give them is not accessible, if the businesses aren't big enough to get attention, if the owners don't bank at the right place, or if they aren't already companies worth tens of millions of dollars.

And yet, some of the 'wow' stuff  in those bullet points, things that shock even cynics like me, really aren't all that surprising.  Rather, they are exactly the kind of things that happen when legislators, acting with great urgency and (generally) good intentions, try to fix a major mess that is anything but one size fits all.

I don't envy them, I really don't. But some of these excesses or goofs or not-well-thought-out provisions - combined with the president's distaste for oversight - seem ripe for abuse and mismanagement.

Tapper cited comments from the Obama administration's SBA head Karen Mills, who suggested that the Dems need to get with the program and get the new round of funding - the response to - not, as Tapper said, the reason for the program running out of money - in place quickly. And, according to multiple news reports (here's one), agreement has been reached on the next round, nearly $500B worth - and "bipartisan approval" is expected as early as today in the Senate and Thursday in the House.

One thing they didn't agree on? Extra funding for state and local governments, which are bearing the brunt of the costs of fighting the pandemic. Dems wanted to address assistance for them in this round. But, because of who we are, there's this from the same article on the agreement (emphasis added), which made me chuckle.

And while Republicans succeeded in staving off another federal infusion of funds for cash-strapped states and local governments, fearing a mismanagement of funds...

I guess they've become irony-blind.