Quick Takes (v51): So Bright I've Gotta Wear Shades

"Let... the sun shine in, let... the sun shine in, the sun shine in!"

You know, transparency and stuff like that. Like, the government  after messing with the IGs appointed to give us transparency on the trillions of our dollars being spent on coronavirus stimulus packages.

The move follows several steps Trump has taken to combat oversight of the bailout fund. After signing the relief package into law last month, the president issued a signing statement saying he would not allow the special inspector general for the relief program to report to Congress without his supervision.

So, with that as background, let's look at an exchange from the White House coronavirus update (you may know them by their other name, Trump campaign rallies) the other day, on the subject of transparency. Treasury Secretary Steve Mnuchin was asked

Mr. Secretary, given the size of the taxpayer dollars that are going out the door, have you fellas come to a different way of thinking about the need for oversight — independent oversight on behalf of the taxpayer?

Mnuchin's response? Here's the first part.

We have independent oversight. We supported it in the last legislation. Let me be very clear: We have a new inspector general. The President has already picked someone for that position. We look forward to the person being confirmed. We have an oversight committee of Congress that many of them have already been appointed.

 Yes, we look forward to the confirmation of someone who worked on the president's impeachment defense - much of which was based on not being transparent and not letting others be transparent, either - to be the IG of something about which the White House doesn't want transparency.

Now, the White House pointed out that Brian Miller, the White House lawyer tapped for the role, has previously been confirmed for an IG role in the General Services Administration. Dems, however, including Senate Minority Leader Chuck Schumer, are not impressed.

This oversight position, which will be responsible for overseeing hundreds of billions of taxpayer dollars, requires complete independence from the president and any other interested party to assure the American people that all decisions are made without fear or favor, To nominate a member of the president’s own staff is exactly the wrong type of person to choose for this position.

It's good that Mnuchin understand the importance of being open with us, though, and he even provided an example of his understanding for us to, you know, understand.

And let me just say, we put up last week, for full transparency — we had no obligation to do this.  We put up — you can go to Treasury.gov — full transparency on the money that had been sent out on the PPP across states, showing all the big lenders, how it was distributed.  No one lender did more than 4 percent.  Showed the businesses.

Well, if you tell me I can go to Treasury.gov and get a dose of full transparency, you can be sure I'm going to do that. Here's a link to the slide deck that Mnuchin referred to as an example of unobligated full transparency. Note that I had previously shared the slide on the distribution of loans by dollar amount in my Sidebar on Small Business Funding.

First, the slide that "showed the businesses." This slide showed the breakdown in number of loans, dollars, and percentage of total PPP dollars by NAIC subcategory. The top five?

1. Construction: 177,905 loans, over $44.9B, 13.12%
2. Prof/Scientific/Technical Svcs: 208,360 loans, over $43.2B, 12.65%
3. Manufacturing: 108,863 loans, over $40.9B, 11.96%
4. Health Care and Social Assistance: 183,542 loans, over $39.8B, 11.65%
5. Accommodation/Food Services: 183,542 loans, over $39.8B, 8.91%

I get that it would have been extremely difficult, in a slide deck, to provide more of a breakdown on the businesses, so the categories was reasonable as a first step - but there should be a sortable database made available providing much more data than that.

But the slide "showing all the big lenders" was anything but reasonable and anything but transparent. 

I'd guess that JPMorgan Chase and Wells Fargo are up there on the list, probably in the first two or three, but who are the rest of them? And who did they primarily lend to, by NAIC subcategory, or by size of the company, and who lended to the publicly traded companies? And what's the reason for withholding the names in the first place? Is that to prevent us from seeing which banks are collecting all the fees, and in effect, getting their own little bailout?

I know, I'm asking too much, aren't I? I mean, shouldn't I be satisfied by Mnuchin's final comments on this?

So, again, the President and I very much believe in full transparency.  We’re spending a lot of money, and we want to make sure that it’s done effectively and fairly.

No. I shouldn't be, and you shouldn't be either.

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.