- Americans are upset that big corporations are taking money from the Paycheck Protection Program, a government fund meant to help small businesses through the coronavirus pandemic. But no one in Washington can explain how that happened.
- Democrats blame Republicans, and Republicans blame the Treasury — but new legislation to add money to the Paycheck Protection Program still doesn’t solve the problem.
- Meanwhile, even public companies with the ability to raise money in the stock market are taking money meant for your corner bodega or local hardware store.
- This needs to stop. For some small businesses this may be the best access to capital they have. It needs to be there when they need it.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider’s homepage for more stories.
As upset as the American people seem about it, as plainly unfair it is, it looks like no one in Washington wants to fix the loophole that allows big businesses to take money allocated to help small businesses through the coronavirus.
That is to say, it looks like no one really wants to fix the Small Business Administration’s Payroll Protection Program (PPP) — not Democrats, not Republicans, not the White House, and not the Treasury. A draft of legislation to re-up the program, viewed by Business Insider, does not address the issues that allowed big businesses to take from its pot. It is likely to pass by the end of this week.
A few days ago Americans found out that national restaurant chains like Shake Shack and Ruth’s Chris were able to secure multi-million dollar loans meant for small businesses struggling through the pandemic. They were able to do this because the program classified each location of the restaurants as individual businesses.
According to Bloomberg, everyone in Washington is saying that it’s someone else’s fault that big businesses were allowed to draw from this capital.
President Trump has said that big businesses should just kindly give the money back. Florida Senator and Monday morning quarterback Marco Rubio said he’s going to conduct “aggressive oversight” of the program this fall. The Democrats are blaming Republicans. The Republicans are blaming big banks, or saying the problem is a Treasury Department rule.
The Treasury released guidance on Thursday urging businesses to only take the loans if they can “certify in good faith that their PPP loan request is necessary.” That’s it, requesting these businesses act in “good faith.”
That’s nice, but obviously not enough. The loopholes allowing corporates to take money for small businesses should be easy to close — especially while an addendum to the program is being written —but not in our Washington. In our Washington it’s pure theater.
Access, access, access, access
Last week when Senate Majority Leader Mitch McConnell (along with the White House) pushed to add funds to the PPP program, the effort hit a snag when Democrats insisted on making reforms to the program along with adding some money for hospitals and state governments into the bill. McConnell did not want those additions in the current bill.
So there was a brief stalemate. And during that stalemate the country came to understand why and how the program should be reformed to ensure the money was going to small businesses. For example, on Monday Shake Shack was shamed into giving back its $10 million PPP loan. The company’s CEO Randy Garutti explained on CNBC that it could not keep the money in good conscious after it had been able to tap $150 million worth of capital in the stock market the week before.
You see, that’s the advantage of being a big, public company. You can tap all sorts of funding, and not just from the myriad programs the Federal Reserve has for corporates in this pandemic. You can go to your investment banker and look at all kinds of options, including issuing shares in the stock market. That’s why the fact that big companies are getting PPP money is so frustrating. They have other places to go to get money and small businesses don’t. For a lot of small businesses this is it.
Now, you might be saying to yourself — “but Linette, what about the existing shareholders? They’ll take a hit if companies issue shares. They’ll get DILUTED!”
To which I say, “So what? Sometimes you lose money in the stock market.”
When the PPP program was first being written, experts of all stripes (and me) warned Washington that, because the program was operating on a first-come first-served basis, big companies with accountants and lawyers and access to their bankers would box out smaller business. That is what happened.
The bill that replenishes the PPP funds is likely to pass this week. It attempts to address the problem with the program by setting aside $60 billion for credit unions, minority depository institutions, and other financial institutions that serve the underserved. Democrats got $100 billion for pubic health (though nothing for state budgets) too.
But the addendum does not change that language that allowed big companies to get money allocated for small companies. It is appalling that no one in DC seems to understand why this happened — not the legislators writing the bill, and not the president who’s restaurant advisory counsel consists of only large chain restaurants. Must be some kind of strange coincidence.
It makes you think maybe no one in Washington wants to fix this problem. Maybe in Washington this isn’t really a problem at all.
Face it, no one in Washington wants to fix the small business loan program