Even in the midst of reports that dozens of public companies and well-known restaurant chains have asked for and received money under the program, the Senate voted on Tuesday for a proposal that increases the program by $ 310 billion. dollars without significantly reviewing the rules.
To some extent, this illustrates a natural tension in trying to develop an emergency program that debits money quickly, while ensuring that only a subset of businesses – in this case, small businesses. less than 500 employees – can qualify.
“The more we had to meet requirements, the more difficult it would be to get the money out the door,” Republican Senator Marco Rubio of Florida, the program’s lead author, said in an interview with CNBC on Tuesday. “We have sinned by opportunism. The biggest mistake we can make is to move too slowly. “
In this case, it meant limiting as much paperwork as possible for the application process, according to the people who helped write the program, while defining the main restriction as a certification that the applicant company needs money to maintain its activities due to the economic damage caused by the pandemic.
The new round of funding attempts to address this problem, at least in part, by including $ 60 billion in funds set aside for small lenders such as community banks and credit unions to spread loans in the hope that the money will flow. impacts small businesses that may not have long-maintained existing relationships with a larger lender.
But there are no additional policy changes related to the new funds that would prevent it from going into large companies, including those that are public, that meet the eligibility conditions defined by law and the Department of Treasure.
Instead, legislators and policy makers rely on public shame as the only remedy.
“I know people who were enthusiastically looking for (looking for) $ 25,000, $ 30,000 in loans, had all their ducks in a row, and the rest and don’t even have an answer. It really has to stop. And Congress will monitor. “You can be sure,” House Speaker Nancy Pelosi said in an interview with MSNBC’s “Morning Joe” on Wednesday.
While a handful of senators have expressed their concerns and frustrations about the big companies receiving the loans, behind the scenes, there has been a broad bipartisan agreement that franchise owners – many of whom may own only one or a few franchises and employees only dozens of people – should be eligible for Paycheque Protection Program loans. In addition, larger publicly traded companies with fewer than 500 employees have also been included to qualify for loans with bipartisan agreements. As a testament to the broad support for the program on Tuesday, when the Senate voted to include additional funds, the bill was passed without a roll-call vote even being called.
Right now, the only way Congress can prevent well-known or publicly traded companies from qualifying for paycheck protection program loans is to change the program’s eligibility requirements. As the members are scattered across the country, it is unlikely to find broad agreement to change these rules in the short term.
And while there was never any significant incentive to revise the application process, there was concern that any significant change could mean once the money has been replenished, according to a bank executive.
“The deployment was quite difficult – with so much vagueness about what we could and couldn’t do,” said the executive. “Now we think we have a good handle on things. Changing the rules now would only cause delays and problems once new funds are posted. “
According to the rules of the Small Business Administration’s paycheck protection program, companies with fewer than 500 employees who have certified themselves to have been injured as a result of a coronavirus could qualify. The program was designed to ensure that businesses can get money quickly. But, it was not a violation of the rules for larger and even publicly traded companies to obtain funding. Instead, it is only a violation if a business owner has falsely self-certified on their request that the coronavirus has made it difficult to continue operating their business.
Senator Rick Scott, a Republican from Florida, has asked that this language be specifically reinforced.
“We cannot be cautious about the wind in the midst of a crisis,” said Scott. “We still have to be smart about how we spend taxpayers’ money. “
But this effort has not been incorporated into the new legislation, despite bipartisan concerns about some of the companies that have received funding, as it has been determined that the current wording has a similar effect.
Treasury Secretary Steven Mnuchin said Tuesday that he plans to conduct monitoring to ensure that the businesses that received the loans are in need, but that could be more difficult to do than say. . Mnuchin said the Treasury will issue clear guidelines explaining the rules for self-certification and give business owners the opportunity to return money if they break the rules without asking short-term questions. However, Mnuchin promised “that there are serious consequences for people who do not properly test this certification”.
He added, “We want to make sure that this money is available to the small businesses that need it, the people who have invested all their life savings. We appreciate what is going on and they are recruiting people. ”
Rubio, who is the chairman of the Senate Committee on Small Business, also committed to vigorous surveillance if a business owner who was not actually injured by a coronavirus received an SBA loan.
“Any business, no matter how small, must certify that it has been damaged by the coronavirus crisis and that PPP is necessary to maintain operations,” Rubio wrote on Monday. “This fall, the Senate Committee on Small Business and Entrepreneurship will aggressively monitor the use of P3s. If the companies do not show up, the Committee will use its power of assignment to compel cooperation. “
Representative Nydia Velazquez, the New York Democrat who heads the House Small Business Committee, has promised similar oversight and will hold a hearing on Thursday to roll out the program.