Loans Intended For Small Businesses To Retain Workers Were Hijacked By Large Corporations And The Rich
The Paycheck Protection Program, part of the multitrillion dollar government stimulus package, was primarily intended to help small businesses retain workers. The loosely managed and poorly regulated process was perverted and hijacked by thousands of companies that gamed the system. Through technicalities and loopholes in the program, the sloppy roll out was marred by too-little oversight and the allowance of large corporations, hedge funds, money managers, law firms and fast food chains to receive millions of dollars in forgivable loans.
The concept of PPP was laudable. In the teeth of the Covid-19 pandemic, small businesses that were deemed nonessential were ordered to cease operations. This placed thousands of small and midsized companies in a perilous position. With the sudden shocking lack of customers plummeting revenue, evaporating profits and still bills to pay, many small businesses faced financial ruin.
The federal government previously offered enhanced unemployment benefits to workers that lost their jobs due, in large part, to the economic effects of the virus outbreak. In an effort to both keep the doors of small businesses open and as an enticement to retain workers and keep them employed, the PPP was put into effect. Companies were offered the opportunity to apply for a forgivable loan. There wasn’t a lot of red tape and the major requirement was a promise to retain employees for a specified time period.
Unfortunately, the lion’s share of the funds went to companies that didn’t fit into this profile. The program was rushed out and handed off to Treasury Secretary Steven Mnuchin to manage the process and oversight. Mnuchin then passed it over to the banks. They became in charge of the review, approvals and underwriting the loans.
There were angry complaints, especially during the initial rollout of the program, that the intended recipients—small and midsize businesses—were shut out. Within days, the initial funds were sucked up by large organizations. These corporations boasted sharp lawyers, accountants, political ties and already held close relationships with banks. They easily cut to the front of the line. Facing pressure and public embarrassment, a number of organizations said that they’d return the funds.
A second phase of PPP was enacted. Once again, heated complaints of cronyism arose. This placed pressure on the Trump administration to reveal which companies received loans from the $660 billion program intended to keep small businesses afloat.
According to the Washington Post, “Among the loan recipients, 48,922 reported zero as the number of jobs they would retain with the money, and 40,506 applicants appeared to leave that section blank. It appeared that 10 other companies received between $5 million and $10 million, but reported retaining only one job with the money they received.”
Without the PPP loans, the number of people claiming unemployment benefits would have substantially increased. In light of the resurgence of Covid-19 cases, calls for reclosing businesses and a still weakened economy with little demand from consumers, many of the companies that accepted loans will lay off workers as soon as their restrictions are lifted.
There is another beneficiary of the loan program. Banks stand to see a windfall of billions of dollars in fees paid directly by the Small Business Administration. The top 10 bank lenders, according to S&P Global Market Intelligence, will receive about $3.8 billion.
Here are some of the not-so-small companies that received money from the PPP:
Billionaire Kanye West's Yeezy brand borrowed between $2 million and $5 million. There’s no word yet if this money will go toward his newly announced run to become the President of America.
A major law firm with ties to President Trump, Kasowitz Benson Torres, received a loan for between $5 million and $10 million.
$350,000 to about $1 million was given to Esplanade Livingston, a Jared Kushner family entity. Kushner previously divested his stake in the entity.
A real estate entity owned by various members of the Kushner family, Princeton Forrestal, received a loan of between $1 million and $2 million.
The uber-powerful and successful law firm, Boies Schiller Flexner, received between $5 million and $10 million.
United States Transportation Secretary Elaine Chao’s family’s business, Foremost Maritime, received $350,000 and $1 million. Elaine Chao is married to Republican Senate Majority Leader Mitch McConnell.
Trucking company Perdue, cofounded by Agriculture Secretary Sonny Perdue, got roughly $150,000 to $350,000 in loans.
Restaurant chains P.F. Chang’s, China Bistro and Chop’t received between $5 million and $10 million.
Private equity-backed TGI Fridays realized at least $5 million.
The Archdiocese of New York received between $5 million and $10 million. The Catholic Charities of the Archdioceses of San Francisco, Washington, D.C., New Orleans and Boston all received loans valued at over $2 million.
Ironically, self-reliant, libertarian-oriented the Ayn Rand Institute got $350,000 to $1 million.
Joseph Kushner Hebrew Academy in New Jersey received a loan of about $1 million to $2 million. The academy is named after President Trump’s son-in-law Jared Kushner’s grandfather.
Alamo Drafthouse received a loan of about $5 million.
News organizations such as the Washington Times got at least $1 million, the Washingtonian $350,000, the Daily Caller received about $350,000 and the American Prospect received at least $150,000.
Political organizations, including the Ohio Democratic Party, got at least $150,000 and the Florida Democratic Party Building Fund received at least $350,000.
The National Republican Club of New York realized at least $350,000 and the Black Republican Caucus in Florida recognized at least $150,000.
Members of Congress received loans too. Republican Representative Kevin Hern of Oklahoma, who owns KTAK Corporation, received between $1 million and $2 million. Republican representative Mike Kelly from Pennsylvania received a loan for his car dealerships.
Democratic House Speaker Nancy Pelosi’s husband, Paul Pelosi, received a loan.
Republican West Virginia Governor and billionaire Jim Justice received between $11 and $24 million for his portfolio of companies.
The list is much longer, but I don’t want to raise your blood pressure higher.
https://www.forbes.com/sites/jackkelly/2020/07/07/loans-intended-for-small-businesses-to-retain-workers-were-hijacked-by-large-corporations-and-the-rich/#335d3b0b316d
