Oversight Is Needed For Paycheck Protection Program
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Recently, I’ve received an email from Peter Rossi of the Patriotic Milionaires, expressing his concern of insufficient oversight of the Paycheck Protection Program. So allow me to share some of the causes of his concern, below. :
The Paycheck Protection Program (PPP), the relief package designed by Congress to give small businesses a lifeline during COVID-19 pandemic, when social distancing and stay-at-home orders have significantly reduced or eliminated number of customers. The Paycheck Protection Program is a $669-billion business loan program established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help small businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses keep paying their workers.
The Paycheck Protection Program allows small businesses to apply for low-interest private loans to pay for their payroll and certain other costs. A PPP loan was approximately equal to 2.5 times the business’ average monthly payroll costs. The loan proceeds may be used to cover the business’ payroll costs, rent, interest, and utilities for eight weeks. The loan may be partially or fully forgiven if the business keeps its employee counts and employee wages stable. The program is implemented by the U.S. Small Business Administration.
Even though this loan program was intended for small businesses, several corporations with market values over $100 billion dollars and hotels and large chain restaurants received these loans while some independent struggling local businesses that needed the emergency capital have received nothing. Even though another bill was signed by President Trump to infuse an extra $310 billion into the program, oversight of the funds is still sorely missing. In an excerpt from a letter by Dale Walker of the Patriotic Millionaires, Big Corporations Are Preying on Small Business Loan Program, Mr. Walker indicated that, in bold italics, below:
To ensure that needed cash would benefit local communities the PPP specified that the loans were intended for businesses with fewer than 500 employees. Despite this, it was reported that 17 companies with more than 500 employees collectively received upwards of $143 million dollars from the small business loan program, thanks to a loophole that specified 500 employees per location instead of in total. Although Shake Shack and several other large public firms have returned the loans they secured, that doesn’t alter the fact that they never should have received them to begin with.
That’s not the only way that big companies gamed the system. The ‘first come, first serve’ system that the PPP used disproportionately benefited the large corporations who already had a relationship with their bank and were able to get their loans fast tracked. If this program was properly designed with watchdogs to ensure things were operating as intended, these funds would be in the hands of the vulnerable Americans who were relying on it.
It’s not just the PPP. The entire Coronavirus relief package lacks critical oversight that lets large corporations suck up all the government money before working people and small business owners ever get the chance to ask for help. What few oversight measures that are in place lack the teeth to punish any abuse of these funds, setting us up for an ugly repeat of the utter failures of the 2008 financial crisis oversight panels. The process of disbursement favors banks hurrying to get it to customers whose documents are on file, while small businesses without a banking relationship stand in line, and the money disappears in a matter of hours.
With no serious accountability, it’s no surprise large businesses used these loopholes to quickly drain PPP of its funding. Those loopholes include large tax breaks for corporations and the wealthy. While Congress passed a necessary emergency bill to refill the coffers last week, the new package still lacks any significant oversight to curtail abuses, so what’s to stop large corporations from doing the same thing again?
Our recovery only comes when every working American has cash on hand to stimulate their local economy, and small businesses – ones that are actually small. Infusing an extra $310 billion dollars into the PPP is a good start, but a flawed system with more money is still a flawed system. Moving forward, it’s essential that our government ensures all further PPP loans are free of loopholes that corporations can exploit, and that needed cash is delivered to local businesses who will keep their employees productively employed.
Why Main Street will look like a ghost town and other devastating outcomes of the government’s shutdown and “help” of small business. Explanations for why small businesses matter (they employ half the private sector in America) and why the SBA’s Paycheck Protection Program is a failure, are in videos below.
Video from 3 weeks ago: It’s grossly underfunded, favors large businesses, and shows a complete misunderstanding of how small businesses work and the money they spin off for the good of the economy. And don’t tell me about the unemployment option for gig workers — it’ll take months for states to ramp that up, in the video “Why SBA’s Paycheck Protection Program Is A Failure and Why Small Biz Matters“, below:
Video from 2 weeks ago: Small business owners worry the Paycheck Protection Program has failed them, in the video “Paycheck Protection Program fail“, below:
Video from 1 week ago: Business owners with few employees feel that they were left behind by the federal Paycheck Protection Program created to help small businesses get through the coronavirus crisis. Restaurant chains received millions of dollars while thousands of Arizona businesses were turned away from their own banks, in the video “Some small businesses feel federal paycheck protection program left them behind“, below:
A new federal program to help small businesses during the coronavirus pandemic is running out of money and falling short in the industries and states most battered by the crisis, according to a report. Stephanie Ruhle discusses, in the video “Payment Protection Program Set To Run Out Of Funding, Morning Joe, MSNBC“, below:
For more on SBA’s Coronavirus Relief Options, please click HERE.
Some type of oversight is definitely needed to insure the people the program intended for will receive these funds. At this point, Eligibility criteria for the PPP program, excerpt from Wikipedia, is shared, in italics, below:
In order to be eligible for the Paycheck Protection Program, an applicant must be a small business, sole proprietor, independent contractor, self-employed person, 501(c)(3) nonprofit organization, ,[a] 501(c)(19) veterans organization,[5][6] or a tribal business.[b][8][9]
Applicants who operate as a sole proprietorship, an independent contractor, or an eligible self-employed individual must have been in operation on February 15, 2020. Other types of applicants must have been in operation on February 15, 2020,[c] and must have either had paid employees or paid independent contractors.[8]
The applicant and its affiliates[d][e][f] must also:[9]
- Have 500 or fewer employees whose primary residence is in the United States;[g][h][16] or
- Meet the Small Business Administration‘s industry size standards based on average number of employees.[i][j][k][20][21][18] or
- Have a tangible net worth[l] that did not exceed $15 million on March 27, 2020, and an average net income that did not exceed $5 million for the two full fiscal years prior the date of the PPP application.[23]
The applicant must be located in the United States or its possessions. The applicant’s primary operations must be located in the United States or its possessions or, alternatively, the applicant’s business must make a significant contribution to the economy of the United States.[24]
An applicant is ineligible for a PPP loan if:
- It engaged in any activity that is illegal under federal, state, or local law;[m][25][24] or
- It is a household employer, such as an individual employing nannies, housekeepers, or other household employees;[26] or
- It is a passive business, such as a hedge fund or a private equity firm;[27][28] or
- It is in bankruptcy proceedings at the time of application or before the loan proceeds are disbursed;[29][28] or
- It is a public hospital that receives 50% or more of its funding from state- or local-government sources, excluding Medicaid;[29][28] or
- An owner of 20% or more of the business is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years;[24] or
- The applicant, the business’ owners, or any business owned or controlled by the applicant or the business’ owners has ever obtained a direct or guaranteed loan from any federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the federal government;[24] or
- The business is owned in whole or in part by an undocumented alien.[24][30]
An applicant is not required to demonstrate that it cannot find credit elsewhere, but it is required to certify, in good faith, that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant”.[2][8]
Each business may receive only one PPP loan.[n][8]
Gathered, written, and posted by Windermere Sun-Susan Sun Nunamaker
More about the community at www.WindermereSun.com
Let us be wary as the country will be reopened. Let’s be cautious and wear facial coverings in public and continue practicing social distancing (at least 6 feet from others), for COVID-19 is not yet gone. It does appear that U.S. is deficient in testing and contact tracing at the moment. Let’s hope this will soon change. It is not likely that our life will return to normal until 2022, after the vaccine for COVID-19 will become available to general public globally.
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Gathered, written, and posted by Windermere Sun-Susan Sun Nunamaker
More about the community at www.WindermereSun.com
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