Perhaps an intermediary wasn’t the best decision to distribute disaster relief funds.
In the wake of the spread of the novel coronavirus, both the U.S. Senate and House agreed to a $2.2 trillion stimulus package, which was then fired to President Donald Trump who immediately signed it into law.
The process was not without it’s snags, but for ‘government work’ the bill moved through both houses and was pushed out.
Here’s the rub, and definitely the first red flag – for just about every fund, there was a problem. Stimulus checks ran late, and direct deposits were placed into wrong bank accounts; governments and hospitals are still waiting for guidance on how to spend their money; meanwhile state and local governments are just running up a tab hoping that their expenditures will fall under the slogan of “necessary” and “reimbursable” by, you guessed it, FEMA.
So that makes the Paycheck Protection Program (PPP) look like a slam dunk by comparison – a program which ran out of money within 13 days, wherein $369 billion was spent by the SBA to keep small businesses afloat. Both houses of congress agreed to require that the Small Business Administration funnel the money through banks to their customers.
After all, who knew them best?
But, was that knowledge necessary? Questions have already stacked up against the program, with full-blown, class-action lawsuits already begun in some of the larger states with a multitude of small business who are angry. Their anger stems from a promise made by the federal government that the loans would be doled out on a ‘first come, first served’ basis.
Someone at the SBA decided to release the statistics of the first round of SBA loans. Then someone else at the SBA (at least, we can only hope it was someone else) decided that it would be a good idea to release the final statistics of the first round of funding.
The difference? In the first set, most of the money went to large businesses who were requesting $350,000 or more in loans – 70% of the money, in fact. That total didn’t change much in set two of the statistics, but more small businesses were shown to have received money after the second set of statistics were released.
Read – the big clients got their money first, then the banks worked to smaller businesses. This is the basis for the class-action lawsuit.
Of course the banks targeted their larger clients first, it’s a no-brainer. They received more money per transactions, and made sure their more (probably) stable clients were set first. It’s also a better deal for the government, who are heavily reliant on personal income taxes.
“Save the larger ones first,” you can hear them saying.
This will, of course, be disputed in court and who knows if anything will come of the law suit as more money is, supposedly, on the way after Republicans and Democrats sparred over spending in the second round of funding for PPP. Democrats wanted more protections, but also more money for various entities – including governments and hospitals – that had not even spent their round 1 funding. Republicans wanted it out the door.
Small business owners, for the most part, don’t care – get the money out however you can, they’ll say.
Why do they say this? Because what does it matter, they were short-changed from the beginning.
There were two red flags from the beginning with regard to the PPP program that only the most government-hopeful wouldn’t notice. First, the SBA’s definition of small business is somewhat amorphous, and can be determined by income or number of employees – a ruse lobbied by larger businesses to give them to ability to qualify for small and large business perks.
According to the IRS, small businesses can be up to 500 employees in size.
So even the two-person partnerships were competing with businesses that were larger than Livingston Parish’s government, and 1/6th the size of the entire school system.
Second problem was the involvement of banks, and not the SBA. Why? The SBA already had application methods in process, it’s not as if the administration doesn’t get to know the business as they both government and client move through the tangled web of financial analysis.
Well, the why is the banking lobby. We as Americans have become so used to disasters, and the windfall of cash that comes with them, that we have become experts the world over in “consulting” and “managing” disaster response.
Read: private firms getting their money.
This isn’t an all bad scenario, in some cases, but giving banks, who have financially vested interest in who gets the bucks first, the keys to the small business stimulus car is akin to teaching your kid to drive – very entertaining from the outside looking in, but bad for your health if you’re involved.
There’s a silver-lining to all this, in that the government appears to be ready to shift out more money to refuel the program. If you applied, you were asked to sign that you would not apply again – but with the issues surrounding round 1, time will tell if rules are followed.
This isn’t a dig against local bankers, most of them helped their clients through the process and pushed those applications as soon as they were ready. Make no mistake, it’s the big players who made the decisions to put those customers first.
But, as we see from the multitude of folks who want to re-open everything just the way it was, one wonders if some don’t really want it that way. Hard to stay motivated without an oppressor, I suppose.
J. McHugh David is editor and publisher of the Livingston Parish News.