SMALL BUSINESSES NEED BIGGER ASSURANCES
On Friday, President Donald Trump signed a fourth recession stimulus bill that included an additional $310 billion in Paycheck Protection Program (PPP) loans for small-business owners on top of $349 billion in such loans a month ago. The bipartisan resolve shown by Congress and the Trump administration to help small businesses weather the massive recession caused by the coronavirus pandemic and the country’s closures is commendable and something all too uncommon in the days before the crisis. But good intentions are not enough.
What’s needed is well-crafted legislation that ensures that businesses most at risk of never reopening get help. The initial $349 billion in small business loans was gone in two weeks, and ever since then, evidence has emerged that many wellcapitalized companies were prime beneficiaries.
Ruth’s Chris Steak House’s parent company, which has more than 100 luxury restaurants in North America, got $20 million in loans. Shake Shack, which has nearly 300 premium fast-food restaurants, mostly in the U.S., got $10 million. After facing harsh criticism, both announced this week that they would return the money. But that doesn’t appear to be happening with the 15 companies with market values of $100 million or more, particularly energy and hotel firms, which got federal loans.
Treasury Secretary Steven Mnuchin agrees that this shouldn’t be happening. He told the Fox Business Network on Wednesday that the federal loan application requires companies to certify that they need the money to stay in business. “I think a lot of these big companies, it’s questionable whether they can make that certification,” the Wall Street veteran said. He even raised the possibility that such firms could face investigations and punishment.
But companies that have returned loans have for the most part said that they believed they were complying with the vague guidelines contained in the law approved March 27. “The PPP came with no user manual, and it was extremely confusing” is how Shake Shack’s founder and CEO put it in a statement they shared on Linkedin.
It’s hard not to contrast all this with the Troubled Asset Relief Program (TARP) — the law enacted in 2008 that allowed the Treasury Department to invest hundreds of billions of dollars in banks, automakers and other companies at risk of doom during the Great Recession. Six years later, as the program wound down, the government announced that it had actually made money on its investments. The officials who oversaw TARP under Presidents George W. Bush and Barack Obama should be closely consulted on present economic preservation efforts. An inequitable and “extremely confusing” small-business loan program will hurt Americans.