Questions of transparency have dogged the Paycheck Protection Program, which benefited big corporations and political donors, despite being meant for small businesses owners, many of whom have failed to receive loans.
House Democrats on Wednesday accused the Trump administration of illegally obstructing Congress’ watchdog agency from providing oversight of the $659 billion small business coronavirus relief program.
In a letter to Small Business Administration administrator Jovita Carranza, five Democratic committee and subcommittee chairs said the SBA has not complied with requests from the Government Accountability Office—Congress’ independent oversight arm—to interview top department officials and access key data and documents relating to the Paycheck Protection Program.
“GAO informed the Committees that SBA has not complied with GAO’s requests and repeatedly failed to commit to a timeframe in which SBA would comply,” wrote Reps. Carolyn Maloney (D-N.Y.), Nydia Velazquez (D-N.Y.), James Clyburn (D-S.C), Nita Lowey (D-N.Y.) and Mike Quigley (D-Ill.).
Democrats are asking the SBA to “immediately comply” with the GAO requests for information and interviews.
The letter is the latest development in the battle over a lack of transparency surrounding the PPP. The Trump administration has come under scrutiny for its failure to share which companies have received loans. President Trump himself has long balked at the idea of oversight—going so far as to remove a key official in April charged with overseeing $2 trillion in emergency coronavirus spending.
But Treasury Secretary Steven Mnuchin initially promised that the administration would aim for “full transparency” in releasing information about PPP recipients. He reversed his position last week, arguing before the Senate Small Business Committee that the names and amounts of the PPP loans was “proprietary” and “confidential” information.
Frustrated by the Trump administration’s efforts to skirt oversight, House Democrats on Monday announced an investigation into the PPP’s distribution of funds.
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“The administration should release the names of all P.P.P. borrowers — as the S.B.A. routinely does for similar loan programs,” Democrats wrote in a letter to Mnuchin and Carranza. “Contrary to Secretary Mnuchin’s recent testimony, there is nothing ‘proprietary’ or ‘confidential’ about a business receiving millions of dollars appropriated by Congress, and taxpayers deserve to know how their money is being spent.”
When Congress created the Paycheck Protection Program in March, the stated aim was to help small businesses weather the coronavirus pandemic. The program, passed as part of the $2.2 trillion CARES Act, was supposed to provide forgivable loans of up to $10 million to some of America’s 30 million small businesses to help cover payroll and operating costs.
But from day one, the program has been dogged by controversy. The PPP initially received $349 billion in funding and opened on April 3, under the oversight of the SBA and the Treasury Department. Small business owners across the country scrambled to apply, but encountered confusing bank guidelines and struggled to submit their applications before funding ran out less than two weeks after the program launched.
Congress approved a second round of $310 billion in funding in April, but the PPP only came under more scrutiny after it was revealed that many large corporations received PPP loans, even though the program was meant for businesses with fewer than 500 employees.
A handful of companies eventually returned the money, but more than 80% of the 400 publicly traded companies that received loans didn’t.
A handful of companies eventually returned the money, but more than 80% of the 400 publicly traded companies that received loans didn’t, according to an analysis by market research firm FactSquared.
Big companies owned or founded by donors to President Trump also received large loans. Jet Linx Aviation, a private jet company owned by Danny Carreker, received $20 million in PPP funds. Carreker and his wife donated $68,100 to Trump’s campaign, the Republican National Committee and the Trump Victory Committee between October 2015 and November 2016, according to a ProPublica analysis of Federal Election Commission filings.
These big corporations and donors took advantage of several loopholes within the PPP’s rules. For example, applicants did not need to offer proof that they have been affected by the pandemic. Instead, they only needed to certify that “current economic uncertainty makes this loan request necessary” to support their operations.
The program has also been criticized for allowing banks to decide which companies get funding instead of the SBA. Banks, which collect a percentage-based lender fee from the SBA for each loan, are financially incentivized to approve larger loans to wealthier clients.
In the face of public pressure, the Trump administration changed the PPP’s guidance for the second round to make it more difficult for public companies to obtain loans.
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The second round of funding has proven more equitable, and the federal government has since made it easier to obtain full or even partial loan forgiveness, but issues remain, and the battle over transparency continues.
Democrats on Monday also sent letters to eight of the nation’s leading banks, demanding information about the distribution of loan money.
“The Select Subcommittee on the Coronavirus Crisis is investigating whether implementation of the Paycheck Protection Program (PPP) has favored large, well-funded companies over struggling small businesses in underserved communities—contrary to Congress’ clear intent,” they wrote.