WASHINGTON–When Congress passed the $2.2 trillion dollar Coronavirus Aid, Relief, and Economic Security Act (CARES) in late March, lawmakers said it would not be a repeat of the 2008 bailout, which largely went to help powerful banks on Wall Street, and would instead benefit those smaller companies most in need. But a new analysis suggest that has not been the case.
According to the analysis performed by TIME, few of the supposed guardrails built into the CARES Act “appear to have made much of a difference. The disbursement of the money so far has been riddled with complaints and analyses showing it has disproportionately gone to the wealthiest corporations and individuals.”
“No lessons have been learned [from the 2008 bailout]—it certainly seems that way,” Neil Barofsky, who oversaw the Troubled Asset Relief Program (TARP) as Inspector General under the Obama administration, told TIME.
TIME said its analysis of just three pots of money allocated in the CARES Act—the programs buttressing small businesses, healthcare organizations, and institutions of higher education—"indicates that the inequitable distribution was of a myriad legislative and regulatory design flaws. While lawmakers included language in the law that explicitly directed funds to those most in need, they often designed programs that were not set up to carry out those intentions.
“While few dispute that an ambitious federal bailout package was necessary to help the country confront dueling economic and public health crises, it’s clear now that Congress’ massive outlay of cash has been often inefficient, helping to exacerbate the already-yawning wealth gap in the United States while leaving the neediest in the lurch…” TIME added.
The Findings
TIME said it found:
- Small, minority-owned businesses struggled to access the Paycheck Protection Program. “Because PPP required banks to act as intermediaries, it created a dynamic wherein larger, more established companies—often with existing relationships and lines of credit with banks—received funds before smaller operations, who feared their collapse was imminent,” TIME reported. “In a controversial move, the Treasury Department has refused to release recipients of the program, making it impossible to fully assess which enterprises benefitted most. But independent analyses indicate that the smallest companies, and particularly minority-owned shops, were the least likely to receive PPP funds. A survey of African American and Latinx workers conducted by the Global Strategy Group released May 13—after the second round of funding—found that just 12% of workers received the assistance they requested…while three-in-10 of Black and Latino small business owners…did not receive the amount they requested.”
- The wealthiest universities were eligible for the most aid—leaving community colleges in the lurch. One big problem: the formula relied on the number of full-time Pell Grant recipients physically on campus prior to the pandemic. “While that data point sounded good on paper, it had the effect of disproportionately rewarding wealthier institutions, which tend to have more full-time students and graduate students than poorer institutions like community colleges,” TIME reported, adding hospitals serving wealthier patients got more aid than those serving the poor.
- Hundreds of billions have yet to be disbursed. As CUToday.info has reported, more than $100 billion in funding remains available in the second round of the PPP.