WASHINGTON–Congress is getting closer to passing approximately $450 billion in funding, including another $350-billion to replenish the Paycheck Protection Program (PPP). The new funds are being discussed at the same time numerous large financial institutions are asking Congress to close loopholes in the PPP they say aren’t just unfair to smaller businesses but also causing backlash against the lenders.
In addition to the $350-billion for the PPP, the additional $100 billion would include $75 billion for hospitals and $25 billion for COVID-19 testing, according to Treasury Secretary Steven Mnuchin. Proposals also call for approximately $50 billion for the Economic Injury Disaster Loan program.
All of the numbers are in negotiation between Republicans and Democrats, Congress and the administration.
Should lawmakers be able to reach an agreement in the near term, the Senate and House could pass the legislation this week, although any number of issues and procedures could cause delay.
Democrats had also been demanding funds for cities and states, but that issue is reportedly being pushed back for consideration as part of additional stimulus bills.
As CUToday.info has reported, the Paycheck Protection Program ran out of its initial $350 billion less than two weeks after going live. Financial institutions have reported tens of thousands of applications are currently in their queues. The PPP loans are supposed to cover payroll at companies of 500 employees or fewer and are to be forgiven if the company maintains its workforce numbers.
'Class Warfare'
Meanwhile, big banks are worried the uneven distribution of loans through the PPP in favor of large companies “will further ignite nascent class warfare tensions and they are now trying to get ahead of what they say is a looming public relations nightmare,” according to Fox Business. “…Banks are worried the backlash over how the loans were administered will stoke class warfare against the financial industry similar to or worse than what followed the 2008 financial crisis when banks got massive bailouts while Main Street suffered through the Great Recession and the weak economic recovery that followed.”
Financial institution executives told Fox News they can't prioritize their lending based on need because the Treasury didn't stipulate need as lending criteria.
“As a result, they argue, they were forced to lend first to their best customers, which means many smaller businesses got pushed aside and money went to bigger, more financially secure businesses,” Fox News said.
The news outlet said senior executives at the nation’s largest banks have been speaking to the Treasury Department about closing PPP loopholes that have allowed profitable financial firms, law firms and big restaurant chains to “essentially move to the front of the line and in front of many legitimate small businesses who were the intended recipients of the government’s pandemic stimulus program.”
As CUToday.info reported here, many of the businesses approved for PPP funds have been anything but the small mom and pop shops many envisioned. Among those receiving funds have been an investment firm that owns the Ritz-Carlton Coconut Grove, which applied for 48 of the loans; a Maryland hotel company with more than $1.5 billion in revenue in 2019, which applied for more than 50 loans (and was approved for 10 prior to the funding running out), and Ruth’s Hospitality Group Inc. — the parent company of Ruth’s Chris Steak House that made $42 million in profits last year and spent $41 million buying back stock and paying dividends and which has received $20 million through two small business loans, according to the Orlando Sentinel.