Administration May Have Learned Nothing After Bungling the Paycheck Protection Program
WASHINGTON, D.C. – As the Trump administration and the Federal Reserve prepare to launch their $600 billion Main Street Lending Program (MSLP) meant to help “small and medium-sized” businesses weather the COVID-19 crisis, stakeholders are already raising red flags as to the program’s effectiveness. From business owners labeling the MSLP as “dead on arrival” to former Fed economists worrying that too many businesses will be needlessly shut out, it’s clear that the Trump administration still has a lot to prove — especially after its Paycheck Protection Program has been mired with corruption and mismanagement.
Since its conception, the MSLP sought input from powerful special interests, but small businesses and workers never had a seat at the table. The Treasury Department ignored worker protections outlined in the CARES Act for loan recipients, such as restoring 90 percent of its workforce and prohibited companies from shipping U.S. jobs overseas.
“The Trump administration found yet another way to shower well-resourced and well-connected companies with incredibly generous loans,” said Kyle Herrig, president of Accountable.US. “By design, it appears MSLP loans will go mostly to large companies that may not actually need them, but will take them because the terms are just too good. That’s why it’s essential that the public is told how every last dollar of this program is being spent at a time small businesses continue to disappear by the thousands on the President’s watch.”
ROUNDUP: SMALL BUSINESS OWNERS, ECONOMISTS, BANKERS ALREADY SEE WARNING SIGNS IN MAIN STREET LENDING PROGRAM
- American Banker, [6/19/20], Why bankers remain unsold on Fed’s Main Street program: “When you think small business, you think mom and pop,” said Cynthia Romano, global director of CohnReznick’s Restructuring and Dispute Resolution Practice. “And they wouldn’t qualify for a loan that size, no matter what their situation was, nor would they need that.”
- “I would have to say we’re leaning towards not participating just because we really haven’t had a lot of demand from our customers.” — Bob Fisher, president and CEO of Tioga State Bank in Spencer, N.Y., and incoming chairman of the Independent Community Bankers of America.
- Washington Post, [6/18/20]: ‘It’s very discouraging’: America’s new $600 billion rescue program for small businesses is off to a rocky start: “You’d think after all of this delay, this would launch more smoothly than PPP [Paycheck Protection Program]. As it turns out, it looks like it’s dead on arrival, which is sad,” said Valeo, chief executive of Documo, a software company for secure documents.” […] “It’s very discouraging as a small-business owner,” he said. “When big boys need a bailout, that money moves fast.” But for small businesses, “it just seems like nobody really cares.”
- Business Insider, [6/18/20]: Former Fed economists recommend widening scope of $600 billion Main Street Lending Program: “The downturn is very deep, and the risk of permanent harm to labor markets because of protracted high unemployment is large,” Former Fed economists, Liang and English, wrote. “Thus, the Fed and the Treasury should move quickly to adjust the terms of the program if take-up is low.”
- ABC News, [6/16/20], The Main Street Lending Program was recently revised, but some say it still misses the mark: “This money should be used to support workers, and the Fed should require companies receiving bailout money to certify that they will use those funds for that purpose,” Senator Warren told ABC News in a statement. “The Fed is making it easier for more companies to access taxpayer funds, and is not doing enough to hold them accountable. This is another giveaway to corporations and CEOs to use this money to enrich themselves,” Warren said.
- “If the business takes the money and invests it in something that does not actually help retain jobs, then fundamentally we’re just giving low interest rate loans or free money to companies that that don’t need it and aren’t using it to benefit all of us, even though all of us are footing the bill as taxpayers,” Katie Porter told ABC News in a phone interview.
- Bloomberg, [6/6/20]: “I think saying this is likely to be the least successful is probably right,” Matthew Mish, a strategist at UBS Group AG, said of the Main Street program. “There are a number of hurdles where participation is going to be limited.”