Washington D.C. – Ahead of Treasury Secretary Steven Mnuchin’s testimony before the House Financial Services Committee about the administration’s COVID-19 response, government watchdog group Accountable.US released the top five questions that American taxpayers deserve the answers to.
Big Firms Got PPP Loans While Small Businesses Die Off
Secretary Mnuchin, on June 19, your Treasury Department and the Small Business Administration announced that you would release some basic information on entities receiving Paycheck Protection Program (PPP) loans of more than $150,000. However, these disclosures will only constitute 14 percent of forgivable PPP loans despite accounting for nearly 75% of funds disbursed.
While bigger firms were enjoying the lion’s share of PPP funds you helped to oversee, one survey projected that the pandemic could close 7.5 million small businesses and another showed that 41 percent of Black-owned small businesses were shuttered just between February to mid-April.
On June 10, you told the Senate Small Business & Entrepreneurship Committee “we absolutely believe small businesses, and, by the way, many big businesses in certain industries, are absolutely going to need more help.”
1) If Congress extends the PPP program, how can you assure us that you won’t squander it on more big firms while truly small businesses continue to fail?
PPP Is Failing Minority-Owned Businesses
Secretary Mnuchin, the Paycheck Protection Program (PPP) has disproportionately left minority-owned small businesses behind.
- According to the Center for Responsible Lending, roughly 95% of Black-owned businesses, 91% of Latino-owned businesses and 75% of Asian-owned businesses stood “close to no chance of receiving a PPP loan through a mainstream bank or credit union” because of how poorly the program was structured.
- A recent surveyconducted on behalf of Color of Change and UnidosUS found that only 12% of Black and Latinx business owners received the SBA relief they had applied for, with 26% saying they “received only a fraction of what they had requested.”
- “A recent reportby the National Bureau of Economic Research found that the total number of Black-owned businesses in the U.S. fell 41%, from 1.1 million in February to 640,000 in April, because of fallout from the coronavirus.”
You were Chairman and CEO of OneWest Bank from March 2009 to August 2015. While you led the bank, it was sued for allegedly violating federal law by redlining Black and Latino homebuyers. According to the groups who filed the suit, your bank “made just two mortgages to Black borrowers in 2014 and 2015 across a swath of Southern California counties including Los Angeles, where it had 52 branches.”
Additionally, one 2015 study found that 68 percent of OneWest’s 36,000 foreclosures in California were in minority neighborhoods. In fact, you earned your nickname “the Foreclosure King” for your time running the bank in the wake of the last financial crisis.
2) Secretary Mnuchin, the PPP has acutely neglected small minority businesses under your watch. How do you intend to overcome these failures and ensure that already-disadvantaged minority-owned businesses do not continue to be left behind by the PPP?
Made Exceptions For Foreign-Tied PPP Recipients
Secretary Mnuchin, the Paycheck Protection Program (PPP) has been set up to help small U.S. businesses struggling amid the COVID-19 pandemic. You yourself said the CARES Act, which established the PPP, would “provide unprecedented economic relief to American workers and businesses.” The program requires applicants to specify their total number of employees—both domestic and foreign—and disqualifies any firm with more than 500 employees. However, the Small Business Administration, in consultation with your Treasury Department, declared it would not disqualify any company that neglected to count its foreign workers in PPP applications made before May 5, 2020. This calls into question just how many potentially forgivable PPP loans the Trump administration has already doled out to deeply foreign-tied firms.
On your watch, the PPP has doled out millions of dollars to large, publicly-traded firms with non-U.S. headquarters or non-U.S. parent corporations.
3) Secretary Mnuchin, did you do anything to make sure that primarily foreign business interests did not benefit from these PPP loans made before May 5? Did you do anything to make sure these loans weren’t made at the expense of U.S. small businesses, U.S. workers, and U.S. taxpayers?
Lax Oversight Over Politically Connected Bailouts
Secretary Mnuchin, multiple bailouts and emergency loans have been offered to politically connected businesses. Some of these include:
- $67 million for Omni Air International, which the Trump administration has contracted to conduct deportation flights and which is a subsidiary of a firm that donates exclusively to Republican campaigns.
- $27 millionf or Clay Lacy Aviation, a private jet company founded by one of President Trump’s donors.
- $55 million to six other private jet companies with ties to Trump donors.
- Nearly $20 millionfor GEE Group Inc., which has been closely linked with longtime Trump advisor Art Laffer
Despite these suspicious bailouts and other concerns over your handling of the COVID-19 response, you have repeatedly pushed back against transparency measures: your Department has disputed the oversight power of the Pandemic Response Accountability Committee (PRAC) and you have argued that “we never agreed to full transparency” as you fought against Paycheck Protection Program (PPP) disclosures.
4) Given all of the issues that have already been exposed in how you have handled this crisis, one would think that you would be doing more to promote transparency. How does anything less than full disclosure and proper oversight serve the public interest?
Power To Waive CARES Act’s Protections For Workers And Taxpayers
Secretary Mnuchin, the CARES Act has given you the power to waive certain conditions on companies that have taken federal aid, including prohibitions against stock buybacks and dividends.
After Delta Air Lines took a $5.4 billion Payroll Support Payment from your Department, CEO Ed Bastian defended the company’s years of buybacks. He said, “‘At some point, owners of a business deserve a return, too,’” despite the fact his airline spent $11.5 billion on stock buybacks from 2013 to 2019.
Multiple unions have alleged that Delta, in addition to other major airlines that took bailouts, have violated the CARES Act by cutting worker hours. United Airlines had to reverse a plan to cut worker hours after a union filed a lawsuit.
5) Secretary Mnuchin, under what conditions do you think it would be appropriate to use your power to lift the CARES Act’s restrictions on buybacks, dividends, and executive compensation? Particularly for any of these companies that may have flouted the law’s protections for taxpayers and workers? Have you or your Department already considered lifting such restrictions for any bailout recipients?