Forgivable Paycheck Protection Program (PPP) loans were distributed to millions of self-declared businesses over the spring and summer, but it looks like we may never know exactly how many of the loans were legitimate and how many were fraudulent.
The House Select Subcommittee on the Coronavirus Crisis released the results of their preliminary review of the program and found that least 11,000 loans were probably fraudulent but virtually none will ever be audited by the Small Business Administration (SBA) and the Treasury Department.
The SBA apparently intends to audit so few loans it beggars belief.
More than 11,000 loans totaling more than $3 billion raised "red flags" for the subcommittee, it said in its report. These issues included addresses on PPP loan applications that didn't match those used in the federal government's System for Award Management, which businesses have to register with to do business for the U.S. government, possibly indicating fraud. Another 10,856 loans totaling $1 billion went to companies that got multiple loans, which was against the PPP loan rules. In addition, 613 loans totaling $96 million went to companies that are barred from doing business with the government altogether, while 353 loans totaling $195 million went to government contractors previously flagged for performance or integrity issues, the subcommittee found.
The Treasury Department should've noticed these issues, the subcommittee said. But the department and the Small Business Administration would only audit PPP loans over $2 million, constituting just .6 percent of all the PPP loans they issued. That left "the other 99.4% of loans with little or no oversight," the subcommittee said before going on to suggest ways the department could audit more loans based on the House's findings.
Just because 99 percent of loans are vulnerable to fraud because there's no oversight doesn't mean all 99 percent of them are fraudulent, but if you were trying to design a system that could be easily gamed I don't know if you could do better than this.
You may recall that on top of this mile-wide gap in oversight, Treasury Secretary Steve Mnuchin and Republicans in Congress have been lobbying in favor of automatic forgiveness for PPP loans under $1 million.
If that happens, there will never be an accurate accounting of where the money went or how many jobs the program actually saved. There probably won't be anyway even if we don't automatically forgive the vast majority of loans. And maybe that's the idea.
I trust my gut when it tells me the vast majority of fraudulent loans were probably obtained by local conservative businessmen, party donors, grifters, and other reliably Republican constituencies. It's not as if you can't find similar people who also consider themselves liberal, but this country is awash in dubious "small businesses" with zero employees owned by conservatives who take advantage of virtually every handout they can scrub from the federal government and the tax code. It's practically a cottage industry. And those same owners decry people on food stamps without a second thought.
For authentic small businesses that actually used the funds to cover the cost of keeping their employees on their payroll, it's unfortunate the program was allowed to expire just because Republicans in Congress do not believe in passing more stimulus at all.