Coronavirus

How Large Business Got Small Business Money

JM Ashby
Written by JM Ashby

A majority of the funds distributed by the Small Businesses Administration under the Payment Protection Program (PPP) was doled out to mostly conservative states and a significant portion of the funds were given to large firms within those states.

But how did large firms qualify for money intended for small firms?

Just three words in the legislation passed by Congress allowed large business to qualify for small business money according to Bloomberg.

The culprit in the earlier bill was three words that made all the difference: “per physical location.

“During the covered period, any business concern that employs not more than 500 employees per physical location” in the hospitality sector should be eligible to get a loan. [...]

Restaurant and hotel lobbyists concede they pushed for their industries to get special treatment, but denied they were behind the language that opened the door to large firms. A key House Democrat blames Republicans, one of whom pins fault on the Treasury. Others say the measure was sought and approved by lawmakers from both parties to keep unemployment from swelling.

“The idea when this was passed, was to bring as many small businesses as possible into this to help their employees,” Representative Steve Chabot of Ohio, the top Republican on the House Small Business Committee, said in an interview. “They are hurting just like everybody else is.”

Large businesses were able to obtain funds because while they have many more than 500 employees, they do not have more than 500 at any single location.

Lawmakers from both parties are apparently pointing fingers at each other for the loophole and they both may be guilty to some degree, but the evidence certainly points me in one direction. I think the fact that most of the funds went to states that voted for Trump in 2016 is a big clue.

In any case, the latest round of "small business" funding passed by Congress reportedly does not close this loophole. Treasury Secretary Steve Mnuchin says he'll issue guidance to close it, but if the actual language of the bill says otherwise he may not have much legal wiggle room.

I believe we should help as many businesses as possible to retain as many employees as possible, but I can't help but feel like this isn't going to accomplish that. I feel like we're about to flush another $500 billion down a toilet because of poor if not corrupt administration by the Trump regime.

Congressional Democrats are in a difficult position because they can't hold up relief money longer than they already have in their attempts to gain more oversight. Everyone wants something done quickly at a time like this even if getting it right is more important. As a nation we're simply unprepared for actual emergencies.

  • muselet

    “I confess, he did it.”

    I’d be more impressed if someone just said, “Yeah, we screwed up on that. Won’t happen again.”

    I’d also have been more impressed if the proposed solution weren’t loans and grants to employers, but direct paycheck support, as the Europeans have done (government guarantees x percent of employees’ wages), so workers would be less likely to become unemployed and companies would be less tempted to pay their executives bonuses. However, that’s socialism!, so it was never remotely likely.

    No matter where the cutoff is, some companies that deserve relief won’t get it and some companies that don’t deserve relief will get lots of it.

    Expect more of the same in the next round of relief, alas.

    –alopecia