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Stung by the failure of its $2.2-trillion rescue fund to reach enough small businesses, the U.S. Congress has added $484 billion in new money, including $310 targeted again to the Paycheck Protection Plan.
Here’s what’s included:

  • $250 to replenish the Paycheck Protection Program, or PPP, which is designed to cover businesses’ payroll costs and keep people off the unemployment rolls;
  • $60 billion will be administered by credit unions and small banks; the first tranche of money was handed out by Wall Street megabanks that dealt first with their corporate customers and had few relationships with mom-and-pop operations;
  • Businesses applying for the money now must not only qualify for the forgivable loan but attest that they really need the money to keep operating;
  • $60 billion for Economic Injury Disaster Relief loans and grants, which can be as large as $10,000, to small businesses, farms, and agricultural operations harmed by the shutdown. The money is administered directly by the Small Business Administration, not banks;
  • $75 billion to help hospitals cover the cost of battling the virus pandemic and replace income lost when elective surgeries were canceled;
  • $25 billion for virus testing, including the creation of a strategic plan to conduct testing nationally; $11 billion of the amount is earmarked specifically for states and localities to conduct tests and trace contacts. The Centers for Disease Control and Prevention will receive $1 billion of the money for contact tracing.
  • $2.1 billion for Small Business Administration administrative expenses.

With the economy still in general lockdown and businesses failing, Washington has pledged yet another round of money injections.
Rescue the Bigs, Screw the Smalls
The $349-billion PPP, part of the $2.2-trillion CARES Act economic rescue plan, was intended to give small companies access to working funds they couldn’t otherwise get. The money was designed as a loan that would be forgiven if the cash was used to keep workers on the payroll.
There are two principal reasons why it didn’t work out as planned.
First, the original round of PPP funding was intended to underwrite companies with fewer than 500 workers. The program was widely criticized after large, publicly traded companies took advantage of a provision Republican senators inserted into the legislation that allowed companies to qualify if they had fewer than 500 workers in a single location.
More than 200 restaurant chains and other geographically diverse corporations strolled through that loophole and applied for at least $854.7 million, according to data from public records obtained by FactSquared, an analytics firm.
Perhaps the most egregious example is $126.4 million applied for by three publicly traded companies owned in part by hotelier Monty Bennett. One, the Ashford Hospitality Trust, applied for 117 separate loans totaling $76 million, according to publicly available regulatory data.
The loans treated each individual hotel owned by the trust as a separate business eligible for its own loan.
A round of public shaming has persuaded 11 companies to return $75 million to the PPP. The 275-store Shake Shack has handed back its $10-million loan; the Ruth’s Chris Steak House chain gave up its $20-million bequest.
The Ashford trust has received at least $38 million in loans so far and has said it has no intention of returning any of the money.
The hotel industry has been among the most damaged by the economic shutdown, with an estimated 70 percent of its workers laid off, according to the American Hotel & Lodging Association.
Publicly traded companies are considered to have access to capital other than PPP funds and, therefore, should not have received any of the loans.
But analysts with Morgan Stanley have reported that public companies collected $243.4 million from the PPP, a figure that has since grown as companies make required public disclosures.
The treasury department has given large, publicly traded companies until 7 May to return their loans.
In a guidance brief, the department stated that PPP borrowers must certify to the Small Business Administration that their loan was essential to continue their operations.
“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith,” the brief warned.
“Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith.”
Companies that do not comply face “potentially other consequences,” said Steven Mnuchin, treasury secretary.
The program’s initial bias toward large, public companies grew, in part, from the PPP’s second major flaw: the government dispersed PPP funds among major banks, such as JPMorgan Chase and Bank of America, to accept and process PPP loan applications and hand out the money.
The big bank’s customers include a large proportion of big, publicly traded companies. When banks saw applications from those customers, they processed them quickly – good customer service is a hallmark of good banking practice – often ahead of other, smaller companies that the giant banks had never heard of.
By the time the big banks had taken care of their customers, there were only small puddles of PPP money left for everyone else.
The new round of PPP funding addresses that issue by setting aside $60 billion to be managed by credit unions and small banks.
The new funding measure also mandates stricter oversight of the funds.
“The Senate Committee on Small Business and Entrepreneurship will conduct aggressive oversight into the use of the PPP,” vowed committee chair Senator Marco Rubio. “If companies are not forthcoming, the committee will use its subpoena power to compel cooperation.”
Rubio and his committee championed the provision in the original bill that gave large companies with multiple branches access to the small business loan program.
TREND FORECAST: As we have long noted, going back to the $29 trillion the U.S. Federal Reserve secretly pumped into the banking system during the Panic of ’08 and the hundreds of billions given to the too-big-to-fail financial institutions and businesses during the G.W. Bush and Barack Obama administrations, in America, it is socialism for the rich and capitalism for small business and the working class.
As evidenced by the latest bailout scams, not only has the trend to enrich the Bigs continued, as also evidenced by President Trump’s and Congressional approval of the 2017 tax cuts that went into to trillions of dollars in stock-buybacks and 82 percent into the pockets of the one percent… it has escalated.
As the “Greatest Depression” worsens, more small businesses will go out of business and the large players in the industrial, tech, commercial, and retail sectors will grow larger.

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