One part of the stimulus program was the Paycheck Protection Program (PPP) that was meant to enable owners of small businesses to keep paying their employees even while their businesses were shut down. The program was limited to companies that had less than 500 employees. Why did employees of large corporations like Amazon not get similar protections? The assumption by the government seemed to be that these companies could afford to do so on their own without government help though in the absence of any law forcing them to do so, one cannot imagine Amazon’s Jeff Bezos depriving himself of even the tiniest bit of his huge wealth.
But what happened was that the initial tranche of money ran out so quickly that very few small businesses could get any money, leaving them frustrated. Why was this? It was because there was a loophole that allowed some large publicly traded companies to get hold of the funds because it “allowed restaurants and hotels to apply for loans under the PPP so long as they had no more than 500 employees working at a single location.”
Also big companies have teams of lawyers that could quickly file applications for the money and because the government used banks as the distributor of the money, the big banks found it easiest and most profitable to give the money to their biggest customers. Some banks are now being sued for their actions.
Multiple new lawsuits allege that financial giants responsible for doling out billions in small business relief “prioritized” large corporate clients for the loans after dozens of publicly traded firms received aid before the program ran out of funding.
About 75 publicly traded companies, some with market values of more than $100 million, received a combined $300 million in loans from the program, according to the Associated Press. Eight of the companies received $10 million apiece, the maximum loan amount.
The SBA provided the loans on a first-come, first-serve basis but banks were given wide latitude to process the applications. Bank of America, for example, rejected applications from small businesses that had received previous loans or credit from other banks. A judge ruled earlier this month that the practice did not run afoul of the program’s rules, but these new lawsuits allege that banks also set aside applications that had not rejected to process at a later time — and then the funding ran out.
“Chase concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money,” said one of the suits against the bank.
A few big companies that got money were shamed by the negative publicity to return it but what is clear is that big banks are just awful institutions that play a major role in generating greater inequality and should be broken up.
A second round of funding has now been approved to replenish this fund. I wonder what new loophole exists in that that will enable at least part of it to be siphoned off for the wealthy.. It is an iron law of economics that there is always a loophole that benefits the wealthy.
Marcus Ranum says
Basically, it became a “tax rebate for the wealthy.”
Everyone knew that was going to happen, as soon as Pelosi got “bipartisan” and shelved any idea of the money going directly to citizens. Note that, Pelosi never even seriously tried to push that angle -- she’s a deficit hawk and immediately tried to tie it to unemployment insurance. I.e.: to people who already had decent-paying jobs that kept records, not the vast mass of new unemployed who were hourly workers that worked for shit companies that deliberately manipulated their work hours so as not to have to give them unemployment insurance.
The republicans were their usual evil selves, and the democrats went right along with it, because surrendering without a fight feels so darned good.
This renews my faith in neoliberal economics. The private sector always is more efficient and effective than government.
I’d say the program is working as intended by the Republicans and most elected Democrats.
On the other hand, my Gov’t has just hired Amazon to deliver PPE to needy hospitals, etc so we may not be doing a lot better.
I wonder if Canada Post was consulted on this?