A small, overlooked federal agency is shouldering a massive relief effort for the nation’s small businesses and their workers left reeling by the novel coronavirus. The U.S. Small Business Administration has committed to auditing every sizable emergency loan it approves, yet nearly two months since the $660 billion Paycheck Protection Program was launched, the agency has yet to make public the recipients of taxpayer aid.
A signature piece of Congress’ multitrillion-dollar pandemic rescue, the Paycheck Protection Program is targeted to help small employers stay afloat and preserve jobs in a cratering economy losing tens of millions of them.
“Our swift action supported or saved 30 million American jobs at least,” President Donald Trump said at a White House event on small business late last month with Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza.
Managing the program fell to the SBA, an agency with some 3,200 employees and an $819 million annual budget that’s one-tenth the size of the Commerce Department’s. It may be best name for its previous administrator, the pro wrestling entrepreneur Linda McMahon, who spent nearly 30 years building what is now WWE Inc., or World Wrestling Entertainment. She left the SBA a little over a year ago for to work for the pro-Trump PAC America First.
The PPP rollout has not been an easy one. On at least two occasions last month, the SBA’s computer system slowed under the crush of loan applications, creating a bottleneck. The agency says that so far it has processed 4.4 million loans for some $512 billion in awards as of Friday, May 22.
The need for a detailed public accounting of the small-business relief program is amplified by controversy over how it has unfolded since early April. Experts said it’s a way for the public to know whether the program is working as Congress intended.
Several hundred publicly traded companies received hundreds of millions of the low-interest, potentially forgivable loans from the program. They tapped the federal aid despite their potential ability to find the money from private financial sources and even public stock markets. Some had market values well over $100 million. Many had executives earning millions annually. All made their loan information part of the public record through mandatory company filings with the U.S. Securities and Exchange Commission.
On its website, the SBA says it “is becoming more transparent, participatory and collaborative through open government.” It cites, among other things, its Freedom of Information Act program and improvements to online services.
So far, the agency has only provided general information, such as the total amounts of loans awarded in a given time period.
With huge amounts of money flying out of the government’s door in a crisis, full public disclosure can help prevent fraud and improper spending, according to Kathleen Clark, a law professor at Washington University in St. Louis and expert in government ethics.
Otherwise, “the risks to taxpayers are greater,” Clark said. “I would think the SBA would be proactive in making information public.”
Asked by news organizations for information on the companies receiving loans and when it might be provided, the SBA said in a statement it’s too consumed now by the urgent effort of helping small businesses through the economic downturn. It said specific loan data may be released sometime “in the near future.”
“At this time, the agency is focusing its efforts on assisting small businesses during this unprecedented disruption to the economy,” the SBA statement said. “The agency recognizes the need to balance the interests of transparency with the privacy and confidentiality issues release of loan information raises.”
The loans made to big deep-pocketed companies in the Paycheck Protection Program meant that less money was available for smaller businesses that dot the Main Streets of America. Publicly shamed, the big corporations, including national restaurant chains Shake Shack, Ruth’s Chris Steakhouse and Potbelly Sandwich Shop, said they would return their loans.
It was news reports of big companies receiving loans that sparked the public outcry. CBS News, the Associated Press and other news organizations combed through voluminous filings with the Securities and Exchange Commission to unearth public companies that had received PPP loans. The SBA did not make the information public.
That may be surprising because, until now, the SBA has regularly released information on businesses that have borrowed under its main lending program, the so-called 7(a) program.
In fact, the loan application for the Paycheck Protection Program includes this notice to potential borrowers: Under the Freedom of Information Act and with certain exceptions, the SBA “must supply information reflected in agency files and records to a person requesting it.”
Several news organizations, including the Washington Post and the New York Times, have sued the SBA in federal court over its not having released the loan data despite several FOIA requests. They accuse the agency of violating the FOIA law. The SBA has declined to comment on the lawsuit.
Amid the public outcry, Mnuchin recently threatened criminal prosecution and warned companies they must return the money if they falsely certified that they needed federal aid to operate and couldn’t get it elsewhere. But last week, SBA issued revised guidance indicating that criminal action won’t be pursued if companies found to have falsely certified their needs return the money.
Elsewhere in the government, the Treasury Department recently released an accounting of its emergency lending program for airlines and air cargo carriers under the pandemic relief legislation. Under the program, companies are required to use the funds exclusively for employee salaries. The names of companies and amounts of loans or grants they will receive are provided.
So far Treasury has approved about $25 billion in aid to 352 applicants, including all the major passenger airlines and some 260 smaller passenger carriers.