One of the problems with how humans respond to a crisis is by following feelings instead of facts. Cherry-picked examples make for nice, memorable headlines, but often don’t tell the full story.
During the current Corona-crisis, the Small Business Association (SBA) and Treasury have hurried to keep struggling companies afloat, and paychecks flowing to bank accounts, through the Payroll Protection Program, which offers forgivable loans to companies with fewer than 500 employees that keep workers on payroll during COVID or rehires them later. Approval depends on borrowers matching the program’s criteria to spare banks from time-consuming due diligence during a time when speed is of the essence.
However, a couple of nasty headlines may be making U.S. Treasury Secretary Steven Mnuchin pull back on the program instead of stick the landing.
The most click-baity of these was the news that the Los Angeles Lakers — the Cobra Kai of professional sports – received $4.6 million in PPP funds. Articles were shared. Outrage spread. The Lakers gave the money back.
Mnuchin is publicly shaming private companies — not just extremely valuable ball clubs – into returning PPP funds, and has gone so far as to threaten criminal liability against some. The trickle down affect is American franchise workers end up suffering because of a public relations problem.
At least 13 of the public companies that received loans promised to return the money –including AutoNation, Ruth’s Chris Steak House, and Shake Shack Inc. – all of which employ millions of Americans the PPP was designed to help.
One of Treasury’s biggest mistakes was including the so-called affiliation rule which lumps into one entity businesses that share common controlling shareholders, so they’re over the 500 employee threshold and out of the PPP.
This put pro-business trade organization Institutional Limited Partners Association in the very unusual position of siding with Democrats against the Trump administration in a letter to Mnuchin. This week, the Family Business Coalition (FBC) likewise released a letter with 10 additional small-business advocacy groups urging the Trump Administration that, "Simply put, any company that employs American workers should have access to relief."
We shouldn’t make policy decisions based on the rage. The US has thrived thus far because it is a republic, not a democracy, and has — thus far — been reasonably protected from mob rule. During the current crisis — where it seems like the secondary effects are hurting more people than the disease itself — local economies are surviving by the skin of their teeth.
Initial federal relief has been uneven, complex, and difficult to aim under the extraordinary circumstances.
The Federal government needs to keep funding going, without discrimination, until health officials are able to get a better handle on the crisis. Bad actors within the government itself are capitalizing on the crisis to confusticate the Trump administration with click-bait.
During a recent Senate hearing, Democratic 2020 also-ran Sen. Elizabeth Warren, D-Mass., disingenuously accused Mnuchin of "boosting your Wall Street buddies" while "leaving the American people behind!"
In response, the Treasury Department asked for publicly traded companies that received PPP loans to return the money. It also updated its guidelines to make it clear that it was “unlikely that a public company with substantial market value and access to capital markets” could demonstrate it needed a government-backed loan to keep its head above water.
As someone who has, let’s call it, a complicated past with Wall Street, Mnuchin might be overreacting to avoid accusations of collusion. Warren knows this, but she knows deep down that Wall Street is just as integral a part of the US economy as Main Street.
Starving Wall Street hurts the retirement investments of millions of Americans, including the first responders that we are currently relying so heavily upon during this pandemic and many of the millions who are now unemployed.
Mnuchin needs to stand strong against pressure like this and stay the course with the PPP.
Treasury cannot pick winners and losers at a time like this when virtually everyone is losing. Instead, Treasury must focus on protecting American workers. Assuming that companies are misbehaving, simply because they’re big, is falling into traps set by the Warrens of the world.
This is an unprecedented time for the world and everyone wants to see the best possible outcome. The future of our country’s economy and livelihood rely on how the Trump administration approaches future aid packages, and it’s imperative that every struggling business receives equal lending opportunities.
Jared Whitley is a long-time politico who has worked in the U.S. Congress, White House, and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's Reports — More Here.
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