Senate Fails To Boost Paycheck Protection Program After Partisan Clash
WASHINGTON ― An effort to quickly provide more funding for a new program designed to prevent layoffs at small businesses went down in flames in the Senate on Thursday as lawmakers from both parties accused each other of holding hostage added relief for millions of Americans struggling during the coronavirus pandemic.
At issue was the Paycheck Protection Program that Congress included in its $2 trillion coronavirus stimulus bill less than two weeks ago. The program has experienced a rocky rollout ― with many business owners reporting difficulties in either applying for or receiving a loan.
Businesses with fewer than 500 employees are eligible for loans to cover two months of payroll costs, with a $10 million limit, that are supposed to be forgiven if the firm avoids layoffs or big pay cuts. The funds are supposed to be disbursed through banks, which are in charge of vetting applicants.
On paper, the program has the potential to be the most significant part of the government’s response to the economic impact of the pandemic, which has shuttered businesses and resulted in an unprecedented 16 million unemployment claims in just three weeks. Under the terms of the program, companies could hire some of those workers back with the government paying their wages for two months.
The Small Business Administration, which administers the program with backing from the U.S. Treasury Department, said Thursday that there have been “454,000 applications totaling nearly $118 billion” at more than 3,800 lending institutions.
It’s not clear, however, how much of that $118 billion has actually made its way to businesses, which have complained of a chaotic application process as banks either didn’t take applications or restricted them to only certain existing customers.
Seven company owners told HuffPost on Thursday that they’d applied for loans, but had not yet received them and didn’t know when they will.
Republicans wanted to quickly approve $250 billion more for the program on top of the original $350 billion it was given in March.
But Democrats laid out their own demands for an interim spending package that included conditions on how money to small businesses was dispensed, as well as additional hundreds of billions of dollars to hospitals, states, and municipalities. Democrats also sought to boost food benefits for low-income individuals and families.
Neither side got what they wanted during a pro forma session of the Senate on Thursday. Sens. Ben Cardin (D-Md.) and Chris Van Hollen (D-Md.) blocked the GOP’s request for clean funding to the small business program. Senate Majority Leader Mitch McConnell (R-Ky.), meanwhile, blocked the Democrats’ alternative proposal.
“The Democratic leadership has suggested they may hold Americans’ paychecks hostage unless we pass another sweeping bill,” McConnell said. “The country can’t afford unnecessary wrangling or political maneuvering. Don’t block emergency aid you don’t even oppose just because you want something more.”
Cardin, who negotiated the creation of the Paycheck Protection Program, called the GOP move a “political stunt” and said the program isn’t close to running out of money. He noted that while $100 billion in small business loans had been committed, none have actually been given out yet.
“Yes, we need more money for this program,” Van Hollen added. “But for goodness sake let’s take the opportunity to make some bipartisan fixes to allow this program to work better for the very people it’s designed to help.”
The partisan clash took place just hours after the Department of Labor reported that an additional 6.6 million people filed for unemployment benefits last week.
Senators on both sides of the aisle have expressed concerns about the rollout of the Paycheck Protection Program. Sen. Jeff Merkely (D-Ore.) wrote in a letter earlier this week that in giving loans, banks “are prioritizing bigger, more lucrative customers” over smaller minority-owned businesses. Sen. Rick Scott (R-Fla.) warned that companies that haven’t suffered at all due to the crisis are also eligible to receive funds.
“Congress should clarify that only small businesses that have seen a substantial reduction in their revenue can qualify for these loans, so we make sure the funds available are helping businesses hurt by this crisis,” Scott said in a statement.
The Senate could try and pass more funding for the program as early as Monday, the next scheduled pro forma session.
Tony Roug, owner of Hot Cookie, a San Francisco bakery, said this week he dipped into his own savings to make payroll for his more than 20 employees at two locations. He said he filled out application forms on Friday, the first day of the program, and his lender asked him to fill out more forms this week. He said he’s been in personal contact with bank executives.
“We’ve been right on top of it from the beginning,” Roug said. But as of Thursday morning, he’d been told he would be approved but hadn’t received any money.
While the Payroll Protection Program looks promising, a past partnership between the Treasury Department and banks, designed to reduce foreclosures in the wake of the Great Recession, never lived up to the promise that it would help as many as 4 million homeowners modify their mortgages.
Reuters reported Thursday that a New York investment firm had drawn up a scheme to profit off the Payroll Protection Program, sourcing the loans from online lending platforms that are not approved to participate.
The scheme recalls mortgage rescue scams that promised homeowners help navigating the mortgage modification program’s application process, which was notoriously difficult due to banks losing paperwork and simply refusing to comply with program rules.
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