Yesterday, echoing the frustration that so many lawmakers and citizens feel toward Trump’s failing government relief programs, House Small Business Chair Nydia Velázquez threatened to cut funding for the Small Business Administration should the agency not cooperate and take seriously the responsibility to scrutinize its broken programs, including the Paycheck Protection Program (PPP).
Q2 2020 hedge fund letters, conferences and more
Fraud And Abuse In Broken PPP
"We do not deny that the agency must do everything they can to put money into the hands of deserving businesses," Velázquez said. "But not at the expense of compromising the fact that they have to take every control or put in place every mechanism to make sure that we avoid mismanagement, fraud and abuse. And it is not happening."
With little oversight or accountability of which to speak, the PPP and other relief programs have been hijacked, with fraudsters using and abusing the program to obtain aid dollars as actual mom-and-pop businesses were left out in the cold. As Rep. Velázquez states, it is essential that the SBA work with federal watchdogs to take stock of these relief programs and ensure aid dollars reached the people who needed them most.
Here’s a look back at this week’s headlines through the lens of failed government programs and the impact it continues to have on Americans hit hard by the pandemic.
PPP Continues to Let Down Borrowers...
With more than 100,000 businesses permanently out of business since the start of the COVID-19 crisis, the Trump administration has failed to offer clear guidance for recipients of federal assistance to forgive their loans.
No forgiveness: Small businesses still on hook for rescue loans. Banks say the process for converting the government-backed loans into grants has been frustrating... Lenders that helped the government deliver the money are warning that the effort is running into new delays and complications that could leave struggling employers on the hook with unanticipated debt. [Politico, 9/27]
Government Accountability Office evidence supports calls for streamlined forgiveness process – but time is running out for politicians to act. “Although SBA [the Small Business Administration] states on its standard loan forgiveness application that it will take borrowers three hours to complete, representatives from one [trade] association heard from lenders that it could take 15 hours for some borrowers to complete.” [Banking Exchange, 9/28]
Nearly 100,000 establishments that temporarily shut down due to the pandemic are now out of business. At the onset of the pandemic 140,104 were marked temporarily closed on Yelp.com, but by August that had fallen to 65,769. That drop, however, is not entirely driven by businesses reopening; instead, many have simply gone under. More than 97,966 businesses have permanently shut down during the pandemic, according to Yelp.com's Local Economic Impact Report. [Fortune, 9/28]
...While Fraud Pours In
As Trump and his Senate allies dally on securing new small business aid, new instances of fraud in the PPP are popping up every day.
Clearwater doctors got a PPP loan, then dissolved practice — but only on paper. Three weeks before the partnership formally ended May 31, the doctors applied for and received a $222,700 Paycheck Protection Program loan, a federally backed payment designed to assist struggling small businesses during the coronavirus pandemic. [Tampa Bay Times, 9/28]
N.C. Man Received $1.7 Million In PPP Loans For Fake Businesses Using ‘Game Of Thrones’ Names. The U.S. Department of Justice has charged 38-year-old Tristan Bishop Pan, of Garner, North Carolina, with wire fraud, bank fraud and engaging in unlawful monetary transactions for taking money from a program intended to help out small businesses struggling due to the coronavirus pandemic. [Forbes, 9/30]
Thieves take out $45,000 SBA pandemic loan using Nashville woman’s identity. What upsets Golab the most isn't knowing that her information may have been compromised for years to come, but knowing there are small businesses out there who could actually use this money and now won't have it. [WVTF Nashville, 9/28]
Honolulu businessman accused of stealing $12.8 million in COVID relief funds. Forty-seven-year-old Martin Kao was arrested Wednesday, Sept. 30, and charged with two counts of bank fraud and one count of money laundering. Federal prosecutors described him as greedy for taking money that should have gone to other business owners who are struggling. [KHON2, 9/30]
Americans STILL Need Aid
There is still no clear path forward on a new relief package. Amidst the chaos, Americans are suffering.
"We Don’t Have the Luxury of Time." Americans Suffer as the Passage of a New COVID Relief Bill Is Complicated by Ginsburg's Death. “I’m terrified,” says Hernandez. “As it is, in the six months that we’ve all been experiencing a pandemic, the statistics are showing we’ve already lost 40 percent of black owned small businesses and 32 percent of Latino small businesses. We don’t have the luxury of time on our side. We need relief and we need it now.” [TIME, 9/25]
Thousands of aviation layoffs loom amid a dysfunctional Congress. “Standalone bills to extend payroll support for aviation workers have gone nowhere in either chamber.” [Politico, 9/28]
America’s most vulnerable families could face financial crisis if government relief fades away, Fed says. “Stimulus checks and enhanced unemployment benefits that helped the poorest Americans weather the coronavirus pandemic are in danger of ending, throwing the finances of the most economically vulnerable into a tailspin.” [CNBC, 9/29]
'On the precipice': How the cratering economy became a second public health crisis. “Regardless, recovery could take years, with the nation's most vulnerable enduring the worst of it. And their ranks will only continue to swell as the pandemic reshapes society, forcing more Americans out of their jobs and homes even as safety-net funding dies up.” [Politico, 9/30]
Unemployment claims in the U.S. show little relief from pandemic layoffs. “American employers continue to cut jobs at rates that dwarf the pace of layoffs in past decades, even as the economy crawls forward from the coronavirus-induced recession that began last spring.” [New York Times, 10/1]
