Companies owned by West Virginia Gov. Jim Justice (R), a billionaire, got up to $24 million. PF Chang’s and Silver Diner, restaurant chains backed by private equity firms, got more than $5 million each. Kanye West’s apparel brand received a similar amount. Republicans were furious that 43 Planned Parenthood clinics collected some $60 million. Democrats countered that entities associated with Trump administration figures such as Transportation Secretary Elaine Chao, Agriculture Secretary Sonny Perdue and presidential son-in-law Jared Kushner cashed in, too. Firms linked to members of Congress from both parties, including some who helped write the PPP law, benefited. A $350,000-plus loan to the libertarian Ayn Rand Institute, a think tank named for the uber-capitalist author of “Atlas Shrugged,” astonished everyone.
Still, all of the above will probably claim to have followed the program’s rules, designed by Congress on a bipartisan basis in March, when the U.S. economy was in free fall and the prime directive was to save jobs — and ask questions later. Intentionally, the PPP was not rigorously targeted: “small business” included firms with up to 500 employees and up to $5 million in net income, with plenty of wiggle room and exceptions.
The declining unemployment rates of the past two months suggest this broad approach did indeed help save jobs, mostly at small firms: While loans above $1 million accounted for about a third of the $521 billion in outlays as of June 30, 86.5 percent of all loans were for less than $150,000. The PPP still has $132 billion on hand: Loose as they were, the PPP’s rules regarding the use of the loans were still too restrictive for many businesses.
Disclosure of the largest loan recipients is itself a good check against conflicts of interest, real and apparent. All the more reason Congress was right to demand it and the Trump administration was wrong to resist it, until now. To strengthen that deterrent, the SBA should reinstate ethics rules, which it quietly waived for the PPP, requiring preapproval from the agency’s Standards of Conduct Committee for loans to companies in which certain officials or a “household member” have a stake. In its next economic support package, Congress should target a narrower range of small businesses — while allowing those firms to spend the money for a wider range of purposes, beyond maintaining payroll.
Realistically, the huge and hasty PPP was bound to make a lot of questionable loans. Now, however, Congress has enough time and data — as well as a duty — to fix it.