Amid an outcry about large companies receiving the loans, the Lakers repaid the $4.6 million government-backed loan it took out. Mnuchin said in an interview on CNBC that it was “outrageous” the NBA franchise had obtained the money in the first place. It’s unclear if other professional sports teams received similar loans. The organizations aren’t required to disclose it, and the government has not provided any records.
Mnuchin also said, while appearing on Fox Business, that firms that improperly took these loans could be subject to “criminal liability.”
The uproar came as the White House is rushing to disburse hundreds of billions of dollars in emergency spending, both through corporate bailout programs and also through things such as the $1,200 stimulus checks sent to millions of Americans. There has been little government scrutiny of these payments, as the oversight structures that Congress put in place to monitor the money have remained mostly dormant.
A congressional oversight commission created to oversee a $500 billion treasury fund for major industries and others has not yet gotten up and running because the group’s chair, who has to be jointly selected by House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.), has not been named. A separate select committee that Pelosi created also has not gotten off the ground. And the White House has named its future nominee to serve as special inspector general for pandemic recovery, but the nomination has not been considered yet by the Senate.
“I’m distressed about it because I wish we had them set up,” said Rep. Donna Shalala (D-Fla.), one lawmaker who has been named to the oversight commission for the treasury fund. “I hope they agree on a chair because I want to get going.”
White House officials have repeatedly defended their actions, saying they rushed to put the spending measures in place to prevent the economic fallout from worsening.
The inaction on oversight comes a month after Congress passed the $2 trillion Cares Act that devoted a record sum of taxpayer money to propping up the economy in the midst of the coronavirus pandemic. Despite the delay, Shalala and other lawmakers expressed confidence that the appropriate oversight mechanisms ultimately would be in place, noting that it also took some time to set up oversight structures after the bailout passed during the 2008 financial crisis.
The small business loans facing the most scrutiny came through the new Paycheck Protection Program that Congress created as part of the March law. The program was initially funded with $349 billion in taxpayer money, but the money was quickly exhausted. The Treasury Department said it funded 1.6 million loans, but only several hundred were disclosed publicly, mostly by the companies themselves. Last week, Congress directed another $310 billion for the program and did not impose any major new restrictions regarding disclosure.
Hours after the Lakers’ loan was made public on Monday, President Trump told reporters that he’d be open to having the names of all loan recipients disclosed publicly but hedged and said it should be studied by lawyers.
“I wouldn’t mind doing that,” he said. “I don’t know what the legal status of something like that — I would like to do that, as far as I’m concerned. I’m not involved in that process, but I would certainly like to have it listed. I’d have to find out if there’s a legal problem. But if there isn’t, I would do it gladly.”
The PPP was intended to help businesses with fewer than 500 workers stay afloat and keep employees on payroll, but loopholes allowed larger businesses to tap into the program. Under the program, companies obtain loans from banks, and then the federal government will repay the loan if companies retain or rehire workers and meet other requirements. Little scrutiny goes into borrowers at the beginning of the process, however, and firms are required to “self certify” that they meet the requirements.
Mnuchin said he would be announcing additional reviews by the Small Business Administration to ensure the loans are being used as intended.
“For any loan over $2 million the SBA will be doing a full review of that loan before there is loan forgiveness, so we will make sure that what is the intent for taxpayers is fulfilled here,” Mnuchin said, while insisting that the program has been an “overwhelming success” and that a million loans had gone to companies with fewer than 10 workers.
Details on how the new review would be conducted were not immediately available.
Since banks and lending institutions are the ones that actually distribute the money, the SBA has said it has no way of knowing who the recipients are and cannot make that information public. As a result, information about larger organizations such as the Lakers, Shake Shack and Ruth’s Chris Steak House that have gotten loans has all come to light through media reports and searches of public securities filings, not through any mandated disclosure.
Sen. Ben Cardin (D-Md.), the top Democrat on the Small Business and Entrepreneurship Committee, said lack of transparency on the part of SBA was not acceptable.
“I don’t accept that, I really don’t accept that,” Cardin said. “This is a public program that they’re participating in with loan forgiveness with the taxpayers of this country. They can’t operate without supervision and oversight.”
The legislation creating the PPP was drafted as part of a huge bill that came together quickly requiring compromises on all sides. Cardin said that the program was drafted to make it as easy as possible for small businesses to access and that he believes it’s been successful in that regard.
But in retrospect Cardin said he perhaps would have sought to include additional reporting requirements by the SBA and the Treasury Department.
“That’s been the one area where I’ve been really disappointed that we haven’t gotten more timely information,” Cardin said. He said lawmakers had to write legislation authorizing the second tranche of PPP money without full information on how the first $349 billion was spent. In the bill passed last week, Democrats pushed for language aimed at ensuring some of the money goes to more underserved areas and smaller and minority-owned businesses.
Cardin said with the Senate coming back into session next week he hoped to be able to “put a spotlight” on any companies that improperly received funds. But they still don’t have a sense of which companies are participating because the Treasury Department and SBA produce that information. No hearings are yet scheduled in the Small Business and Entrepreneurship Committee, which is chaired by Sen. Marco Rubio (R-Fla.).
As Congress turns its attention to writing the next coronavirus rescue bill, partisan fights already are flaring. There are some signs that oversight of the first four bills that have already passed — which along with the $2 trillion Cares Act total nearly $3 trillion — threatens to turn partisan, too.
“Republican chairmen take oversight seriously, what we’re talking about is oversight of trillions of dollars,” one Senate GOP aide said, speaking on the condition of anonymity to describe internal thinking. “But we’re not going to let oversight become a partisan show that detracts from implementation.”
Republicans have criticized Pelosi for forming a new select committee on top of the oversight mechanisms already in place, as well as the oversight authority of congressional committees.
Rep. French Hill (R-Ark.), who has also been selected to serve on the congressional oversight commission of the treasury fund, said Pelosi’s new select committee was “redundant.” But Hill expressed confidence that he and his colleagues could get to work effectively once a chairman has been selected.
“There’s been an immense statutory effort to make sure taxpayers are well represented and scrutinize how this funding is taking place,” Hill said.
“I wouldn’t use the word frustration but I think it’s important for us to have a chair that represents the consensus of House and Senate leadership and start our work,” he said. Hill said that under the requirements of the law, the commission should produce its first report May 9, though it’s not clear how that deadline can be met since the committee has not been fully constituted.
A Pelosi aide said the House speaker and McConnell spoke on Monday and agreed to exchange lists of candidates later this week to chair the commission.
On Friday, Cardin and Senate Minority Leader Charles E. Schumer (D-N.Y.) released a letter calling on the SBA inspector general, Mike Ware, to investigate reports that “some lenders participating in the SBA’s Paycheck Protection Program have prioritized the applications of their larger and wealthier clients to the detriment of smaller businesses adversely impacted by the coronavirus pandemic."
“The lack of a prior relationship with a larger bank should not stand in the way of lending to small businesses that are truly small, unbanked, underserved, minority or woman-owned,” the senators wrote.