Wednesday, April 22, 2020

Trump and the GOP Ensures Relief for Rich People

It's been widely reported that some very big businesses, like Ruth's Chris Steak House ($20 million) and Shake Shack ($10M) got "small business" loans from the Paycheck Protection Program.  Potbelly sandwich chain, national chain Taco Cabana, video storage company Quantum and coal company Hallador Energy, all snatched up $10 million each.

That should come as no surprise, as the emergency loan program was rigged by the GOP to favor big restaurant and hotel chains without congressional oversight.   “Big Wall Street-backed restaurant chains that pay their executives super-sized bonuses should not be the first served up SBA loans by this administration," said Derek Martin, a spokesperson for the watchdog group Accountable.US.  "What a slap in the face to the untold thousands of legitimate small businesses that will not survive this crisis, many because they couldn’t get the help they were promised from the president soon enough, if at all.”

An Associated Press investigation into the recipients of this first round of funding has revealed that a lot more very big businesses have exploited the program.  At least 75 publicly traded companies, "with thousands of employees, past penalties from government investigations and pre-virus risks of financial failure were among those receiving millions of dollars" from the loan program. Some of these companies had market values "well over $100 million." These 75 companies got a combined $300 million in the taxpayer-funded, low-interest and potentially forgivable loans.

One of the companies that got $10 million is a software company in California that had been investigated by the Securities and Exchange Commission for accounting errors overstating its revenue; it settled late last year with the SEC. Looking at the statistics released by the SBA last week, AP found that 4,400 of the loans exceeded $5 million. No wonder the fund, which again was supposed to rescue small businesses, was depleted so quickly.

Some of the large companies that surfaced in the AP review had foreign owners, had been de-listed from the stock exchange, or threatened with de-listing because of poor stock performance even before the coronavirus crisis.  Some have had strings of financial losses for years. One of them, Wave Life Sciences USA Inc., a Boston-area biotechnology company in pharmaceutical development, got $7.2 million.  Its parent company is based in Singapore and disclosed in its annual report that it had suffered "net losses of $102 million, $147 million and $194 million during the last three fiscal years." The company has also admitted, "We currently have no products on the market and expect that it may be many years, if ever, before we have a product candidate ready for commercialization."

The PPP fund-- meant to keep small businesses and their employees afloat during the crisis-- ended up being a bailout for a lot of companies that were failing even before the crisis.  But it gets even worse.

75% of loan requests from Nebraska (a GOP-led state) were approved; 71% of loans from North Dakota (another red state) were approved as well.  Who knew that North Dakota was a powerhouse of the nation's small business?  While California and New York saw less than 25% of their loans approved.  Washington D.C. only got 19% of their loans approved.  Sounds like the fix was in for Republican vs. Democratic states, don't you think?

On top of that, it came to light that Texas has been approved for $1 billion more in loans than California (and 30,000 more loans) despite California's economy being $1 trillion larger and being much harder hit by COVID-19 (1,200 deaths in CA vs. 500 for TX).

Democrats are trying to make sure that the next round of funding for the PPP, will have $125 billion guaranteed to go to small lenders and thus to actual small businesses.

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