Steven Mnuchin SO MAD Big Companies Bogarted 'Small Business' Stimmy $$$, As Designed
Treasury Secretary Steven Mnuchin is simply astonished to learn that very large companies took advantage of a provision in the the small business loan Paycheck Protection Program, because golly, the PPP was supposed to be only for small businesses that really needed it! Not that anything in the actual law said so; the CARES Act was written to allow restaurant and hotel chains to access the loan program, just as long as no single location has over 500 employees. On Fox Business Blather Wednesday, Mnuchin warned that if any big company were proven to have wrongly received a loan under the Paycheck Protection Program, it could face investigation and maybe even big penalties.
For some reason — probably jealousy — a lot of people have gotten very angry to learn that the PPP loans have gone to giant outfits like the corporate parent of Ruth's Chris Steakhouse, which received $20 million in loans despite laying off hourly employees. Ruth's Hospitality Group announced Thursday it would return the money to the Treasury Department. It was unclear at press time whether CEO Cheryl Henry then covered her face with a cape (black with red satin lining) and muttered, "Curses, foiled again!"
Mind you, the problem Mnuchin focused on is not the fact that big companies are getting loans as "small businesses." A Treasury Department 'splainer issued Thursday actually reiterates how restaurant and hotel chains qualify as small businesses as long as any division of the megacorporation that applies is a restaurant or hotel business, and has no more than 500 employees. Instead, Mnuchin said he was shocked² that many big companies appeared to have grabbed up the loans even though they weren't truly needy.
On Fox News's Stupid Little Brother, Mnuchin said some recipients of the loans may not have qualified for the funds because they incorrectly interpreted the loan program's self-certification language. Why yes, of course the applicants were allowed to decide for themselves whether they qualified for the loans; the goal here was to be fast, not careful. CNBC explains the fuzzy language that Mnuchin insists should have prevented companies from certifying they needed the loans:
In the PPP application form, companies need to certify that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant."
"I think a lot of these big companies, it's questionable whether they can make that certification; I think they should review it," Mnuchin told Fox Business Network.
Publicly traded companies should look over their finances and think long and hard about how "necessary to support ongoing operations" the bailout loans really are, and if they know what's good for them, said Mnuchin, they should "pay back the money quickly" and the Small Business Administration will smile as they return the funds. "There will be no liability to Treasury and the SBA. ... If they don't, then they could be subject to investigation."
Treasury issued helpful updated guidelines on that self-certification process Thursday to let the big wealthy recipients of PPP loans know they may want to rethink their decision to put on old jeans and ask for a handout, at least now that people are watching. It notes that while the CARES Act waived the SBA's "ordinary requirement that borrowers must be unable to obtain credit elsewhere," companies still need to cross their hearts and PROMISE the loans are "necessary" and not just a nice cushion they'd like to have.
Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.
But no worries, as long as fiscally sound big companies return their loans to the SBA by May 7, they'll be "deemed by SBA to have made the required certification in good faith," no further questions asked. As far as we can tell, the extra $310 billion in new funding for PPP that Donald Trump signed today still allows smaller units of big companies to apply, just as long as they comply with the Treasury guidelines.
Following the new Treasury guidance, a whole bunch of big corporations decided they may as well give back their loans, since golly, they were given a chance to pretend it was all just a regrettable mistake. Ruth's Meat Concern issued a statement saying it was totally qualified for the loan, and had intended to pay the loan back anyway, but it would "accelerate that repayment," seeing as how the PPP funds were depleted so quickly, who'd have thought?
Faced with terrible publicity, Shake Shack already returned its $10 million loan last week. In a statement, the company complained that the "PPP came with no user manual, and it was extremely confusing," but fine, here's your dumb money back, taxpayers.
Two other chains, Kura Sushi and salad purveyor Sweetgreen, said yesterday that they too would return their SBA loans, of $6 million and $10 million respectively. Kura Sushi said in a statement that it was "impossible to ignore the fact that our finances allow us to weather financial hardship for a longer period than independent restaurant owners," and the salad folks said they had no idea they might have been taking money other people needed, wasn't it just free money for everyone like usual?
We learned that the money had run out and so many small businesses and friends in the industry who needed it most did not receive any funds. If this crisis has taught us anything, it is that we are all in this together and we believe strongly that the restaurant community needs more support and resources to weather this storm.
Then the salad chain's owners sang the I'm Very Sorry song from Calvin and Hobbes and probably said they support the troops, just to be on the safe side. Want some PPE with your next order?
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Doktor Zoom's real name is Marty Kelley, and he lives in the wilds of Boise, Idaho. He is not a medical doctor, but does have a real PhD in Rhetoric. You should definitely donate some money to this little mommyblog where he has finally found acceptance and cat pictures. He is on maternity leave until 2033. Here is his Twitter, also. His quest to avoid prolixity is not going so great.