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On the Paycheck Protection Program, Congress needs to get it right

Apr 10, 2020 by AFP

The COVID-19 crisis has caused an unprecedented amount of economic hardship for workers, families, and businesses across the country.

Some of this hardship is the result of necessary government policy needed to address the coronavirus pandemic. In response, Congress passed the CARES Act, which is intended to provide needed relief funding for those individuals and businesses adversely affected by the government’s actions. This legislation established the Paycheck Protection Program, through which $349 billion has been authorized to be loaned to eligible small businesses.

The $2 trillion was passed two weeks ago. Now, Congress is already looking to approve additional spending without having first assessed whether the CARES Act is working.

Early indicators suggest that the rollout of even just the business relief is already in need of improvement.

On Friday, April 3, the PPP’s first day of operations, the Small Business Administration approved 17,500 loans totaling $5.4 billion according to the Treasury Department and the SBA. Four days later, on April 7, the SBA recorded over 220,000 loans totaling $66 billion.

Demand for these loans is steep, and there are approximately 30 million small businesses that would qualify, representing 50% of all U.S. jobs.

However, the program launch was beset with serious problems.

The SBA’s online loan application program crashed on Saturday, and lenders are having problems accessing accounts or getting assistance from the agency.

  • The biggest lenders are swamped with applications. Wells Fargo, for example, quickly reached its $10 billion allotment from the program in three days. Other big banks are having similar issues.
  • Smaller, community banks are having trouble getting approved for this program.
  • Many lenders, particularly big and major banks, are concerned about violating federal anti-money laundering laws, so they are lending only to existing accounts.

Moreover, the details and terms of these loans are not clear to impacted small businesses who must carefully weigh taking on additional debt that may not be forgiven later.

It is important to deliver timely, targeted, and temporary relief to those experiencing hardship like lost jobs or shuttered businesses as a result of government action.

But given that only $66 billion in loans has been recorded (not necessarily awarded), and there are still tremendous challenges in getting funds into the hands of those that need it, members of Congress need to focus on getting problems like these resolved. Approving more spending without addressing the distribution or long-term cost is reckless. Lawmakers need to make sure we’re getting the CARES Act right before doubling down on another package.

Sign the letter encouraging lawmakers to assess the effectiveness of the CARES Act and help ensure Americans in need are getting the relief they deserve.