Treasury Weighs Safeguarding $17 Billion in Aid for Boeing, GE
Treasury Weighs Safeguarding $17 Billion in Aid for Boeing, GE
(Bloomberg) -- The Treasury Department is considering holding off on giving more companies access to an untapped $17 billion relief fund for national security businesses in case Boeing Co. and General Electric Co. eventually need the money, according to people familiar with the matter.
The loan program was created under the $2.2 trillion Cares Act with the two defense giants specifically in mind, according to Treasury Secretary Steven Mnuchin. But so far, both companies have taken a pass, saying they don’t need the government loans after raising cash on Wall Street.
Only about 20 companies applied for loans by the program’s May 1 deadline, according to the Defense Department. There are about 300,000 companies in the Pentagon’s contractor supply chain, and some have turned to other Cares Act programs to win federal support. Treasury has until the end of the year to use the funds.
Defense officials have urged the Treasury Department to loosen the rules so that more companies could obtain loans but have yet to offer alternate criteria, the people said on the condition of anonymity.
Lieutenant Colonel Mike Andrews, a Pentagon spokesman, said that while the department won’t comment on its internal coordination and communication, it “has and continues to work” with Treasury, other agencies, defense industry groups and Congress “to address national security implications from Covid impacts.” A Treasury spokeswoman declined to comment.
In a statement, GE spokeswoman Meghan Thurlow said the company “did not seek and does not plan to request” government loans. Boeing spokesman Bryan Watt reiterated that the company has no plans to seek additional funding through Treasury or capital markets “at this time.”
Mnuchin, who has authority over which companies are eligible for the funds, has limited eligibility to companies whose work is designated DX -- the highest rank on the military’s list of national priorities -- or to those with top-secret security clearances.
Congress and President Donald Trump authorized about $6 trillion in stimulus to mitigate the economic damage of the coronavirus outbreak. Deaths from the virus in the U.S. are slowing, and the economy has started to show signs of recovery from nationwide restrictions on public activity that shut down many businesses. However, hospitalizations have surged in recent days in some states.
Mnuchin said last week that even if there’s another increase in coronavirus cases, the economy shouldn’t be shut down. U.S. stocks tumbled last week as evidence mounted of a second wave of Covid-19 cases, but signs of an economic recovery reversed some of that concern.
In March, Boeing asked the government for a $60 billion bailout for itself and its suppliers. But after the Federal Reserve bolstered credit markets, the plane maker was able to raise $25 billion from a bond offering, allowing it to pause its pursuit of government help.
The Chicago-based company also said the robust demand for its notes was partly the result of market confidence created by federal support programs put in place by the Trump administration, Congress and the Fed.
GE has also been an active debt issuer, with the company and its finance arm selling $13.5 billion in bonds since mid-April. The Boston-based company also raised about $20 billion through the sale of its biopharma business, which it closed at the end of March.
The $17 billion loan package for companies deemed critical to national security is not the only untapped business relief program overseen by the Treasury Department. A similar $29 billion loan initiative for airlines also has yet to disburse any money.
Still, the department has rapidly injected money into the economy, including more than $25 billion in payroll assistance to carriers and some $500 billion to small businesses.
Last week, Mnuchin said he was considering easing rules for coronavirus stimulus intended for national security-related companies.
“We have thought about that, we’re taking that into consideration,” he said during a video conference with reporters. “If for whatever reason we don’t have enough demand for that money, we may go back to Congress and ask them to reauthorize that.”
He can also use unspent portions of the $17 billion loan pool to backstop additional lending programs through the Federal Reserve, according to the Cares Act.
Senator Mark Warner, a Democrat on the banking committee, said the Treasury and Defense departments need to be clear about how they will help companies “working on our highest defense priorities.”
“Many of the employees in this workforce have undergone months-long, even years-long security clearance processes,” Warner said in a statement. “These jobs can’t just be turned off and on again.”
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