Lenders, Businesses Say Confusing Rules Hampered Virus Rescue
(Bloomberg) -- Representatives of lenders as well as businesses that received pandemic bailout money told an oversight board Wednesday that delayed and confusing instructions from the government hampered the effectiveness of the main rescue program for smaller companies.
Guidelines for Paycheck Protection Program loans were released in a fragmented basis and underwent several revisions that made it difficult for businesses to know if they qualified for the money and what they must do to get the loans forgiven, said Anthony Wilkinson, president of the National Association of Guaranteed Government Lenders.
The guidance, which is at times contradictory, also puts banks making those loans at risk, he said.
“Is it any wonder why borrowers and lenders are questioning whether Treasury has set everyone up to fail?” Wilkinson said at the hearing in front of the Pandemic Response Accountability Committee. “Is it any wonder why borrowers of all sizes have been returning their loans out of fear of their own government?”
Some big restaurant chains like Potbelly Corp. and Ruth’s Chris Steak House got loans, while many mom-and-pop companies were left stranded. Both businesses said they would give the loans back after facing criticism from lawmakers and pressure from the Treasury Department.
The forum was the first public event for the independent committee created to oversee spending under the $2.2 trillion Cares Act that Congress approved and President Donald Trump signed into law in March. The panel is comprised of inspectors general from more than a dozen federal agencies.
The effort to help small businesses retain their workers has been the subject of criticism from businesses and lenders who were charged with distributing the money. Some businesses said lenders gave priority to larger companies where the bank could generate larger fees, and lenders have said the spotty regulations and “know your customer” rules left them exposed to losses as businesses rushed to apply for the stimulus funds.
PRAC is one of several panels in charge of overseeing government spending to combat the economic fallout of the coronavirus pandemic. The Senate on Tuesday confirmed former White House lawyer Brian Miller to serve as a special inspector general for pandemic recovery. There’s also a bipartisan congressional oversight panel.
PRAC investigations are underway looking into airlines receiving federal support, the validity of tax credits claimed by businesses, the accuracy of economic stimulus payments and the Health and Human Services Department’s adherence to safety protocols during the outbreak.
The U.S. Chamber of Commerce urged the committee to refrain from investigations focused on politically unpopular industries.
“There’s already growing concern that congressional oversight will in part focus on companies or sectors that various elected officials view as unworthy,” said Neil Bradley, the Chamber of Commerce’s chief policy officer. “There will likely be numerous requests for this committee to investigate entities not based on evidence of wrongdoing but because of a belief that an industry or entity shouldn’t have been allowed to receive assistance in the first place.”
Even before it was fully operating, Trump had challenged and undercut the power of PRAC, indicating contentious times ahead for the effort to hold agencies accountable for spending and managing a bailout program for small businesses.
On April 7, Trump removed an experienced inspector general who was appointed to chair the committee. The career official, Glenn Fine, had been serving as the acting inspector general of the Defense Department. But Trump designated a new acting inspector general at the Pentagon, thereby demoting Fine and making him ineligible to chair the committee. Fine later resigned.
In a signing statement accompanying the law creating PRAC, the president said he doesn’t recognize a requirement that congressional leaders help select the leadership of the panel.
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