Mnuchin Says Relief Loans Over $2 Million Will Be Audited
(Bloomberg) -- Treasury Secretary Steven Mnuchin said all loans of more than $2 million in a government relief program for small businesses will be audited to ensure they were justified after large public companies and big chains sparked outrage by taking funds.
Mnuchin said the loans of as much as $10 million meant to keep workers on payrolls under the Paycheck Protection Program were intended for small firms, not public companies and big chains that have access to other capital. The U.S. Small Business Administration will check that borrowers who took large loans properly certified they were needed because of the coronavirus outbreak, he said.
“I want to be very clear it’s the borrowers who have criminal liability if they made this certification and it’s not true,” Mnuchin said Tuesday on CNBC. “We will make sure that what was the intent for taxpayers is fulfilled here.”
Mnuchin said it was “outrageous” that the Los Angeles Lakers took a $4.6 million relief loan, and that it was inappropriate for other large public companies and big chains to get funding as well.
A backlash against those companies getting relief aid has prompted entities including the Lakers to start returning the money. More than $2 billion from the first round of funding for the program was declined or returned and will now be made available, SBA Administrator Jovita Carranza said in a tweet on Monday.
The SBA and Treasury issued guidance last week reaffirming that companies must certify they were affected by the pandemic and telling large firms with access to other capital they shouldn’t apply -- and that firms can return loans by May 7 without penalty. Hedge funds and private-equity firms were also told they were ineligible.
Senate Minority Leader Chuck Schumer said Tuesday that the Treasury Department and the SBA failed to give guidelines to the banks providing loans under the PPP that would have pushed more of the financing toward smaller firms.
While Democrats helped get money in new Paycheck Protection Program funds that would be “walled off” for smaller businesses in legislation Congress passed last week, he said the implementation of the small business rescue program has been an “abject failure” and more work is needed.
Speaking on MSNBC, Schumer said he will send a letter Tuesday to Senate Majority Leader Mitch McConnell, urging him to convene Senate hearings as soon as next week into the administration’s broader response to the pandemic. Such hearings would allow “tough question after tough question” about the program’s implementation, the lack of adequate testing and other matters, Schumer said.
The relaunch of the Paycheck Protection Program with an additional $320 billion approved by Congress last week got off to a rocky start Monday, with lenders reporting being shut out of the overwhelmed SBA system amid a flood of loan applications and concerns about when struggling companies will get the funding they need.
Mnuchin said on Fox Business that “we did have systems issues yesterday” and the SBA team was “working through the night” to correct the problems. But he said the certification borrowers make when they apply is important because “we’re not going to be able to check all the loans before they go out the door.”
The Treasury secretary said the program is getting funding to small businesses with an average loan size of $206,000 so far, despite the attention the large firms that took relief at the expense of mom-and-pop shops are getting.
“It is unfortunate that there’s a small number of companies that have created a lot of publicity that took loans,” he said on CNBC. “I think it was inappropriate for most of these companies to take the loans.”
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