1 Percent of PPP borrowers in U.S. got more than one-quarter of the loan money
By Stacy Cowley and Ella Koeze
The Paycheck Protection Program was the centerpiece of the federal government’s relief efforts to keep millions of small businesses afloat during the coronavirus pandemic. But new data shows what many had suspected all along: The money was shared unevenly, with the biggest sums going to a sliver of the companies in need.
Detailed loan information released by the Small Business Administration late Tuesday showed that a mere 1% of the program’s 5.2 million borrowers — those seeking $1.4 million and above — received more than one-quarter of the $523 billion disbursed.
About 600 businesses — including powerful law firms like Boies Schiller Flexner, restaurants like the steakhouse chain started by Ted Turner, as well as the operator of New York’s biggest horse tracks — received the maximum loan amount of $10 million, according to the data. It was the first full accounting of how federal money was spent through the program. Aimed at small companies — generally those with 500 or fewer workers — the program provided forgivable loans to desperate business owners who were faced with widespread shutdowns.
But the program allowed businesses to take enough money to cover only a couple of months’ expenses, and it has come under criticism for its poorly defined rules and a hasty and haphazard rollout that allowed fraudsters to tap into the money, which will take years of litigation to sort out.
The newly released data also includes details of loans made under the Economic Injury Disaster Loan system, a long-standing SBA program that was vastly expanded to offer relief to businesses affected by the pandemic. Together, the two programs spread more than $700 billion to struggling companies in just a few months.
The loan data was released under an order by Judge James Boasberg of the U.S. District Court in Washington, who rejected the SBA’s request to keep the information confidential. Previously released data on the paycheck program contained only ranges for larger loan amounts and no information about loans under $150,000.
Calling the program “vast in both size and sweep,” Boasberg wrote in a ruling last month that “the weighty public interest in disclosure easily overcomes the far narrower privacy interest of borrowers who collectively received billions of taxpayer dollars in loans.”
With virus case counts rising rapidly and public health experts predicting a dark winter ahead, small businesses remain fearful about their survival. Many have used up their allotted aid, which was intended to cover up to two months of payroll costs and a handful of other expenses. Many owners say they would immediately apply for additional funds if available, but the rules permit only a single loan, and there has been little movement toward breaking a monthslong stalemate in Washington over additional aid.
President-elect Joe Biden and his economic advisers have urged quick action on additional stimulus measures. A bipartisan group of lawmakers has proposed a stopgap plan to extend lapsed federal unemployment benefits until March — although at a lower rate — and provide $288 billion to help small businesses, restaurants and theaters. Top Democrats in Congress endorsed the proposal as the basis for further negotiations.
The companies that received the maximum $10 million PPP loan include dozens of restaurant chains such as Ted’s Montana Grill, which was started by Turner; TGI Fridays; P.F. Chang’s; Black Angus Steakhouse; and Legal Sea Foods. They took advantage of an exception the restaurant industry lobbied for to make chains eligible for the aid money. The New York Racing Association, which operates Aqueduct Racetrack, Saratoga Race Course and Belmont Park, the home of the Belmont Stakes, also received the maximum loan.
Prominent law firms like Boies Schiller Flexner, the high-priced firm run by David Boies, and Kasowitz Benson Torres, founded and run by President Donald Trump’s longtime personal lawyer, Marc Kasowitz, also collected loans for $10 million. (It was previously known that both firms received large loans, but the exact amount had not been disclosed.)
Boeis Schiller did not respond to a message seeking comment; Kasowitz’s firm referred to a previous statement saying the loan helped it preserve hundreds of jobs.
Most of the program’s borrowers sought far less: Loans of $150,000 and under accounted for around 87% of the loans made through the program, which ended in August, when its congressional authorization expired. But those loans made up less than 30% of the total handed out, about $146 billion.
The data shows how federal money flowed to tenants of Trump’s properties, like 40 Wall St., a commercial skyscraper in lower Manhattan. Nearly 100 businesses listing an address in that building collected loans totaling more than $34 million.
The largest loan in the building went to Atane Engineers, a contractor that changed its name in 2018 after a corruption scandal that culminated when two former top executives pleaded guilty to paying bribes for city infrastructure contracts. The company, which pays $2.5 million a year for its rent at 40 Wall St., received a $7.6 million loan, which it said supported 235 workers. The firm did not respond to messages seeking comment.
Lenders collected $18 billion in fees, according to a New York Times analysis of the SBA data. The largest payment went to JPMorgan Chase, which stands to collect just over $1 billion in fees on more than 280,000 loans worth a total of $29 billion. The runner-up is Bank of America, which will earn $947 million in fees on around 343,400 loans worth nearly $26 billion.
Both banks have pledged to donate any profits they earn from the program, but executives from each have told analysts that their expenses were so high that there may not be much, if any, left to give after the loans are settled.
“We have committed that net proceeds from the fees will be dedicated to supporting small businesses and the communities and nonprofits we serve,” Bill Halldin, a Bank of America spokesperson, said Wednesday. JPMorgan declined to comment.
The Paycheck Protection Program was hastily constructed in late March after Congress passed the $2 trillion coronavirus relief bill. The Treasury Department, which called most of the shots on the program, released technical guidance to banks just hours before lending began in April, and the terms shifted many times before the program ended in August. The Treasury Department has issued dozens of changes and clarifications to its rules.