Mnuchin giveth, and Mnuchin taketh away. That’s the message coming from the secretary of the Treasury, who warned that his department will be conducting audits of funds dispersed to companies as part of the Paycheck Protection Program, the loan program established by the $2 trillion CARES Act. “We want to make sure this money is getting to where it should be,” Treasury Secretary Steven Mnuchin said in an interview with CNBC on Tuesday. He said that companies that received more than $2 million in loans could be looking at “criminal liability” if it turns out they weren’t actually eligible for the loans, which were earmarked for small businesses.
Recently, large businesses like Shake Shack and the Los Angeles Lakers have come under scrutiny and ultimately returned 8-figure loans that they received as part of the program. Mnuchin in particular called the $4.6 million PPP loan given to the Lakers “outrageous” and said that public companies had until May 7 to return the money. “The purpose of this program was not social welfare for big business,” he added.
The treasury secretary further argued that banks weren’t at fault for giving out loans to companies that shouldn’t have qualified for them; the aid was supposed to be available only to businesses with 500 workers or fewer. Per CNBC, 116 large publicly traded companies have disclosed receiving loans over $2 million and not returned them.
“It’s really the fault of the borrowers,” Mnuchin said. “It’s the borrowers who have criminal liability if they made this certification and it’s not true.”
While Mnuchin is posturing here as an opponent of corporate greed, the situation in fact underscores how ridiculous it is to have a cap on the PPP in the first place. Congress could easily allow for an unlimited amount of funding to be directed to the program, giving loans to any qualified business that applied. Per the CARES Act, 75% of the PPP money has to be spent on paychecks, meaning that the bulk of those funds go into the pockets of struggling workers no matter where they’re employed. Already, after the initial round of funding disappeared in two weeks, Congress was forced to add another $350 billion to the pot — and that, too will soon be sucked dry, leaving the government and the economy back at square one.
There’s a ridiculous irony to this particular government throwing a bunch of cash in the air and then trying to play corporate referee once it’s already stuffed into stockholder pockets.
An uncapped fund wouldn’t have created this absurd race for limited funding, putting bigger companies with their pre-existing cozy relationships with banks into competition with mom-and-pop shops. Is it any wonder that larger companies sprung into action when the PPP was announced and successfully muscled out smaller ones in the race for cash? If there’s one thing that free market economists like Mnuchin have been pushing for years, it’s that companies should take advantage of every loophole and exploit every government program to inflate their bottom line.
Furthermore, what Mnuchin has failed to acknowledge in promising criminal penalties for larger companies is that these businesses followed his rules to apply for funds from his aid program and were granted those funds by an administration that he is a part of. Shake Shack, for example, was actually eligible for the funds despite being such a large enterprise because the CARES Act stipulated that a company needed to have 500 employees or less per business location. “Few, if any restaurants in America employ more than 500 people per location,” wrote the company’s owners in an op-ed explaining their rationale for applying. “That meant that Shake Shack — with roughly 45 employees per restaurant — could and should apply to protect as many of our employees’ jobs as possible.”
Shake Shack said it would return the money, but the Trump administration issued updated qualifications for receiving the business loan only after it and other large chains had applied for help. In other words, Mnuchin is now threatening companies for following the guidelines he laid out in the first place.
Arguably, modern America’s single most shameless and enthusiastic proprietor of the winner-take-all approach to business practiced by companies like Shake Shack has been Donald J. Trump. All in all, it’s good that Mnuchin is trying to funnel money to small businesses, but there’s a ridiculous irony to this particular government throwing a bunch of cash in the air and then trying to play corporate referee once it’s already stuffed into stockholder pockets. When capitalists try to play socialist, is it any wonder that big companies make it to the front of the bread lines?