The House followed along with Senate on Wednesday to give the coronavirus relief Paycheck Protection Program an extension to August 8 to spend the $130 billion still available in loans. (Disclosure: Kos Media received a Paycheck Protection Program loan.) The August 8 deadline is assuming that between now and then, Congress will have finished tinkering with it to, they say, make it work better. But they've got a big problem: the banks are over it.
"There's PPP fatigue," said Paul Merski, a bigwig at the Independent Community Bankers of America. "This is just adding a whole new complex program with terms that are generally not viable for banks to make." Sen. Marco Rubio, the Florida Republican who authored the program, and Sen. Ben Cardin, a Maryland Democrat, are trying to figure out how to get the money to smaller companies, those that were left out in the first round, including to "underbanked communities and minority businesses and rural areas,” Cardin explained. They want to create new sorts of government-backed loans that could turn into grants for businesses that are able to maintain payrolls. The banks basically want to be left out of it at this point, don't want to deal with more complex rules and to be responsible for figuring out all the details of who is and isn't meeting payroll and whether they're spending allowed percentages of their loans on pay versus overhead. They're pushing for direct government grants. When the banks are basically saying "do socialism," Congress needs to listen.
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"The legislation as drafted needs a lot of work," said James Ballentine, executive vice president for congressional relations and political affairs at the American Bankers Association. "It certainly needs work for banks to participate at the level they did over the past three months. We would hope that the Senate would be willing to listen to the industry most responsible for delivering this assistance to ensure that it can work for both borrowers and lenders." The PPP program has been a problem for banks from the outset. In the first days of the program, banks were complaining that they were supposed to be handing out money with no guidelines. Then the news that they had been lending to some very big businesses and that Black and brown small business owners were "just screwed," left out of the program, and that the Small Business Administration was overwhelmed on its second program launch.
The loan program hasn't been a complete disaster by any stretch. But it also hasn't been nearly as effective as it needed to be. It hasn't reached every business. It has been a headache for the banks. The banks are right. The program doesn't have to be made more complex and it doesn't have to have them in the middle. If Congress wants businesses to get grants, give them grants, directly. Don't create a whole bureaucratic process for making them apply for loans and then make them prove that those loans should be turned into grants and make the banks responsible for administering all of that. Just give businesses money. Subsidize their payrolls directly—there's even legislation all ready to go that would do that in the House, the Paycheck Guarantee Act.
Unfortunately, the "good" jobs numbers, based on two-week-old data from before the surge in coronavirus cases and the re-shutdowns, will likely mean that the White House and Republican Senate will drag their feet and reduce the price tag for the next package. They'll also fight against continuing the enhanced unemployment payments.
Senate Democrats should not be participating in this fiction, nor should the House. They need to scrap the PPP while it's marginally ahead, and fight for something that will actually help everyone—direct grants to businesses and direct payments to people, that will last through the crisis. The CBO has said that the impact to the economy of this disaster is $16 trillion over the next decade. If the government doesn't get a grip on this and start doing everything now to boost the economy when we come out of it, it could be worse. It might not be too late to bail everyone out, but Democrats are going to have to fight like hell to get it done.
