As scrutiny of PPP increases, Treasury to screen larger applications
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Treasury Secretary Steve Mnuchin.
It's slow, but things are improving for the Small Business Administration.
Lenders still struggled to upload applications Tuesday into the agency's database. But the technical glitches are getting better -- and while frustrating -- are just the tip of the iceberg for lawmakers and aides who are watching as this and other well-intentioned programs that got overwhelming bipartisan support come under renewed scrutiny for how the money is being used.
Calls for oversight are growing, and the SBA Inspector General has already told lawmakers his office will review implementation of the Paycheck Protection Program in an upcoming investigation.
Democratic senators want Treasury Secretary Steve Mnuchin and SBA administrator Jovita Carranza to come before the relevant committees when Congress returns. Mnuchin said Treasury will scrutinize all loans they gave over $2 million. And Sen. Marco Rubio, a Florida Republican who chairs the Senate's small business committee, already threatened to use his subpoena power to make sure businesses who got loans were deserving.
What happened Tuesday
Things were better in the E-Tran system Tuesday. Things weren't smooth, but they were slightly better. SBA alerted industry Tuesday afternoon that some of the money allocated for smaller institutions had been used, and sources reported that seemed to make things move faster.
What does better look like?
"It is still clunky, it is still slow, it is still up or down," said Richard Williams, the CEO of Essential Federal Credit Union in Baton Rouge, Louisiana.
Maggie Sayer, the CEO of Keys Federal Credit Union in Florida (who is uploading these applications herself to help out), said Monday she only got one application out the entire day because of crashes. On Tuesday, system freezes were still happening, but she was able to process nine or 10 loans.
"Let's say an application takes 10 screens ... you crash between each screen. ... You hope that it saved what you were typing. You try to type really fast so you can hit save fast enough," she said. "Today was better. Today was doable, but it is slow going."
Again, SBA often remarks that in the first weeks of the Paycheck Protection Program, they shoveled what normally would take them 14 years' worth of loans out the door in fewer than 14 days. And, while SBA used to have 1,700 approved lenders, they now have 5,100. That means more lenders, more money, tons of more applications, all flooding the system at once. The system wasn't built to handle that kind of capacity. No one is disputing that right now.
Other outstanding issues: Larger banks were upset SBA barred anyone from using robotic input systems Tuesday afternoon because it was slowing down the system for everyone. That meant only banks that had another kind of automated system could do that. Others had to input applications manually. And banks that sent in bulk applications (meaning more than 5,000 at a time to SBA) were sounding the alarm they still hadn't heard back on the status of those applications.
Hindsight is 20/20
More than a dozen aides and members of Congress CNN has talked to in the last several days acknowledge that PPP has had some unintended consequences.
Remember a bipartisan group of 96 senators voted "yes" on this legislation. Every single member present voted yes. And, after news reports of major public companies receiving PPP loans came out, after questions about lenders giving preferential treatment to some customers came out, the Senate approved more money for SBA by unanimous consent. They changed almost nothing. Republicans and Democrats both backed this.
Democratic Sen. Chris Coons of Delaware offered up a good reminder to CNN on Tuesday of how the stimulus came together: "It went from back of the envelope to 880 pages of bill text in a week."
Asked if there are things he wished, they had done differently in drafting the stimulus package when it came to SBA, Democratic Rep. Gerry Connolly of Virginia, a member of the House Oversight Committee, responded "Oh God, yes," but said "warts and all, the concept of the PPP is not bad. Execution is a different issue."
It's easy to forget where this country was when this program was imagined last month. When aides were drafting the $2.2 trillion stimulus package, members were staring down a recession and job-loss numbers they hadn't seen in decades. The urgency was palpable. The fear that doing nothing -- or waiting too long -- would unleash further calamity was all anyone was thinking about.
"I don't know that we really thought about some of the things that have happened. We should have, but when you are panicking about the world collapsing around you, it's easy to not to see things until you see them in retrospect," one Republican aide who worked on negotiations told CNN.
A note about next week
It says a lot that Democratic leaders in the House announced a plan to return to Washington only to back away from it 24 hours later.
House Speaker Nancy Pelosi summed up what ultimately happened: "We had no choice."
Look, logistically it's pretty hard to justify bringing 435 members (and some staff) back to the Capitol after many of them likely were coming from airports and train stations.
However, the plan is still for the Senate to come back into session. Divisions between the two parties are coming into view once again. Democrats are demanding immediate oversight with Senate Minority Leader
Chuck Schumer telling his members on a caucus call Tuesday afternoon that the focus of the next session is going to be holding the administration accountable. This is where programs that were bipartisan (think PPP, more hospital funding, funding for testing) begin to have a political sheen.
If they are coming back to Washington, Senate Democrats -- who don't control any of the committees -- are demanding hearings on testing, SBA loan programs, the implementation of the Main Street Lending Program, a hearing on best practices for safety and a confirmation of individuals who have been named to serve on the Congressional Oversight Commission. Democrats want to hear from Mnuchin, Carranza and Federal Reserve Chairman Jerome Powell. Republicans aren't likely to honor those requests right now.
The fight over oversight is just the beginning: Even as lawmakers were negotiating the $2.2 trillion stimulus package, the expectation always was there would have to be another major package. The most recent bill was just a $482 billion tie over, but this next chapter is going to be far messier. The clearest illustration so far of that has come in the form of the fight over state and local funding.
Senate Majority Leader Mitch McConnell initially dismissed the idea, but has since offered Democrats state and local funding in exchange for liability limits for businesses and employees returning to work amid the pandemic. Democrats rejected that Tuesday.
But that fight is just one of many. Democrats are going to push for more money for vote-by-mail efforts, more money for the US Post Office -- which is predicting it could run out of money by the end of September -- and more money for food assistance. Those are red lines for Republicans and could mean that the next round of negotiations could take weeks or months.
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