WASHINGTON — Treasury Secretary Steven Mnuchin on Tuesday, April 7, asked congressional leaders to swiftly commit another $250 billion to replenish a new $349 billion small-business coronavirus program that is being overwhelmed by surging demand.
President Donald Trump said banks have processed $70 billion in taxpayer-backed loans for 250,000 small businesses since Friday, as companies seek emergency help to deal with the enormous business disruption caused by the pandemic.
He did not say, though, how many of those loans have been approved and how many have received any of the money. And his data suggest the program has so far reached a small fraction of U.S. firms - there are 30 million small businesses in the United States that employ a total of 60 million people.
"We'll be running out of money pretty quickly, which is a good thing in this case, not a bad thing," Trump told reporters.
Republicans will try to advance the matter through Congress immediately. Senate Majority Leader Mitch McConnell, R-Ky., said on Tuesday that he hoped to bring the matter up for a vote by Thursday. The program allows companies with fewer than 500 employees to seek taxpayer-backed loans from banks, and these loans will not need to be paid back if the companies meet certain worker-retention metrics, among other things. Democrats haven't rejected the White House request but they have said they want to include other emergency aid, such as hazard pay for workers.
The Small Business Administration initiative, called the Paycheck Protection Program, was created as part of the $2 trillion coronavirus rescue bill enacted late last month. Many companies are scrambling for assistance as the entire U.S. economy has been upended in the past month because of rolling shutdowns ordered by state and local governments.
Many businesses complained that the program was overwhelmed and impossible to navigate on Friday, but the most recent data cited by Trump suggests many firms have been able to move into the program in recent days.
The White House has made numerous adjustments to the program in the past week to expand it for applicants and make it more attractive to banks originating the taxpayer-backed loans. They have raised the processing fee that banks can charge to make the loan and ensured that churches and faith-based firms can apply, among other things.
Sen. Marco Rubio, R-Fla. - who developed the program - has led the charge in demanding more money.
McConnell said he would speak with Senate Minority Leader Chuck Schumer, D-N.Y., and hoped "to approve further funding for the Paycheck Protection Program by unanimous consent or voice vote during the next scheduled Senate session on Thursday."
Many businesses have laid off workers as their revenue evaporated when millions of Americans were ordered to stay home in an effort to stop the coronavirus's spread last month. To try to avert an even bigger wave of layoffs, Congress created the PPP.
The White House and the Treasury Department have devoted enormous resources to get this program up and running, spending less time on other elements of the stimulus law - including an expansion of unemployment insurance and payments to individual.
Businesses with fewer than 500 employees are eligible for loans of up to $10 million. The loans will be forgiven, meaning business owners will not have to pay them back, if they meet certain requirements, including using 75% of the money to retain or rehire employees. Businesses can receive a $10,000 loan advance that does not have to be repaid, the SBA has said. It's unclear whether the Treasury Department or the SBA will ever disclose the identities of the companies receiving the taxpayer-funded loans.
Bank of America said Monday that it had received 178,000 applications from firms seeking $32.9 billion in loans as companies clamor to qualify for the $349 billion SBA program.
Wells Fargo did not begin taking applications until Saturday and by Monday morning said it had reached the $10 billion cap it had set for loans under the program. To deal with the crushing demand, the Federal Reserve launched a system for banks to offload these assets so they could originate more loans.
Democrats and Republicans have commented in recent days that the $349 billion program would probably need to be expanded, but Democrats have called for other measures, such as more unemployment insurance benefits for laid-off workers. Senate Democrats on Tuesday asked Mnuchin and SBA Administrator Jovita Carranza to ensure that a portion of the PPP funding was directed toward companies owned by women, minorities and veterans, among others, particularly in rural and underserved areas.
Schumer and other Democratic senators also said they would pursue legislation that provides hazard pay equivalent to $25,000 yearly for workers who have been forced to remain on the job during the pandemic. They could try to use the GOP demand for small business funding as leverage to include it in the next rescue bill.
"All I'm going to say is that this is one of our very highest priorities" for the next bill, Schumer told reporters, referring to the hazard-pay addition.
Many businesses and bankers have expressed confusion - and exasperation - at how the program was rolled out, with some fearing that they had to make monumental decisions immediately or risk their company's future.
Todd Ahlberg, who co-owns a San Francisco-based dog-grooming company called Mudpuppy's Tub & Scrub, said he has had to furlough all of his employees with the hope of eventually bringing them back when businesses reopen. He said he faces the predicament of deciding whether to rehire all of his employees even though there is no business just to apply for the loan, even though the terms of the loan - and whether he will have to repay it - are confusing.
"It would be a disaster to reopen with debt," he said. "We wouldn't be able to hang on."
While some lawmakers have pressed the Treasury Department and the SBA for more guidance on how the program works, the loudest calls have been for an expansion of the program. House Minority Leader Kevin McCarthy, R-Calif., tweeted on Tuesday that "the demand for the Paycheck Protection Program has been overwhelming."
The demand for the Paycheck Protection Program has been overwhelming. I spoke with @USTreasury Sec @StevenMnuchin1 this morning and support his request for more money for America's small businesses. Following the Senate’s approval, the House should move swiftly to do the same. pic.twitter.com/OT14W5V29u
The demand for the Paycheck Protection Program has been overwhelming. I spoke with @USTreasury Sec @StevenMnuchin1 this morning and support his request for more money for America's small businesses. Following the Senate’s approval, the House should move swiftly to do the same. pic.twitter.com/OT14W5V29u— Kevin McCarthy (@GOPLeader) April 7, 2020
He wrote that he had spoken with Mnuchin on Tuesday morning and supported "his request for more money for America's small businesses. Following the Senate's approval, the House should move swiftly to do the same."
Other Republicans also called for urgent action.
This program is meant to encourage small businesses to stop laying off employees, after 10 million workers sought unemployment claims late last month. The unemployment rate is expected to surge far beyond 10% this spring, and it could stay there into next year. White House officials have said they want to help enact policies that will lead to a sharp economic rebound this year, but economists have predicted that that is unlikely to occur.
Bank of America's chief executive, Brian Moynihan, and several community bankers are expected to participate in a 3 p.m. call with Trump about the program, according to industry officials.
Small businesses, which employ nearly half of the United States' private-sector workers, have said they are facing long waits, confusing rules and rejection as they scramble to secure loans through the PPP. Many banks have excluded access to non-customers and say that while they have begun processing the loans, they lack the proper SBA documentation to finish the process and turn the money over to the businesses.
There are unanswered questions about how the program works, including what kind of documentation businesses need to collect from the small businesses, banking industry officials say.
"It's a throughput issue. How much volume you can get through the system," said Paul Merski, an executive vice president at the Independent Community Bankers of America. It's currently a "trickle," he said.
Community bankers have been particularly concerned that once more big banks begin processing loans - Citigroup went online Monday - the money would fund would quickly be exhausted. "The small business borrower demand is overwhelming," Merski said.
Some Democratic lawmakers have also encouraged the Treasury Department to loosen the guidelines for the program. For example, loans under the program must be repaid within two years instead of the up to 10 years outlined in the legislation passed by Congress. The federal guidelines also limit how the money can be used when small businesses need flexibility to keep their companies alive, Democratic Sens. Chris Van Hollen and David Trone of Maryland said in a letter to Mnuchin.
"We have fought successfully to ensure this rescue package throws an economic lifeline to those who need it most by extending help to small and mid-sized businesses struggling to stay afloat," Van Hollen and Trone said in their letter. The Treasury Department's guidelines must not "undermine" Congress's intent for the emergency loan program, they said.
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The Washington Post's Renae Merle, Aaron Gregg and Mike DeBonis contributed to this report.
This article was written by Jeff Stein and Erica Werner, reporters for The Washington Post.