Famous People Got Loans!

The Paycheck Protection Program protected some interesting paychecks.

Several news outlets are freaking out over revelations that companies connected in some way to people you may have heard of participated in a government loan program.

AP (“Kanye West? The Girl Scouts? Hedge funds? All got PPP loans“):

The government’s small business lending program has benefited millions of companies, with the goal of minimizing the number of layoffs Americans have suffered in the face of the coronavirus pandemic. Yet the recipients include many you probably wouldn’t have expected.

Kanye West’s clothing line. The sculptor Jeff Koons. Law firms and high-dollar hedge funds. The Girl Scouts. Political groups on both the left and right.

All told, the Treasury Department’s Paycheck Protection Program authorized $520 billion for nearly 5 million mostly small businesses and nonprofits. On Monday, the government released the names and some other details of recipients who were approved for $150,000 or more.

That amounted to fewer than 15% of all borrowers. The Associated Press and other news organizations are suing the government to obtain the names of the remaining recipients.

Economists generally credit the program with preventing the job market meltdown this spring from becoming even worse. More than 22 million jobs were lost in March and April. But roughly one-third of them were regained in May and June — a faster rebound than many analysts had expected.

The government acted quickly in early April, with Treasury lending the first $349 billion in just two weeks. The program got off to a rocky start, one marked by confusion and difficulty for many companies that sought loans.

That the PPP was messy was known from the outset and baked into the system. The whole point was to flood the economy with money as fast and unencumbered by red tape as possible to protect paychecks. And it seems to have helped.

That a billionaire entertainer, a sculptor, and a nonprofit got some money is a little weird. But, if they used the money to pay people who would otherwise have gone unpaid, it’s not obvious what the problem was.

The Daily Beast report (“Trump’s Small Biz Rescue Bailed Out Kushner’s Family, Obama’s Aides and Other Political Elite“) is a little more outrage-worthy:

When the Trump administration began implementing a trillion-dollar program to bail out struggling employers amid the COVID-19 pandemic, a central concern was that the president would use the program to benefit his friends and allies.

It turns out that Trump’s pals weren’t the ones catching the windfall so much as Washington, D.C.’s well-off and well-connected in general. Among the entities cashing six to seven-figure checks from the federal government’s Paycheck Protection Program in recent months were a fiscal responsibility advocacy organization run by anti-tax crusader Grover Norquist, a high-powered consulting firm run by former Secretary of State Madeleine Albright, the nonprofit headed by former Trump campaign official David Bossie, and a political strategy firm linked to two alumni of the Obama White House who’ve turned anti-Trump podcasting into a lucrative enterprise. 

Businesses tied to the president’s son-in-law as well as members of Congress got taxpayer funds. As did the elite D.C.-area schools where both President Donald Trump and President Barack Obama enrolled their children: St. Andrew’s Episcopal School, where Barron Trump is a student, got between $2 million and $5 million; and Sidwell Friends School, where both Obama children graduated high school, got between $5 million and $10 million. 

Now, this is a little sketchier. The Jared Kushner ties certainly raise a red flag and deserve more scrutiny.

Naturally, Fox News is emphasizing Democrats who benefitted (“Biden-founded law firm, as well as a company tied to Pelosi, received PPP funds, docs show“):

A prominent Delaware law firm founded by presumptive Democratic presidential nominee Joe Biden received a Paycheck Protection Program (PPP) loan for between $150,000 and $350,000, according to records released Monday by the Treasury Department and the Small Business Administration.

The Trump campaign told Fox News that the records conflict with recent messaging from the Biden campaign that the PPP is both ineffective and a vehicle to reward Trump “cronies.”

“Instead of attacking President Trump as an involuntary reflex, maybe Joe Biden should just say ‘thank you’ once in a while,” Trump campaign director of communications Tim Murtaugh told Fox News. ”The PPP saved 51 million jobs nationally, including at Biden’s old law firm and a number of companies connected to Obama administration alums. A very likely explanation is that Biden simply doesn’t know what he’s talking about and would rather make a political weapon out of a program that helped people make their rent and mortgage payments.”

The law firm that received the big payout was originally founded as Biden and Walsh and is now known as Monzack Mersky McLaughlin and Browder; Biden currently has no financial interest in the firm.

However, firm co-founder and partner Melvyn Monzack, whom Biden called one of his “great friends” in 2017, has maintained close ties to the former vice president. He served as Biden’s 2002 Senate reelection treasurer, as well as the treasurer for Biden’s 2008 presidential run.

[…]

Meanwhile, House Speaker Nancy Pelosi’s team is rejecting reports that a business connected to her husband received big money under the government’s emergency coronavirus relief program — arguing that his connection to the company is minimal.

The company, EDI Associates in San Rafael, California, has 52 employees and says it’s in the “full-service restaurant business,” government documents show. The company received between $350,000 and $1 million in Paycheck Protection Program (PPP) money.

“He’s an investor,” Pelosi spokesperson Drew Hammill told Fox News. “He wasn’t involved in the application for the loan nor was he aware of it.”

The Washington Post and Bloomberg reported that EDI Associates is identified in Pelosi’s disclosure forms ”as a limited partnership with an investment in the El Dorado Hotel. … The value of the asset on the form — identified as belonging to Pelosi’s spouse — is listed as between $250,001 and $500,000.”

The Biden connection is laughably tenuous; the Pelosi connection is more interesting.

If any of these people used their influence to get to the head of the line, it’s problematic, indeed. But the reports offers no evidence of that, only innuendo.

The Daily Beast report includes this speculation:

Collectively, the massive data dump makes clear that while smaller businesses around the country may have struggled to navigate the process of obtaining the federal government loans, little such difficulty was found among those in and around the nation’s capital.

At a certain level that’s to be expected; Washington is a company town, whose currency may be cash but also connections. To the extent that businesses in the city sought assistance through the program, they were likely to include advocacy groups, lobbying and public affairs shops, and even nonprofits affiliated with lawmakers themselves. 

But unlike other regions of the country, businesses in Washington are in a unique position to affect and extract money from programs designed to benefit American business generally since they’re staffed with people close to those in power. 

They’re also likely pretty well staffed with lawyers and used to dealing with government rules. They’re well positioned to take advantage of government programs in a nimble fashion. But, again, unless there’s evidence of influence-peddling—and the money in fact went to pay employees—it’s not obvious that there’s anything untoward here.

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FILED UNDER: COVID-19, Government
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Bill says:

    AP (“Kanye West? The Girl Scouts? Hedge funds? All got PPP loans“)

    But no mention of a South Florida ebook publisher? Darn! My getting mentioned may have helped my sales. Oh well…..

    Yes my small business did get a loan.

    6
  2. Sleeping Dog says:

    Yawn. The outrage machine so bores me

    4
  3. OzarkHillbilly says:

    I have read a number of reports that people with *preferred* banking connections got loans while those small businesses without such status couldn’t get thru the door.

    *preferred= has a continuing history of large loans with the bank

    2
  4. James Joyner says:

    @OzarkHillbilly:

    I have read a number of reports that people with *preferred* banking connections got loans while those small businesses without such status couldn’t get thru the door.

    That would not at all shock me. And, if you have only so much money to give out and have to do it quickly, that’s probably the easiest way to do it. But it has perverse effects in terms of what the PPP was trying to accomplish.

    2
  5. Bill says:

    @OzarkHillbilly:

    I have read a number of reports that people with *preferred* banking connections got loans while those small businesses without such status couldn’t get thru the door.

    For my loan, I applied at the SBA website. It took a little over two months for my application to be processed and for the funds to arrive.

    The Church that Dear Wife works at applied for a loan from a bank and was declined.

  6. Scott says:

    Without looking at each individual case, it is hard to tell whether some of these firms actually needed the PPP. Sure, restaurants, hotels, tourist based businesses, yes. But law firms, consulting firms, advocacy organizations? Did they actually lose business due to COVID-19 that they had to protect against layoffs. Seems to me it was a free for all.

    1
  7. Kathy says:

    I don’t get it. We keep shoveling more and more money and breaks to the very rich, and yet the poor don’t make any progress.

    We should set up a blue ribbon panel of the richest business executives, bankers, and investors, to determine what the bloody hell the poor and middle class are doing wrong.

    14
  8. Daryl and his brother Darryl says:

    You could see this coming the minute the Trump Administration refused oversight. The most corrupt Government ever. But it’s OK if it’s a Republican Government.

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  9. sam says:
  10. Michael Reynolds says:

    You know what would have avoided all these problems? An emergency UBI. Why are we paying the restaurant to pay its employees when we could just pay the employees directly? Hmm? Is it because banks wouldn’t get their piece? Is it that corporations wouldn’t get to skim the cream off the top?

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  11. Michael Reynolds says:

    @sam:
    Tells you everything you ever needed to know about libertarians and all those rugged individualists.

    10
  12. OzarkHillbilly says:

    @James Joyner: But it has perverse effects in terms of what the PPP was trying to accomplish.

    The most perverse effect being that loans are going out on the basis of customer loyalty, not need.

    TBH, I’m not sure the cure for this might not be worse in so far as economic stimulus. In America it always comes down to who you know. Always.

    2
  13. OzarkHillbilly says:

    @Kathy: I regret only that I have but 1 thumbs up to give.

    3
  14. James Joyner says:

    @Michael Reynolds:

    Why are we paying the restaurant to pay its employees when we could just pay the employees directly

    Presumably, we wanted to keep the restaurants solvent so they could survive the crisis.

    4
  15. Kathy says:

    @sam:

    John Galt must be turning over in his grave, if anyone knows who he is.

    5
  16. Scott says:

    @Michael Reynolds: Because we can’t have employees have free will and not be dependent on the job creators.

    5
  17. Teve says:

    @sam: here’s the mind blowing thing about the Ayn Rand people taking government money. They went on to argue that they were the only people who deserved that money, because they understand that it was taken by theft, and therefore they deserve reparations from the government, and the people who didn’t understand the taxation was theft don’t deserve money from the government.

    5
  18. Michael Reynolds says:

    @James Joyner:
    If the restaurant is passing that money through to employees, how does that keep them solvent? It only helps the corporation if the corporation is not paying their employees.

    2
  19. James Joyner says:

    @Michael Reynolds: According to Wikipedia, “The Paycheck Protection Program allows entities to apply for low-interest private loans to pay for their payroll and certain other costs. The amount of a PPP loan is approximately equal to 2.5 times the applicant’s average monthly payroll costs. The loan proceeds may be used to cover payroll costs, rent, interest, and utilities. The loan may be partially or fully forgiven if the business keeps its employee counts and employee wages stable.” So, it’s not just a passthrough.

    2
  20. OzarkHillbilly says:

    Well well well….

    The U.S. Treasury Department Monday morning released the names of over 660,000 small businesses that received Paycheck Protection Program loans of at least $150,000, per its recent compromise with Congress. Well, at least that’s what we thought Treasury did.

    What happened: Within hours, several well-known companies and investment firms on the list denied that they had ever applied for PPP loans, let alone received them.
    ……………………….
    Be smart: There were over 660,000 companies listed. And reporters only called a tiny percentage of them. If the error rate *we* found is representative of the larger sample, then who knows how many PPP loans there really were, or what companies they went to. Imagine if small businesses got shut out of the initial pool, and then shut down or laid off employees, if the initial pool wasn’t actually exhausted?

    * There’s going to need to be an audit, and not just the promised reviews of companies that got loans north of $2 million.
    *Was this just a bunch of fat fingers? Fraud? Incompetence? A combination of all three?

    The bottom line: The purpose of these PPP disclosures was to better understand how the program worked, particularly ahead of a phase 4 stimulus. What we’ve learned is that we need even more disclosures.

    Never forget to account for flat out incompetence in addition to the garden variety corruption and daily pathological lying when ever dealing with the trump admin.

    3
  21. Raoul says:

    The first thing that needs to happen is to have open records. Maybe all is in the up and up but until we know exactly how the process worked we really don’t know.

    2
  22. Blue Galangal says:

    @Kathy: I heard he was Number 6.

    1
  23. Michael Reynolds says:

    @James Joyner:
    Ah, that explains it. But they should have called it something other than PPP.

    As to restaurants specifically, costs usually break down roughly in thirds: labor costs, food costs, fixed costs (rent etc.). If a restaurant is closed completely it has no food costs, in effect freeing up the third otherwise spent on food. And of course utilities drop dramatically if you’re not running stoves and broilers. You take a place with $1000 a month in labor, pay the restaurant 2,500, assume they pay their staff and rent and the management is basically up by at least $500.

    Incidentally restaurants generally pay their front of the house people minimum wage (at most) which forms just a fraction of a waiter or bartender’s income, tips making up the bulk. So PPP may help cooks, but it won’t do much for waiters. Meanwhile the owners pay their rent, reduced utilities, and bank the difference.

    I imagine each industry has its own issues. But in the case of restaurants UBI would do much more for employees, less for the owners which include huge corps like McD and Darden.

    2
  24. James Joyner says:

    @Michael Reynolds: Yes. A lot of the big companies (I recall Ruth’s Chris being among them) got shamed into giving back their money. It all seems like it was years ago rather than a couple of months.

    Many of us here were calling for just giving money to people who had lost their jobs rather than bailing out failed companies in the wake of the 2008 collapse. But Bush forced bailouts through even over the objections of Congress and Obama doubled down. There were good reasons for doing that, but also some really serious moral hazard.

    2
  25. Kathy says:

    @Blue Galangal:

    I assume that’s in reference to “The Prisoner,” as a Simpsons’ parody leads me to believe.

    1
  26. An Interested Party says:

    @sam: Not simply shameless, but nauseating

    Americans for Tax Reform has released a statement trying to justify itself:

    Americans for Tax Reform (ATR) did not apply for or receive any grant or loan from the Paycheck Protection Program, designed to keep people employed during the pandemic. ATR never opposed enactment of the program however, viewing it as compensation for a government taking during the shutdown.

    Americans for Tax Reform Foundation (ATRF)—a legally and financially separate research and educational 501(c)3—was badly hurt by the government shutdown. It applied for and received a loan and has as a consequence been able to maintain its employees without laying anyone off. ATRF does not engage in lobbying.

    This statement is a little bit weaselley. While Americans for Tax Reform and the Americans for Tax Reform Foundation are technically separate nonprofits, they are run by the same leadership, according to their 2018 990 forms . Grover Norquist is the president of both groups. As of those filings, they also shared the same executive director, director of state affairs, director of international programs, and director of strategic initiatives. I asked communications director John Kartch precisely how ATRF was “badly hurt” by the shutdown, but have not yet received a response. He, by the way, works for both groups too.

    Grover Norquist should be dragged to a bathroom and drowned in a bathtub…

  27. Kurtz says:

    @Michael Reynolds:

    Incidentally restaurants generally pay their front of the house people minimum wage (at most) which forms just a fraction of a waiter or bartender’s income, tips making up the bulk. So PPP may help cooks, but it won’t do much for waiters. Meanwhile the owners pay their rent, reduced utilities, and bank the difference.

    Indeed. The vast majority of states have minimum wage for tipped employees under $5. Many pay the absolute minimum of $2.13/hr.

    1
  28. Kurtz says:

    @An Interested Party:

    Grover Norquist should be dragged to a bathroom and drowned in a bathtub…

    Well that’s excessive. I doubt the bathtub applied for funds.

  29. Kathy says:

    @OzarkHillbilly:

    I’ve wondered a few times whether having two thumbs in each hand would be an advantage.

  30. Just nutha ignint cracker says:

    @Bill: Good! I hope it helped.

    ETA: I’m reminded of the old joke–This money is tainted; t’aint a single dollar of it went to me!

    @Kathy: 😀

    1
  31. Just nutha ignint cracker says:

    @Kathy: On a more serious note, we don’t need a blue ribbon panel to tell us what’s wrong. The lady doctor from the article someone linked to over the weekend could probably explain how the lower class wasted their money on fancy running shoes and now have no bootstraps to pull themselves up by.

    @OzarkHillbilly: [sigh…] It becomes fatiguing after a while. 🙁

    2
  32. Just nutha ignint cracker says:

    @An Interested Party: @Kurtz: Grover Norquist doesn’t deserve a bathtub; he has to get drowned in a toilet bowl. I’m sorry, but that’s my final offer.

    2
  33. An Interested Party says:

    I’m sorry, but that’s my final offer.

    We’ll take it!

  34. Jc says:

    Max loan amounts were two months worth of payroll. Which has likely run out by now. Saved some jobs but likely just delayed layoffs and bankruptcy for many businesses

  35. Kurtz says:

    @Just nutha ignint cracker:

    Where’s the money, shithead? It’s down there somewhere. Let me take another look.

  36. mattbernius says:

    They’re also likely pretty well staffed with lawyers and used to dealing with government rules. They’re well positioned to take advantage of government programs in a nimble fashion.

    I think this is really the crux of the issue being discussed. From my perspective, the big problem wasn’t so much the folks listed above got the money as it is that the “protections” that were put in place to make sure people “who deserved” the money makes said, limited pools of money, more accessible to people with the means to get it.

    This is the fundamental problem with our social safety nets: they are intentionally incredibly difficult to apply for and navigate because–since about the 1970’s–we are far more concerned about the *wrong people* getting money than actually *the intended people* getting it (or rather, we are ultimately concerned that the white… I mean right people get it).

    And so all of these burdens are put on the process that ultimately optimizes the application process for those with the means/staff expertise to navigate it. And when that involves a relatively limited pool of funds, then stuff like this happens.

    I have no issues with any of the above getting the funding if they qualified. My issue is that the funding was limited and distributed on an unlevel play field. I’d much rather of had more money allocated with far less stipulations/requirements about who qualified.