WASHINGTON – The government on Monday identified roughly 650,000 mostly small businesses and nonprofits that received taxpayer money from a program that likely helped prevent the job market meltdown from growing worse but that also benefited some politically connected firms.
Recipients covered a broad swath of industries, with some that were less directly impacted by the coronavirus pandemic, such as manufacturing and construction, receiving a greater proportion of the loans than the hard-hit restaurant, bar and hotel industries. Many law firms and private equity companies also obtained loans.
Businesses owned by politicians also borrowed from the Treasury Department's Payroll Protection Program, (PPP) including a minor league baseball team owned by the family of the governor of Ohio. A large franchisee of Wendy's, Taco Bell and Pizza Hut restaurants, whose CEO is a major donor to President Donald Trump, received loans totaling between $15 million and $30 million.
The program launched April 3 and as of June 30 had handed out $521 billion. Treasury identified just a fraction of the total borrowers Monday, naming only those companies that got more than $150,000. Those firms made up less than 15% of the nearly 5 million small companies and organizations that received loans.
Economists generally credit the program with helping prevent the job market meltdown from being much worse. Employers added 7.5 million jobs in May and June, a solid increase though it left the economy with nearly 15 million fewer jobs than before the pandemic. The PPP probably drove some of that gain.
And research by Tomaz Cajner, an economist at the Federal Reserve, and seven colleagues found that companies with fewer than 50 workers before the pandemic saw their hiring rise 12% in May, while jobs grew just 5% in larger firms, suggesting PPP helped fuel rehiring.
But the program was only intended to carry the economy through a short interruption from the coronavirus pandemic, which is now threatening to have a longer-lasting impact.
"The biggest issue is that PPP is short-term help," said Adam Ozimek, chief economist at Upwork, a freelancing platform. "And now we're dealing with a mid- to long-term problem."
The program provided loans of up to $10 million for small businesses to help them recover from the government-ordered shutdowns and revenue losses caused by the virus outbreak. The average loan amount for the entire program was $107,000, the Treasury Department said in a broad summary of the program.
The loans can be forgiven if the businesses mostly use the money to continue paying their workers. The program initially was set to expire June 30 but it was extended last week to Aug. 8, with $132 billion still available.
The recipients employed 51 million people before the pandemic began, Treasury Secretary Steven Mnuchin said, or about 85% of all workers at companies with fewer than 500 employees. The government won't know how many of these jobs were actually saved until companies apply to have the loans forgiven, a process that is just beginning.
A senior administration official said Monday that some small companies "will need additional support" in the coming months.
The public may never know the identity of more than 80% of the nearly 5 million beneficiaries to date because the administration has refused to release details on loans under $150,000. That secrecy spurred a lawsuit by news organizations, including the Associated Press.
Treasury has released only dollar ranges for the loan amounts, rather than exact figures.