The moving goalposts for PPP loans
The Paycheck Protection Program no longer seems likely to run out of funds, as daily loan approvals have slowed to less than $2 billion per day.
What happened: Politicians and pundits, led by Treasury Secretary Steven Mnuchin, moved the goalposts. It no longer matters if you can qualify for such a loan, per the original rules. It only matters if the loan is worth enduring media floggings and government threats — all without promised clarity into loan forgiveness.
By the numbers: The SBA reports that $188 billion of the refreshed $311 billion pot was spoken for as of last night, representing loans to 1.2 million small businesses. The average loan size between PPP and PPP2 has fallen from $206,000 to $73,000.
SBA has implemented the program as intended. That's the top-line finding of an Inspector General report released Friday, which had been requested by congressional Democrats.
- The IG did identify some areas for SBA to improve, including having lenders prioritize underserved and rural markets. But, again, overall it felt SBA was meeting its mandate.
Criticism of larger loan recipients has been bipartisan, with Mnuchin going so far as to threaten investigations and criminal investigations.
- The common denominator has been frustration that smaller businesses without established banking relationships were shut out of the original PPP, and that it could happen again.
- That’s why Mnuchin said all would be forgiven if larger recipients just poured their money back into the pool.
The bottom line: Moral suasion worked, judging by the current loan pace. But if PPP 2 ends up with plenty of cash in the till, and unemployment keeps growing, there could be boomerang questions about why some businesses were discouraged from applying for loans that could have kept people on payrolls.