Apr 3, 2020 - Economy & Business

Skepticism rises over government's small business bailouts

Dan Primack, author of Pro Rata

Illustration: Aïda Amer/Axios

America today launched its $350 billion bailout for small businesses, and already there is widespread skepticism that the program will run smoothly or be large enough to meet demand.

What's new: House GOP leader Kevin McCarthy yesterday said that the affiliation rule will be waived for any company with less than 500 employees that doesn't have a controlling outside shareholder, thus making most VC-backed startups eligible for PPP loans. This was based on a conversation he'd just had with Treasury Secretary Steven Mnuchin.

What's wrong: Treasury hasn't yet released the aforementioned guidance, which creates an impossible situation for banks that are actually being asked to review and approve the loans. And that's just the tip of the guidance gum-works — with bankers complaining before last night that all they'd gotten were flimsy bullet points, rather than the granular details they really need.

  • JPMorgan Chase, one of the nation's largest business lenders, yesterday warned that it likely didn't have enough information to begin accepting PPP loan applications today.
  • As of this morning, its website says, in bold print: "Please don't send us any SBA or Treasury department forms."

One level deeper: Even if adequate guidance does come and loans get granted, there are worries in D.C. that the federal bureaucracy isn't prepared. Axios' Alayna Treene reports:

Lawmakers and staff who helped draft the rescue package have privately expressed concerns that the Trump administration — particularly the Small Business Administration and Labor Department — may be overwhelmed by the demand for loans and unable to get checks out the door as fast and responsibly as they're needed.
Some fear a repeat of what happened with the botched rollout of the Affordable Care Act in 2013 when the site crashed due to tremendous demand.

Two levels deeper: Even if none of those fears come to pass, as Mnuchin this morning is suggesting via Twitter, there's dawning dread that $350 billion just isn't enough money. Not only because the pandemic has knocked so many small businesses and nonprofits off their feet, but also because there are few guardrails to prevent solvent groups from participating.

  • McCarthy downplayed the need for a "phase 4" stimulus yesterday, including President Trump's call for a $2 trillion infrastructure package, saying he'd need more data on how "phase 3" plays out.

The bottom line: This is understandably messy. The CARES Act wasn't even law at this time last week, yet today banks are asked to begin processing and funding tens of thousands of federally guaranteed loans. You don't blame pilots for the bumpy ride, you just pray they can land it safely in the end.

Go deeper: America's coronavirus bailouts

Go deeper

Updated 4 mins ago - Politics & Policy

Trump says RNC is looking outside of North Carolina for convention site

North Carolina Gov. Roy Cooper in 2018. Photo: Sara D. Davis/Getty Images

President Trump tweeted on Tuesday night that because of ongoing coronavirus restrictions in North Carolina, the Republican Party will be "forced to seek another state" to host its convention in August.

The big picture: The late-night tweet came after North Carolina Gov. Roy Cooper (D) told convention organizers earlier Tuesday that Republicans should plan for a "scaled-down convention with fewer people, social distancing and face coverings" given the impact of the pandemic.

Updates: George Floyd protests continue past curfews

Police officers wearing riot gear push back demonstrators outside of the White House on Monday. Photo: Jose Luis Magana/AFP via Getty Images

Protests over the death of George Floyd and other police-related killings of black people continued Tuesday across the U.S. for the eighth consecutive day, prompting a federal response from the National Guard, Immigration and Customs Enforcement and Customs and Border Protection.

The latest: Even with early curfews in New York City and Washington, D.C., protesters are still out en masse. Some protesters in D.C. said they were galvanized by President Trump's photo op in front of St. John's Church on Monday and threat to deploy U.S. troops in the rest of country if violence isn't quelled, NBC News reports.

Updated 1 hour ago - Politics & Policy

Trump backs off push to federalize forces against riots

Photo: Brendan Smialowski /AFP via Getty Images

A day after threatening to federalize forces to snuff out riots across the country, the president appears to be backing off the idea of invoking the Insurrection Act, sources familiar with his plans tell Axios.

What we're hearing: Aides say he hasn’t ruled out its use at some point, but that he's “pleased” with the way protests were handled last night (apart from in New York City, as he indicated on Twitter today) — and that for now he's satisfied with leaving the crackdown to states through local law enforcement and the National Guard.