On Wednesday Treasury Secretary Steven Mnuchin and Small Business Administrator Jovita Carranza testified on Capitol Hill about the Paycheck Protection Program and other measures designed to help small businesses survive the coronavirus pandemic.
It was the Senate Small Business Committee’s first oversight hearing with SBA and Treasury leaders about their coronavirus relief efforts. Here’s what we learned.
Mnuchin sees a need for additional economic relief
Mnuchin told the committee the economic recovery is underway and he expects the economy to “improve dramatically” in the third and fourth quarters — but he acknowledged certain industries will still need help.
“I definitely think we are going to need another bipartisan legislation to put more money into the economy,” said Mnuchin.
He told the committee the next bill should include provisions to encourage rehiring in industries most impacted by the coronavirus, like travel and hospitality. He also said officials will need to “fix unemployment,” and “seriously look at whether we want to do more direct money to stimulate the economy.”
Mnuchin said he doesn’t want to rush into another bill and said future legislation should be much more targeted to “the industries and small businesses that are having the most difficulty in reopening as a result of COVID-19.”
“The reason not to jump into CARES 4 is hopefully we won’t need a CARES 5 and a CARES 6. I do think the economy is going to rebound significantly, but I’d also l say there is still significant damage in parts of the economy. And we’re going to consider using all of our fiscal tools, working with Congress to make sure we restore this economy back to where it was and where it should be,” he added later.
Senators Ben Cardin (D-MD), Chris Coons (D-DE) and Jeanne Shaheen (D-NH) are working on legislation to allow certain small businesses to apply for a second PPP loan.
“I would hope that we can all agree that this is an opportunity that we should take advantage of for those businesses that need continued help,” said Shaheen. “I know the jobs numbers were better than expected last week, but 13% unemployment is still not acceptable. And we don’t want another whole round of layoffs because we have small businesses who got help and now can’t get additional help when they need it.”
“We’re open-minded, but we absolutely believe small business — and by the way many big businesses in certain industries — are absolutely going to need more help,” Mnuchin told Shaheen.
60% payroll rule clarification
Mnuchin confirmed that borrowers who spend less than 60% of their PPP loan on payroll will still be eligible for partial forgiveness.
Business owners originally had to spend 75% of their loan on payroll expenses to have their loan forgiven, but last week President Trump signed a bill to reduce that threshold to 60%.
While the legislation made it through Congress nearly unanimously, some lawmakers had technical concerns about the new bill and worried business owners wouldn’t receive any forgiveness if they fell short of the 60% requirement.
Changes coming for business owners with criminal histories
Mnuchin said he plans to release new guidance on Wednesday to relax some of the restrictions for business owners with criminal histories.
Right now, people who have a felony on their record from the past five years aren’t eligible for PPP loans. Mnuchin told the committee he wants to “fix this and fix it quickly,” and reduce the timeframe to three years. He noted there would be exceptions for people convicted of some financial crimes.
Some senators said they want the Treasury and SBA to change the rules further. Mnuchin said he was open to making more changes if there was bipartisan support. Congress could also make legislative changes.
Sen. Cory Booker (D-NJ) secured a commitment from Mnuchin that he would change a rule that kept people in pre-trial diversion programs from receiving PPP loans.
“This should shock the conscience of us all,” said Booker.
“I’m not aware of that, but I’ll work with the administrator [Carranza] and if that’s the case we’ll make that fix immediately,” replied Mnuchin.
We might not learn who is receiving PPP loans
Senators pressed Mnuchin and Carranza about why Congress and the Government Accountability Office aren’t receiving data on who is getting the PPP loans.
“How can we know which businesses still need help if we do not know which businesses have received help?,” said Cardin.
Mnuchin indicated that PPP recipients might not become public, because names and specific loan amounts are “proprietary information” and in many cases “confidential.”
“We are working with the GAO from an oversight to make sure they’re comfortable and they do have access to information,” said Mnuchin.
Mnuchin said $12 billion has been returned to the program, “from large public companies and some large sporting teams” who shouldn’t have taken the loans. He reiterated that there will be reviews on loans above $2 million.
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.