Controversy abounds over the Paycheck Protection Program — $660 billion in coronavirus relief made available to small businesses through bank loans — over how the first round of money ran out in just 13 days and why some of it went to the L.A. Lakers and Shake Shack, both of which have since returned the loans.

The program deserves praise for funneling relief to small companies nationwide but its shortcomings should prompt the U.S. to “rethink” its reliance on banks for the distribution of stimulus funds, said former Federal Deposit Insurance Corporation Chair Sheila Bair, who helped oversee lending that followed the Great Recession.

“To their credit, both Congress and the Fed have tried to get creative to have a transmission mechanism that more directly reaches into Main Street,” says Bair, the FDIC chairwoman from 2006 to 2011, who’s currently a contributor to Yahoo Finance. “They are doing better than the big bank bailout mindset we had during the great financial crisis.”

“But going forward, I think we need to rethink this whole idea of using debt and the banking system to transmit stimulus,” she adds, in a newly released interview, taped on Friday.

Earlier this month, the initial rollout of PPP totaling $349 billion elicited frustration from many companies about how to access the funds and disappointment when the money ran dry; and a second round of funding made available on Monday has faced similar technical issues.

Under the program, struggling small businesses can obtain loans that will ultimately be forgiven, as long as they go to core business expenses like payroll and rent. Four of the largest banks in the U.S. — JPMorgan Chase, Wells Fargo, Bank of America, and US Bank — have played a key role in distributing the loans but also face a lawsuit for allegedly favoring large customers that pay higher fees.

Bank of America and US Bank denied the accusations, CNN reported, while JPMorgan Chase and Wells Fargo declined to comment on the lawsuits.

Sheila Bair, the former chair of the Federal Deposit Insurance Corporation, appears on “Yahoo Finance Presents.”

“Right now, we are still using big banks primarily to intermediate all this,” Bair says. “Not surprisingly, the community banks are doing a better job than the big banks in this because the community banks do the lion’s share of lending.”

“One of the many lessons learned going forward is you really need to rethink our payment system, how we get money from point A to point B, who we help and how efficiently we do that,” she says.

Bair spoke to Yahoo Finance Editor-in-Chief Andy Serwer in an episode of “Yahoo Finance Presents.”

NEW YORK, NY – SEPTEMBER 20: Former FDIC Chair Sheila Bair speaks during the 2018 Yahoo Finance All Markets Summit at The Times Center on September 20, 2018 in New York City. (Photo by John Lamparski/Getty Images)

Pointing to an alternative model, Bair highlighted an $808 billion stimulus launched in Germany, which includes a 50 billion euro program for small businesses that offers direct payments of up to 15,000 euros depending on the size of the company.

“If you keep these people on payroll, [and] subsidize part of their wages,” she says. “That probably would have been a much more direct and efficient way of doing it than the way we are doing it with loans.”

“Lessons learned,” she says. “We just were set up to use lending as a way to stimulate the economy and that needs a fundamental rethink as well.”

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