Has it been a surprise to anyone that the CARES Act structure for businesses to apply for benefits using the Act has been anything but bogged down in government bureaucratic red tape? Last Friday was the first day companies could actually file applications for the relief programs under CARES. While the initial application was touted as just being two simple pages, that is just the beginning. Applicants must then go to a participating bank, obtain and then complete that bank’s application for the specific type of program the applicant wants to access, and then begin providing the bank reams of financial records.
Treasury Secretary Mnuchin made it sound like those two pages were all that was necessary to get that ball rolling. In many cases, the ball has even begun to start rolling.
We are following the progress of one California company desperate for help. (I know: it sounds complicated) Friday was the first day they were able to apply for a loan known as the Paycheck Protection Program or PPP, which is part of the two trillion dollar coronavirus stimulus package. It gives small businesses access to short-term cash flow assistance to help cover operating expenses and keep employees during this difficult time.
But as small businesses tried to submit applications over the weekend, many ran into issues with banks like Wells Fargo and were left with no help at all. “This only now just puts me in more distress. It makes me more worried about what my future is because literally my business is 100% shut down. There’s not even a penny coming in, I can’t even pay the rent on my warehouse, and I’ve never been in a situation where I haven’t been able to pay my business,” Michelle Eklof said.
However, Eklof says her bank, Wells Fargo, never had a working application on their website when they launched the program on Saturday. She says she continued to check back several times a day, still nothing. She woke up on Monday, still not able to apply, only to find out that the bank now closed its application process. “I’m angry, I was really counting on this. I was really watching and following their website and believed in them,” Eklof said.
Eklof quickly learned she wasn’t the only one dealing with this big problem.
“Literally a line of people outside the bank frustrated and just asking questions, wanting to know what’s going on. It’s not just me. It’s many Wells Fargo business customers, I mean people were yelling. people are angry,” Eklof said. Others also complain on social media.
When asked what the problems were all about, Wells Fargo replied with this:
“Given the amount of customer interest expressed and our target amount to distribute through the PPP, we have taken the online interest form down. On April 5, Wells Fargo announced it is targeting to distribute a total of $10 billion to small business customers under the requirements of the PPP and will focus on serving two segments of its customer population: nonprofits and small businesses with fewer than 50 employees. “
Wells Fargo did not address questions about links and applications not working on their website or if they would provide alternatives to these customers who never had an opportunity to apply because of website malfunctions.
Here’s the problem: Secretary Mnuchin in the White House nationally televised press conference rollout of this one major segment of the CARES Act that was designed and is impacting so many small businesses in positive ways to get the companies and their employees to the “other side” of Coronavirus and back to work. The Secretary literally made many feel like that two-page application was all that was needed to get those loans started immediately. But then, banks must get involved to manage the process.
Banks did not — at least initially — receive really clear signals from Washington regarding the application process sufficient to satisfy the Treasury. There were vast concerns at the bank level regarding the liability each bank might have in the event something went wrong with those federally backed loans they made to consumers. What if there was a default on loan repayment? What if the bank processed some paperwork wrong? What if applicants provided bogus documents showing fake corporate status and received large amounts of money and then defaulted? What was the liability for banks to be?
With no clear understanding of that liability, banks simply began to demand copious documents and data from these companies and company owners that they felt would be necessary to guarantee that IF there was a default, the bank would not be in the line of fire. Thus, we have massive delays.
Is It Working?
The CARES Act includes, in addition to The PPP which is detailed above, it includes substantial resources for small businesses to help them retain their employees and a sizable fund that the Treasury can use to support larger businesses:
- A sizable expansion of unemployment benefits, including expansions of who is eligible for benefits and increases both in weekly benefit levels for the next four months and in the number of weeks of jobless benefits that someone can receive.
- Significant direct payments (“recovery rebates”) to low and middle-income families of $1,200 for most adults and $500 for children under age 17.
- A $150 billion Coronavirus Relief Fund to help address the large budget holes emerging in states and localities.
- Substantial investments across a range of existing programs that can help respond to the current crisis, including important new investments in programs to serve people experiencing homelessness and to prevent people from losing their housing.
We have heard reports from a number of individuals (primarily from California) that they received notice from their banks on April 7 that were “pre-advices” of their $1200 “recovery rebates” being deposited into their accounts. The date that those amounts will be deposited and funds accessible were not given.
Believe it or not, it appears there is going to be a “next.” House Speaker Nancy Pelosi does not feel there was sufficient relief for everyone that needs and deserves financial relief in the CARES Act, and she is negotiating at this moment with fellow Democrats and even Republicans for another relief package. In fact, she appeared with Rachel Maddow of MSNBC and discussed the immediate needs of Americans for more, what Pelosi wants to see in such a package and when might Americans see it in the pipeline:
We all know what’s next: “Coronavirus Stimulus IV.” What will it include? Nancy will once again back-up the swine truck and load the bill with pork. She’d never do that, right?
- $100,000,000 to NASA
- $20,000,000,000 to the US Postal Service to payoff their debt
- $300,000,000 to the Endowment for the Arts
- $300,000,000 for the Endowment for the Humanities (I’ve never heard of it)
- $15,000,000 for Veterans Employment Training
- $435,000,000 for mental health support
- $30,000,000,000 for the Department of Education stabilization fund
- $200,000,000 to Safe Schools Emergency Response to Violence Program
- $300,000,000 to Public Broadcasting / NPR
- $500,000,000 to Museums and Libraries
- $720,000,000 to Social Security Admin, of which ONLY $200,000,000 goes to recipients. The balance is for “Administrative Costs” — $520,000,000.
- $25,000,000 for Cleaning supplies for the Capitol Building (I know it’s unbelievable. You can find it on page 136)
- $7,500,000 to the Smithsonian for additional salaries
- $35,000,000 to the JFK Center for Performing Arts
- $25,000,000 for salary increases for the House of Representatives
- $3,000,000,000 to upgrade to the IT department at the Veterans Administration
- $315,000,000 for State Department Diplomatic Programs
- $95,000,000 for the Agency of International Development
- $300,000,000 for International Disaster Assistance
- $300,000,000 for Migrant and Refugee Assistance (pg 147)
- $90,000,000 for the Peace Corp (pg 148)
- $13,000,000 to Howard University (pg 121)
- 9,000,000 Miscellaneous Senate Expenses (pg 134)
- $100,000,000 to Essential Air carriers (pg 162)
- $40,000,000,000 goes to the “Take Responsibility to Workers and Families Act.” (Pg 164)
- $1,000,000,000 Airlines Recycle and Save Program (pg 163)
- $25,000,000 to the FAA for administrative costs (pg 165)
- $492,000,000 to the National Railroad Passenger Corporation (Amtrak) (pg 167)
- $526,000,000 Grants to Amtrak to remain available if needed through 2021 (pg 168)
- $25,000,000,000 for Transit Infrastructure (pg 169)
- $3,000,000 Maritime Administration (pg 172)
- $5,000,000 Salaries and Expenses for the Office of the Inspector General (pg 172)
- A clause that ratifies there is No voter ID necessary to get a ballot to vote. It also establishes and makes legal the anonymous “ballot harvesting” process (pg 650)
- $2,500,000 for Public and Indian Housing (pg 175)
- $5,000,000 for Community Planning and Development (pg 175)
- $2,500,000 for the Office of Housing
- $1,500,000,000 for the Tenant-Based Rental Assistance Office of Public and Indian Housing, $billion of which can be used as “additional administrative and other expenses.” (pg 176)
- $720,000,000 to the public housing fund (pg 177)
- $100,000,000 for Community Block Grants for Native Americans (pg 183)
- $250,000,000 for Housing Block Grants for Tribes (pg 182)
- $130,000,000 for AIDS Housing (pg 185) $20,000,000 of which goes to “one-time grantees” (pg 186)
- $15,000,000,000 for the Community Development Fund (pg 188)
- $5,000,000,000 in Homeless Assistance (pg 193)
- $100,000,000,000 for Rental Assistance (pg 198)
- An additional $7,000,000 to enforce the Fair Housing Act (pg 203)
- $227,000,000 for grants to States for “youth activities” (pg 80)
- $261,000,000 for grants to States for dislocated worker employment and training activities, including supportive services and needs-related payments (pg 80)
- $10,000,000 for the Migrant and Seasonal Farmworker program
- $100,000,000 for ‘‘Job Corps.’’
- $15,000,000 for ‘‘Program Administration’’
- $6,500,000, to the ‘‘Federal Wage and Hour Division.’’
- $30,000,000, to OSHA
- $10,000,000 for Susan Harwood training grants
- $1,300,000,000, for ‘‘Primary Health Care’’
- $75,000,000, for ‘‘Student Aid Administration’’
- $9,500,000,000, for ‘‘Higher Education’’
Just in case you forgot, all of this was added to the CARES Act so the Senate could get House Democrats to vote for the bill. What bill? You remember: The bill that was to save all Americans from the ills of Coronavirus and to make sure small companies and everyday Americans were taken care of!
I put that list of “Nancy’s Corona-Pork” so all will remember when we roll out “Corona-Stimulus IV.”
I know that’ll make your day MUCH better!