- Jun 6, 2007
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The Small Business Administration's Inspector General Report on the CARES Act Payroll Protection Program (PPP) dated May 8th 2020 underscores Treasury Secretary Steven Mnuchin's and the Trump Administration's significant amount of poor performance in passing and implementing relief programs to respond to the Corona-virus crisis befalling America! It underscores how they were short on ability and short on caring about the finances of America; a capable and caring White House and Treasury Cabinet official would have been all over the opportunity to pay for the exorbitant recovery bill the American People will incur from this crisis that the V-shaped recovery in the stock markets provided thru the use of stock warrants from the abundance of corporations in the markets that have and will receive critical liquidity life-lines from the Federal government to make it thru the crisis!
The IG's report placed a spot light on how the Administrator of the SBA and Secretary Mnuchin promulgated rules for the PPP that did not follow the law, that did not follow the provisions of the CARES act which Congress enacted into law, which the Executive branch of the U.S. government is duty bound to do. They did this to shore up their political position on this program at the expense of caring about the welfare of Small Business and helping them make it thru the current financial storm; the administration's position is that a dollar spent on the PPP program is essentially a dollar the Federal government doesn't have to spend paying unemployment claims because the money provided to Small Businesses in this program will largely be going to keep these small businesses' employees on the payroll. The Administrator and the Secretary promulgated rules that mandate that seventy-five percent of the money a small business receives through the program must be spent on payroll cost which is not what the Act (Sec. 1102(a)(2)((F)) says the Act permits the monies can be spent on a whole list of necessary business expenses; moreover, their promulgated rules mandate that only twenty-five percent of the portion of the loan that is forgiven can be for non-payroll expenses the Act (Sec. 1106(b)) does not have this limitation. Now the American people have seen an abundance of small business owners on TV explaining how they are in dire straits how their survival is at issue because of the economy being shutdown and how they are going to need every dollar of this SBA loan to keep their doors open so they can make it to the other side where the economy has normalized. One would think the head of the Small Business Administration and the top guardian of the U.S. economy would be putting survival of small businesses in America ahead of justifying a legislative expenditure!
One interesting aspect of the actual bill known as the CARES Act is there is a king size drafting error in the bill which when you think about it epitomizes the abysmal job members of Congress and the President have done in passing legislation to respond to this terrible crisis that has hit the country! The drafting error in the bill involves the design of the loan forgiveness portion of the program. Congress's intent there was that a percentage of eligible expenses (payroll costs, interests on mortgages, rent obligations and utility expenses) incurred for a two month period up to the total amount of the principle of the loan would be forgiven and the percentage is essentially the percentage of the employees a small business kept on the payroll during this two month period compared to the number of employees the small business had prior to the economy being shut down which makes sense because if it is a payroll protection program one would want to incentivize employers to keep employees on the payroll which this design does. The actual language of the statute (Sec.1106 (d)(2)) describe the amount of the loan to be forgiven is this total expense figure for the two month period reduced by the aforementioned percentage of this total percent figure; one can further tell it is a drafting error because the language of the provision doesn't comport with the title of the paragraph "Reduction Based On Reduction In Number Of Employees". What the actual text of the statute does is incentivizes small business owners to lay off as many of their employees as possible because per the text the higher percentage of layoffs the higher percentage of your expenses you will get forgiven!
I was watching the Governor of New York's, Andrew Cuomo, press conference today and it was initially a typical great press conference by the Governor where he demonstrates he is transparent and responsible about this Covid 19 crisis. Then the Governor turns to the current legislative controversy in Washington and I agree with him Congress has to specifically send aid to the states and to the counties across America to stop the alarming numbers of government layoffs that will otherwise occur which will reverberate bad thru the economy. But then he goes on this left wing tirade and I was really surprised because I thought the Governor was a traditional center left Democrat that believed in helping people on the lower rungs of the social ladder but still believed in being fiscally responsible and pro-business! The Governor starts with a wrong interpretation on the Great Recession he says the American people got the shaft when bailing out the financial industry for the massive fraud they committed related to the mortgage market; first he forgot to mention that regulators and Congress were majorly culpable in that fraud they allowed loan applications to be treated like a joke and no taxpayer money was lost in the bailout program which was called TARP which incidentally provided significant help to ordinary home owners who were underwater with their mortgages. Then the Governor begins a tirade where he labels businesses today as the bad guy as the enemy of the American people granted a lot that goes on in our economy with respect to business is wrong but the major wrong doing could be fixed by Congress and the President thru legislation but it was disconcerting that Governor Cuomo didn't seem to appreciate that businesses are the means by which American can achieve a good standard of living vis-a vis good wages they receive thru these businesses he did not seem to appreciate how vital is U.S. businesses in making the American dream attainable for more and more people in America. But what was really alarming about Governor Cuomo behavior was how he acted like a Tasmanian devil against businesses calling for American businesses that have and will receive loans from the Federal government if they lay off even one employee compared to their payrolls prior to the economic shut down they should have to give back the loan money to the Federal Government. Is Governor Cuomo clueless on how capitalism works does he want America's economy to become a stagnant European one where wages and business growth are anemic because of anti-capitalism government regulation. The government cannot expect U.S. businesses to carry staffing levels, and the commensurate wage and benefit costs, higher than what their business activity calls for that is a fundamental principle of capitalism.
The Chinese government hurt the U.S. economy bad when they did not issue warnings that Covid 19 was a highly contagious fatal disease so America could shield itself and the hard truth that prudent financial experts and economist are trying to impress on the American people is that the economic recovery will be a moderately ascending recovery. The President and members of Congress and Governors and members of legislature across America have to stop expecting America's businesses to draw up and implement plans to return their businesses to the state they were on February 15 of this year, it's idiotic, it makes no economic sense and it is going to make things worse. Once America gets thru the medical side of the pandemic the country can focus on rebuilding and do consensus things like bring back domestic production of raw materials in pharmaceuticals and actual production of pharmaceuticals and reagents and PPE's and rebuild and expand America's infrastructure. Politicians in America and the media that pushes America one way and another have to stop with this pipe dream that they are pushing on America that certain entities just have to flip a switch and will all go back to February 15 we need to face reality so we can make prudent steps to make the journey back as less hard as possible with less long-term injury as possible!
The IG's report placed a spot light on how the Administrator of the SBA and Secretary Mnuchin promulgated rules for the PPP that did not follow the law, that did not follow the provisions of the CARES act which Congress enacted into law, which the Executive branch of the U.S. government is duty bound to do. They did this to shore up their political position on this program at the expense of caring about the welfare of Small Business and helping them make it thru the current financial storm; the administration's position is that a dollar spent on the PPP program is essentially a dollar the Federal government doesn't have to spend paying unemployment claims because the money provided to Small Businesses in this program will largely be going to keep these small businesses' employees on the payroll. The Administrator and the Secretary promulgated rules that mandate that seventy-five percent of the money a small business receives through the program must be spent on payroll cost which is not what the Act (Sec. 1102(a)(2)((F)) says the Act permits the monies can be spent on a whole list of necessary business expenses; moreover, their promulgated rules mandate that only twenty-five percent of the portion of the loan that is forgiven can be for non-payroll expenses the Act (Sec. 1106(b)) does not have this limitation. Now the American people have seen an abundance of small business owners on TV explaining how they are in dire straits how their survival is at issue because of the economy being shutdown and how they are going to need every dollar of this SBA loan to keep their doors open so they can make it to the other side where the economy has normalized. One would think the head of the Small Business Administration and the top guardian of the U.S. economy would be putting survival of small businesses in America ahead of justifying a legislative expenditure!
One interesting aspect of the actual bill known as the CARES Act is there is a king size drafting error in the bill which when you think about it epitomizes the abysmal job members of Congress and the President have done in passing legislation to respond to this terrible crisis that has hit the country! The drafting error in the bill involves the design of the loan forgiveness portion of the program. Congress's intent there was that a percentage of eligible expenses (payroll costs, interests on mortgages, rent obligations and utility expenses) incurred for a two month period up to the total amount of the principle of the loan would be forgiven and the percentage is essentially the percentage of the employees a small business kept on the payroll during this two month period compared to the number of employees the small business had prior to the economy being shut down which makes sense because if it is a payroll protection program one would want to incentivize employers to keep employees on the payroll which this design does. The actual language of the statute (Sec.1106 (d)(2)) describe the amount of the loan to be forgiven is this total expense figure for the two month period reduced by the aforementioned percentage of this total percent figure; one can further tell it is a drafting error because the language of the provision doesn't comport with the title of the paragraph "Reduction Based On Reduction In Number Of Employees". What the actual text of the statute does is incentivizes small business owners to lay off as many of their employees as possible because per the text the higher percentage of layoffs the higher percentage of your expenses you will get forgiven!
I was watching the Governor of New York's, Andrew Cuomo, press conference today and it was initially a typical great press conference by the Governor where he demonstrates he is transparent and responsible about this Covid 19 crisis. Then the Governor turns to the current legislative controversy in Washington and I agree with him Congress has to specifically send aid to the states and to the counties across America to stop the alarming numbers of government layoffs that will otherwise occur which will reverberate bad thru the economy. But then he goes on this left wing tirade and I was really surprised because I thought the Governor was a traditional center left Democrat that believed in helping people on the lower rungs of the social ladder but still believed in being fiscally responsible and pro-business! The Governor starts with a wrong interpretation on the Great Recession he says the American people got the shaft when bailing out the financial industry for the massive fraud they committed related to the mortgage market; first he forgot to mention that regulators and Congress were majorly culpable in that fraud they allowed loan applications to be treated like a joke and no taxpayer money was lost in the bailout program which was called TARP which incidentally provided significant help to ordinary home owners who were underwater with their mortgages. Then the Governor begins a tirade where he labels businesses today as the bad guy as the enemy of the American people granted a lot that goes on in our economy with respect to business is wrong but the major wrong doing could be fixed by Congress and the President thru legislation but it was disconcerting that Governor Cuomo didn't seem to appreciate that businesses are the means by which American can achieve a good standard of living vis-a vis good wages they receive thru these businesses he did not seem to appreciate how vital is U.S. businesses in making the American dream attainable for more and more people in America. But what was really alarming about Governor Cuomo behavior was how he acted like a Tasmanian devil against businesses calling for American businesses that have and will receive loans from the Federal government if they lay off even one employee compared to their payrolls prior to the economic shut down they should have to give back the loan money to the Federal Government. Is Governor Cuomo clueless on how capitalism works does he want America's economy to become a stagnant European one where wages and business growth are anemic because of anti-capitalism government regulation. The government cannot expect U.S. businesses to carry staffing levels, and the commensurate wage and benefit costs, higher than what their business activity calls for that is a fundamental principle of capitalism.
The Chinese government hurt the U.S. economy bad when they did not issue warnings that Covid 19 was a highly contagious fatal disease so America could shield itself and the hard truth that prudent financial experts and economist are trying to impress on the American people is that the economic recovery will be a moderately ascending recovery. The President and members of Congress and Governors and members of legislature across America have to stop expecting America's businesses to draw up and implement plans to return their businesses to the state they were on February 15 of this year, it's idiotic, it makes no economic sense and it is going to make things worse. Once America gets thru the medical side of the pandemic the country can focus on rebuilding and do consensus things like bring back domestic production of raw materials in pharmaceuticals and actual production of pharmaceuticals and reagents and PPE's and rebuild and expand America's infrastructure. Politicians in America and the media that pushes America one way and another have to stop with this pipe dream that they are pushing on America that certain entities just have to flip a switch and will all go back to February 15 we need to face reality so we can make prudent steps to make the journey back as less hard as possible with less long-term injury as possible!
