You are here
Management of bailout money poses political test for Trump
[WASHINGTON] When restaurant industry executives gathered at the White House this month, Tilman J Fertitta pleaded with President Donald Trump to let his chains of high-end eateries gain access to a government loan programme meant for small businesses.
Mr Fertitta, the billionaire owner of the restaurant group Landry's, told Mr Trump it was unfair that he had to lay off 40,000 workers at his 600 restaurants only because they were employed by a larger corporation that was suddenly boxed out of the programme amid public outrage over big companies getting bailouts. Mr Trump turned to Treasury Secretary Steven Mnuchin, whose rule changes had excluded companies like Landry's, which owns restaurants like Del Frisco's Double Eagle Steakhouse and Morton's Grille, to see if there was anything he could do to help.
"I mean, he's got a unique situation," Mr Trump said of Mr Fertitta, who bought an Atlantic City casino from Trump Entertainment nearly a decade ago. "You know, he has a lot of restaurants."
Mr Mnuchin, observing that the politically charged debate was taking place with cameras rolling, demurred: "We don't need to have this in front of all of our friends back there."
The Trump administration's carrying out of the largest economic bailout in American history has emerged as a political liability for the president, with businesses, banks and Democrats assailing the White House over its handling of a centrepiece programme intended to help keep businesses and workers afloat during the virus-induced shutdown.
Funds have flowed to rich hoteliers, the Los Angeles Lakers and Planned Parenthood affiliates, sending Mr Trump's advisers scrambling to reclaim money and tighten the programme's terms. With more than 30 million Americans jobless and economists predicting that thousands of small businesses could shutter permanently, the Paycheck Protection Program's (PPP) troubles are shaping up as an opportunity for Democrats heading into the 2020 election.
Top Democrats, including the party's presumptive presidential nominee, Joe Biden, have seized on examples of rich executives getting money ahead of small businesses through the programme as indicative of corporate cronyism.
Last week, the Democratic National Committee and Democratic state parties in swing states held conference calls with reporters and other events highlighting stories of small business owners who didn't get approved for loans.
The Trump administration has hailed the loan programme, which was part of legislation that passed Congress with bipartisan support, as a major success. Mr Mnuchin has claimed that the loans have been a lifeline that saved millions of jobs. To date, US$511 billion in loans have been approved, with an average loan size of US$116,000, according to the Small Business Administration.
Some Republican candidates are running their own ads embracing the effort. Senator Susan Collins, R-Maine, who is facing a tough reelection battle, has spent nearly US$500,000 on ads that promote her role in "co-authoring" the programme, according to data from Advertising Analytics, an ad tracking firm. And Senator Mitch McConnell, R-Ky, the Senate majority leader, spent US$175,000 on an ad featuring small business owners and employees describing jobs and businesses that were "rescued" by Mr McConnell's efforts on the stimulus package.
But left-leaning groups have seized on the programme's stumbles and are spending heavily to get that message to voters. Priorities USA, one of the largest super PACs on the Democratic side, has been paying Facebook to promote certain news stories — a tactic known as "boosted news" — that highlight shortcomings of the programme.
An ad from Priorities resurrected an article from Fox Business with the headline "Stimulus intended to help coronavirus-ravaged small businesses instead rewarding hedge funds, brokerages". Another highlighted an NBC News investigation into firms with deep connections to the Trump administration that received PPP funding.
Democrats and allied groups have been buoyed by polling from Navigator Research, which is overseen by leaders of several progressive organisations, that found a majority of Americans were "very concerned" that the loans were going to large corporations and businesses like the Los Angeles Lakers instead of small businesses.
The issue is already coming up on the virtual campaign trail. Mr Biden has been raising Mr Trump's management of the stimulus money with growing frequency in television interviews and on social media. This month, Mr Biden vowed that, if elected, he would appoint a new inspector general to investigate where the stimulus money went and refer any misdeeds or "corrupt giveaways" to the Justice Department for prosecution.
The PPP, which provides forgivable loans to cover eight weeks of payroll and overhead costs to businesses with 500 or fewer employees, has benefitted many small companies. More than four million loans have been approved and, according to the Federal Reserve's most recent "Beige Book" report, the programme has helped limit layoffs.
But the rollout has not gone smoothly, with technical glitches and delays hampering efforts to send money out the door and millions of dollars in loans approved for large companies, including those that are publicly traded and had other access to capital.
The House on Thursday approved a bill that would give companies more time and flexibility to use the money.
It remains unclear whether the programme will be replenished when it runs out of funds for a second time, but it will most likely continue to put Mr Trump and Republicans on the defensive.
Stephen Moore, the conservative economist who is an informal adviser to Mr Trump, said that Republicans made a mistake in devising a program with insufficient transparency in which most of the loans turn into grants. That has given big companies an incentive to seek free money.
"That was a very foolish and expensive decision that has led to a lot of taxpayer rip-offs," Mr Moore said.