The U.S. government on Monday identified roughly 650,000 mostly small businesses and not-for-profits that received taxpayer money from a program that likely helped prevent the job market meltdown from growing worse but that also benefited some politically connected firms.
Recipients covered a broad swath of industries, with some that were less directly impacted by the coronavirus pandemic, such as manufacturing and construction, receiving a greater proportion of the loans than the hard-hit restaurant, bar and hotel industries. Many law firms and private equity companies also obtained loans.
Businesses owned by politicians also borrowed from the Treasury Department’s Payroll Protection Program, including a minor league baseball team owned by the family of the governor of Ohio. A large franchisee of Wendy’s, Taco Bell and Pizza Hut restaurants, whose CEO is a major donor to President Donald Trump, received loans totaling between $15 and $30 million.
The program launched April 3 and as of June 30 had handed out $521 billion. Treasury identified just a fraction of the total borrowers Monday, naming only those companies that got more than $150,000. Those firms made up less than 15% of the nearly 5 million small companies and organizations that received loans.
The list includes 2,499 Indianapolis entities and 11,853 entities statewide that received PPP loans of $150,000 or more.
Economists generally credit the program with helping prevent the job market meltdown from being much worse. Employers added 7.5 million jobs in May and June, a solid increase though it left the economy with nearly 15 million fewer jobs than before the pandemic. The PPP probably drove some of that gain.
And research by Tomaz Cajner, an economist at the Federal Reserve, and seven colleagues found that companies with fewer than 50 workers before the pandemic saw their hiring rise 12% in May, while jobs grew just 5% in larger firms, suggesting PPP helped fuel rehiring.
But the program was only intended to carry the economy through a short interruption from the coronavirus pandemic, which is now threatening to have a longer-lasting impact. Treasury initially required the loans to be spent within 8 weeks of being received, though that was later lengthened to 24 weeks.
Many small businesses have already run through their PPP money and still face sharply smaller demand, as consumers remain wary of returning to their older habits of shopping, visiting gyms, or eating out. Texas, Florida, California, New York and others have reversed their reopenings, closing down bars and delaying the onset of indoor dining.
“The biggest issue is that PPP is short-term help,” said Adam Ozimek, chief economist at Upwork, a freelancing platform. “And now we’re dealing with a mid to long-term problem.”
A survey by the National Federation of Independent Business found that as of mid-June 14% of small businesses that borrowed from the PPP expected they would have to lay off some workers when their loan ran out.
The program provided loans of up to $10 million for small businesses to help them recover from the government-ordered shutdowns and revenue losses caused by the virus outbreak. The average loan amount for the entire program was $107,000, the Treasury Department said in a broad summary of the program.
The loans can be forgiven if the businesses mostly use the money to continue paying their workers. The program initially was set to expire June 30 but was extended last week to Aug. 8, with $132 billion still available.
The recipients employed 51 million people before the pandemic began, Treasury Secretary Steven Mnuchin said, or about 85% of all workers at companies with fewer than 500 employees. The government won’t know how many of these jobs were actually saved until companies apply to have the loans forgiven, a process that is just beginning.
A senior administration official said Monday that some small companies “will need additional support” in the coming months.
The public may never know the identity of more than 80% of the nearly 5 million beneficiaries to date because the administration has refused to release details on loans under $150,000. That secrecy spurred a lawsuit by news organizations including The Associated Press.
Treasury has released only dollar ranges for the loan amounts, rather than exact figures. Businesses owned by several politicians were listed among the recipients, including Ohio Gov. Mike DeWine, a Republican.
DeWine Seeds-Silver Dollar Baseball received a loan of $150,000 to $350,000, the government said. The company owns the Asheville Tourists, a minor league baseball team in North Carolina, which was purchased by the governor’s family in 2010. DeWine’s son, Brian DeWine, currently serves as president of the baseball team. The minor league baseball season was canceled for 2020.
And Waterville Valley Holdings, an investment group led by the family of New Hampshire Gov. Chris Sununu, got a loan of between $350,000 and $1 million. The company is the principal investor in the Waterville Valley Resort, a ski area where Sununu, a Republican, served as CEO until just before he took office in 2017.
Some major supporters of President Donald Trump also benefited. Muy Brands Inc., a San Antonio, Texas-based franchisee with more than 750 Wendy’s, Taco Bell and Pizza Hut restaurants, received between $15 million and $30 million between three entities. Muy Brands CEO James Bodenstedt is a major donor to the president. He has given $300,000 to the Trump Victory PAC since the start of this year, according to federal campaign finance records.
Restaurants, bars and hotels, the hardest-hit industry from the coronavirus that lost nearly half of its pre-pandemic jobs in March and April, ranked fifth on a list of recipients. Health care, professional and business services, construction and manufacturing received a greater share of loans.
And according to an analysis by Beth Ann Bovino, U.S. chief economist at Standard & Poor’s, some states with the smallest increases in unemployment from the pandemic got more loans than harder-hit states.
“It didn’t reach the industries that needed it, and it looked like it didn’t reach the states that were hardest hit,” Bovino said.
Media companies, including Newsday and American Media, former owner of the National Enquirer, got loans ranging up to $5 million.
While larger businesses received loans, that doesn’t necessarily mean that the loans will be forgiven. If some firms did not fully comply with loan rules they may need to repay them, said Karen Kerrigan, president of the advocacy group Small Business & Entrepreneurship Council.
The data gave few details about loans to minority-owned businesses. Companies were not required to supply demographic data on their applications, and many entries about race and gender contained “unanswered.”
However, many minority-owned businesses don’t have employees, and so their loan amounts likely were under $150,000 and therefore not part of the data release. Senior administration officials who briefed reporters before the release said they hoped to get more information when owners submit applications for loan forgiveness over the next few months.