Three weeks and hundreds of billions in misappropriated loans later, the Treasury Department has issued guidance intended to stop banks from issuing Paycheck Protection Program loans to large companies.

According to CNBC, the Treasury says it’s unlikely that any public company with substantial market value and access to capital markets will be able to credibly prove in good faith that they have a legitimate need for a PPP loan.

In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that ”[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. –CNBC

The guidance comes after national outrage over banks such as JPMorgan prioritizing loans to large, public companies over small businesses struggling during the COVID-19 pandemic, which the funds were intended for in the first place. After they got caught, JPMorgan announced that they were working with the Treasury department to adjust the distribution qualifications for the next round of funding. That’s nice, but it doesn’t help small business owners who continue to struggle amid the pandemic – which resulted in a lawsuit filed last week in a Los Angeles federal court over the debacle.

In a Thursday Op-Ed in the Wall Street Journal, Sen. Ron Johnson (R-WI) writes:

With the rapid deployment of support through the Paycheck Protection Program, it has become clear that access to the forgivable loans hasn’t been limited to those who truly need them. The PPP was intended to support small employers that otherwise would have had to lay off employees because of coronavirus-related revenue loss. Keeping employees connected to employers provides wage and benefit continuity, and we hope it will help ensure a faster recovery.

But the minimal requirements for loan qualification, designed to speed relief, have allowed employers to obtain PPP loans even if they aren’t in financial distress and have no need or intention to lay workers off. Loan applications granted on a first-come, first-serve basis quickly depleted the $349 billion fund, and many deserving small businesses were crowded out, unable to obtain financial relief. On Tuesday the Senate passed a bill that provides another $310 billion for PPP. It places no further limitations on loan forgiveness, and the self-certification of economic harm required by applicants remains a nebulous statement that “current economic uncertainty makes [the] loan request necessary to support the ongoing operations” of the business.

Johnson proposes adding forgiveness limitations to PPP funds based on ability to repay, which would apply to all loans – including those granted under the Cares Act. It would allow no forgiveness for companies whose 2020 taxable income exceeds that of 2019, while full forgiveness would be limited to companies whose 2020 gross receipts are less than 60% of the preceding year’s.

Those in between would be eligible for forgiveness on a sliding scale: 10% of the loan if 2020 gross receipts are 90% or higher of 2019’s; 30% forgiveness for 80% to 90% of 2019 gross receipts; 50% forgiveness for 70% to 80% of 2019 gross receipts; and 75% forgiveness for 60% to 70% of 2019 gross receipts. In no case would forgiveness exceed the loan amount less after-tax income.

Tax-exempt nonprofits would receive loan forgiveness based on net assets – with none going to entities whose 2020 net assets exceed those for 2019 or are more than 2x the loan amount.

At the end of the day, Johnson says that the abuse within the PPP system shohld be remedied, which will ultimately help people and businesses which have ‘borne the brunt of the coronavirus’s economic destruction.’



Scenes from the popular TV series ‘V’ reveal eerily similar parallels to the new medically-induced tyranny that is ongoing with the COVID-19 “plannedemic.”

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