House Speaker Nancy Pelosi, D-CA, and House Minority Leader Kevin McCarthy, R-CA. (SAUL LOEB/AFP via Getty Images)

As Democrats and Republicans deadlock over how to allocate new stimulus funds, top lawmakers from both sides of the aisle seem to agree on one thing — small businesses backed by private equity and venture capital investment firms should be able to tap into the aid.

Congressional leaders continue to negotiate another round of $250 billion in aid to combat the economic impact of the coronavirus.

Small businesses and startups with fewer than 500 employees but controlled by large parent companies including private-equity firms are not currently eligible to get loans under the program. House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.) — hailing from California and catering to Silicon Valley constituents — want to change the rules to extend support to them.

They are among the California lawmakers backing the change who are also beneficiaries of campaign donations from the private equity industry.

Rep. Ro Khanna (D-Calif.), who backs their inclusion, has received the most campaign cash from venture capitalists with nearly $303,000. Pelosi is 15th on the list with nearly $68,000. Former Democratic presidential candidate Sen. Kamala Harris (D-Calif.) also supports including venture capital-backed startups in the loan program. She received the second most campaign cash from the industry with over $281,000.

Pelosi and Khanna wrote a letter to Treasury Secretary Steve Mnunchin in March, asking that rules for the program be amended to permit startups.

“Many small businesses in our districts that employ fewer than 500 employees, particularly startup companies with equity investors, have expressed concerns that the Small Business Administration’s rule may exclude them from eligibility,” Pelosi and Khanna’s letter said. “Our districts in California’s Bay Area and Silicon Valley are home to thousands of these companies. We urge you to issue guidance as expeditiously as possible and to afford our nation’s startups access to a critical source of credit.”

However, progressives like Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) oppose the inclusion of private equity and venture capital firms. “We’re generally against asking the public to bail out PE-backed companies whose business practices can be irresponsible, risky, saddled with debt, and ultimately lead to bankruptcy,” Ocasio-Cortez spokeswoman Lauren Hitt told RollCall. “We shouldn’t be subsidizing vulture funds.”

Meanwhile, some of the richest Wall Street titans are also lobbying for a share in the bailout, Politico reported.

These include the American Investment Council which represents giants like Blackstone Group, Apollo Global Management and Carlyle Group and lobbying group Institutional Limited Partners Association. Private equity and investment firms spent almost $14.8 million on lobbying in 2019 and individuals at those firms contributed millions to lawmakers. These top groups also have close ties to the White House.

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Blackstone Group, which is lobbying for small business loan eligibility, has given over $17 million in contributions. Their CEO, megadonor Stephen Schwarzmann gave $10 million to the Senate Leadership Fund and $2.5 million to the Congressional Leadership Fund in the 2020 election cycle. Schwarzmann is a trusted adviser to President Donald Trump and gave $3 million to Trump’s super PAC in January.

Carlyle Group has contributed nearly $1.6 million to candidates, giving to candidates from both sides of the aisle including McCarthy and Pelosi. And Apollo Global Management reportedly loaned Trump’s son-in-law and senior adviser Jared Kushner’s real estate firm $184 million.

“It shouldn’t matter if these companies are backed by investments from corporations, pension funds or others,” Drew Maloney, President of American Investment Council told Politico. “We’ll continue to work with the administration and Congress to request that federal programs support all businesses, regardless of ownership structure, and their workers.”

The Association for Corporate Growth, a trade group for mid-sized private equity firms, is also lobbying for relief. Five million employees would be at risk of losing their jobs if they are not given government aid, a study conducted by the group found.

The industry is calling for aid since it invests in a wide range of businesses ranging from mom and pop shops to public pension plans. This is why, in a letter to Mnuchin, the Institutional Limited Partners Association wrote there could be “significant harm not only to employees, but also reduced returns to the institutions providing retirement security through pensions, insurance policies and other investments.”

While over a dozen interest groups, including the American Federation of Teachers, wrote to Congress urging private equity firms be kept out of the program, 10 conservative groups, including Club for Growth, asked that they be included.

The GOP wants to add $250 billion to the stimulus package for small businesses leaving other issues for future negotiations, but Democratic leadership wants to include more aid to state government and local hospitals in the current discussions.

The Senate adjourned Monday with no breakthrough as Senate Majority Leader Mitch McConnell (R-Ky.) and McCarthy issued a statement over the weekend stating they would not compromise by making amends to a swift addition of $250 billion to the small business loan program.

Since the originally allocated $349 billion proved to be inadequate, both sides of the aisle agreed an additional $250 billion, if not more, needs to be pumped in the program. But the stalemate over where the money goes continues as the funds quickly run out.



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