PROVIDENCE, RI -- As problems continue to plague the Paycheck Protection Program (PPP), which Congress intended to serve as relief for small businesses, U.S. Senator Jack Reed (D-RI) is calling for a Congressional investigation and thorough audit into how the program is being administered by big banks and overseen by both U.S. Treasury and the U.S. Small Business Administration (SBA).

Senator Reed, a senior member of the Banking Committee, says he is outraged by news reports indicating that big banks are apparently exploiting the program to assist their VIP customers at the expense of creditworthy Main Street businesses and taxpayers.  According to an analysis by NPR, banks were able to rake in $10 billion in processing fees as they administered the first $349 billion in PPP assistance.

“This was supposed to be a paycheck protection program to help small businesses and workers, but it has been plagued by problems, mismanagement, and lack of sound guidance from the Trump Administration.  As a result, favored companies are winning while small businesses are being shut out.  If real changes are not made to the PPP, senators are going to have to think long and hard about whether it’s worth putting more money in the program when it runs out again,” said Senator Reed.

Despite the fact that the SBA had a two week pause to enhance and prepare its small business portal, known as E-Tran, many Rhode Island small businesses and local banks have reported being shutout and denied access, while bigger banks do not appear to have experienced the same issues.

“This is about more than computer glitches, it is about basic fairness and transparency.  SBA headquarters is pumping out skewed statistics while failing to provide critical information about what money has gone out the door and what processing fees banks have charged.  Congress shouldn’t stand idly by while small businesses get shafted and taxpayers get fleeced.  The American people have every right to know where their tax dollars are going and who is benefitting.  The Trump Administration already has access to this information and they can’t withhold it forever.  There should be a bipartisan commitment to oversight, transparency, and accountability.  Congress should launch a bipartisan probe to protect small businesses, taxpayers, and our economy,” said Senator Reed, who sent a letter to SBA and Treasury today urging them “to immediately and continuously disclose non-confidential information related to Paycheck Protection Program (PPP) borrowers and lenders in order for Congress and the public to accurately evaluate PPP’s effectiveness.” 

Congress enacted PPP and has provided it with a total of $659 billion to help eligible small businesses receive relief funds through government-backed low-interest loans from banks and credit unions.  The loans are forgivable in full if the companies use 75% of the federally backed money on paying and retaining their employees.

While millions of small businesses have been unable to access the system, notable brand name companies such as the Los Angeles Lakers, valued by Forbes at over $4 billion, were able to access PPP loans from their bank.  But yet the mom-and-pop shops and Main Street businesses the program was supposed to help were shut out. 

“This was supposed to be a small business rescue plan,” said Reed.  “While the owners of the Lakers were somehow able to score a multi-million dollar loan, millions of minority-owned businesses were boxed out.  This failure to reach minority owned businesses is unfair and incredibly damaging to our economy.  I will continue pushing to expand opportunities and ensure fairness.  Small businesses aren’t asking for much, they just want a fair shot.  And it’s unfair that the Trump Administration’s rules and banks implementation have forced mom and pop shops to compete with the Lakers.”

After the first round of PPP funding lapsed, Senator Reed sought important legislative fixes and updates to the program.  Unfortunately, Congressional Republicans blocked any legislatives fixes from being included in the second round of PPP.  But Democrats were able to secure a commitment to ensure that at least $60 billion would be channeled through community-based financial institutions that serve minority-owned businesses.

And this week, Senator Reed and several members of the Banking Committee penned a letter to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell to ensure that minority and low- and moderate-income (LMI) communities get proper access to the critical assistance made available under the law.

“As you know, the public health and economic effects of the COVID-19 outbreak have been particularly disproportionate and severe for LMI and minority communities. Congress took important first steps to help address the acute impact being felt in these communities by passing the PPP Enhancement Act. This legislation includes important set-asides for community and mission oriented lenders,” the Senators wrote in a letter to Mnuchin and Powell, urging them to take several steps to make funds available to minority depository institutions (MDIs) and mission-oriented leaders like community development financial institutions (CDFIs).

Reed says he will continue to monitor PPP and other coronavirus federal funding closely and is urging Congress to launch investigative hearings and ensure stronger oversight when the Senate is scheduled to return to session next week.