Treasury Secretary Steven Mnuchin speaks during the daily briefing on the novel coronavirus, COVID-19, in the Brady Briefing Room at the White House on April 2, 2020, in Washington, DC.
Mandel Ngan | AFP | Getty Images
Treasury Secretary Steven Mnuchin told CNBC on Tuesday the government will perform an audit on any company taking out more than $2 million from the small business loan program.
“I’m going to be putting out an announcement later this morning that for any loan over $2 million, the Small Business Administration will be doing a full review of that loan before there is loan forgiveness,” Mnuchin said. The program allows companies to have their loans forgiven, provided they spend the funds on payroll, benefits, rent and utilities.
“We’re going to do a full audit of every loan over $2 million. This was a program designed for small businesses. It was not a program that was designed for public companies that had liquidity,” he added.
The program faced backlash after several public companies disclosed they had taken out the loans, which were intended to help small businesses with less than 500 employees weather the coronavirus crisis. More than 220 public companies applied for at least $870 million from the government program, according to Washington D.C.-based data analytics firm FactSquared. Those companies included Potbelly Sandwich Shop, Ruth’s Chris Steak House and Shake Shack.
Mnuchin said it was “inappropriate” for most of those public companies to take the funds. He called it “outrageous” that the Lakers took out $4.6 million from the program, before ultimately returning it.
“We don’t think they ever should have been allowed to,” Mnuchin said. “We put out an FAQ clarifying the certification.”
According to guidance posted by the small business association on April 23, borrowers must “certify in good faith” their loan request is “necessary,” the SBA said.
“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification,” the guidelines states.
Mnuchin said Tuesday he did not fault the banks that stewarded those loans, but, instead, the companies that applied for them that did not need. The small business program quickly ran out of initial $349 billion allotments as established by the $2.2 trillion CARES Act, before injecting another $310 billion into the program in a bill passed last week. Trump signed the bill, which also included funds for hospitals and testing, into law on Friday.
Both rounds of funding have been hampered by glitches, as too many banks trying to jam loans into SBA loan portal.
Oversight of the more than $2 trillion CARES Act has been a key issue for lawmakers, amid concerns the funds would go to companies that do not need it. Sen. Elizabeth Warren, D-Mass, wrote a letter to the Office of the Inspector General for the U.S. Small Business Administration last week urging a “broad investigation into the program’s implementation.”
Among the issues she wants the Inspector General to look into, she called for a “review of the SBA and Treasury Department rulemaking and guidance process, and an assessment of whether this process was effective in ensuring that lenders and small businesses could access the program quickly and equitably, and whether SBA and Treasury included appropriate protections against program waste, fraud, and abuse.”
The administration, meantime, has pushed back against several of the oversight functions that Democrats have pushed for. President Donald Trump earlier this month removed the lead watchdog overseeing the $2 trillion coronavirus package, just days after the official, Glenn Fine, was appointed to the role.
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