Federal officials responsible for spending $660 billion in taxpayer-backed small-business assistance said Wednesday that they will not disclose amounts or recipients of subsidized loans, backtracking on an earlier commitment to release individual loan data.
The Small Business Administration has previously released detailed loan information dating to 1991 for the federal 7(a) program, a long-standing small-business loan program on which the larger Paycheck Protection Program is based.
The SBA initially intended to publish similar information for the new coronavirus-related loans. An SBA spokesman told The Washington Post in an April 16 email that the agency “intend[s] to post individual loan data in accordance with the information presently on the SBA.gov website after the loan process has been completed,” and it made a similar commitment in response to an April 17 open records request.
But the administration appeared to change course at a hearing Wednesday before the Senate Committee on Small Business and Entrepreneurship, as Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza declined to discuss specific borrowers.
“As it relates to the names and amounts of specific PPP loans, we believe that that’s proprietary information, and in many cases for sole proprietors and small businesses, it is confidential information,” Mnuchin said in the hearing. “The reason why we’re not disclosing the names and amounts, unlike in the 7(a) program, is because of that issue.”
The Post is among 11 news organizations suing the SBA for access to records on loan recipients, amounts of loans and other basic information the agency has previously released. In response to questions from The Post on Wednesday, a Treasury Department spokesman said that disclosing “loan-level data” would risk the confidential business information of loan recipients.
“The notion that the administration is hiding something is categorically false,” Brian Morgenstern, a Treasury Department spokesman, said in an email. “The secretary’s point is that loan level data with identifying information would risk disclosing proprietary data of millions of small businesses and the salaries of independent contractors. We are fully committed to transparency while protecting sensitive information,” Morgenstern wrote.
The Post’s Freedom of Information Act request does not seek information about salaries.
The apparent decision to withhold loan records is the latest of several actions by the Trump administration that could shield the federal coronavirus response from public scrutiny.
An unrelated provision in the Coronavirus Aid, Relief, and Economic Security (Cares) Act allows the Federal Reserve chairman, Jerome H. Powell, to request confidentiality for information related to trillions of dollars going to businesses under the auspices of the Federal Reserve. And the Trump administration has taken steps to undermine the independence of executive oversight bodies, declaring that the special inspector general overseeing Cares Act funding cannot submit reports to Congress without “presidential supervision.”
Throughout the Paycheck Protection Program rollout, the SBA has been repeatedly criticized by members of Congress and government watchdog groups for an alleged lack of transparency.
“The very first line of defense for the public to make sure the money is being awarded to the businesses that are supposed to be getting it is through transparency,” said Craig Holman, a lobbyist with the advocacy group Public Citizen. “It’s a problem with PPP, but it also goes far beyond that. . . . The entire pandemic response has been defined by a lack of transparency.”
The Paycheck Protection Program is a cornerstone of the $2 trillion Cares Act economic stimulus package and the federal government’s broader response to the coronavirus pandemic. The program offers small-business owners low-interest loans that can later be forgiven, with the amount of forgiveness contingent on maintaining employment levels. The loans are processed by private banks and regulated by the Small Business Administration and the Treasury Department.
Despite early growing pains, the program scaled up quickly following its launch in early April, helping millions of small businesses keep paying their employees through the economic crisis. It almost certainly contributed to a surprise drop in the national unemployment rate in May.
But there is a concern that the SBA’s exceptionally loose application criteria ― a deliberate policy choice that increased demand for the loans and allowed the money to be spent quickly while the crisis deepened ― could have the unintended effect of increasing fraud and abuse.
In an effort to streamline the process, the SBA and the Treasury Department allowed lenders to take borrowers at their word regarding their need and eligibility. Although the SBA later said that any loan above $2 million would be audited, business applicants were initially subject to very little vetting.
The Justice Department has pointed to allegedly fraudulent transactions among loan recipients. Reality television star Maurice “Mo” Fayne was arrested and charged with bank fraud for spending more than $1.5 million in SBA loan money on jewelry, expensive cars and child support. Fayne received a loan through a Georgia corporation called Flame Trucking.
Numerous large businesses and wealthy organizations availed themselves of subsidized small-business loans, which they contend were legal at the time they applied. Well-known restaurant and hotel chains including Shake Shack, Ruth’s Chris Steak House and Ashford Hospitality Trust initially received tens of millions of dollars through their franchises.
According to filings with the Securities and Exchange Commission, nearly 300 publicly traded companies received $1 billion in stimulus funding, prompting an after-the-fact ruling from SBA that public companies with access to credit elsewhere would probably not qualify. Many of those businesses subsequently returned the money, although the SBA has declined to say exactly how many did so.
Advocacy groups said the decision not to release records could shield other undeserving applicants from public scrutiny.
“Clearly, this is meant to prevent some entities from being embarrassed, or being revealed,” said Steve Ellis, president of the advocacy group Taxpayers for Common Sense. “Nobody forced them to take the money, and it was already set up so that they could return it with no questions asked. And they were told that this information would be made public when they applied for the loan.”
At the Senate hearing Wednesday, members of both parties expressed frustration that they hadn’t been provided the loan records.
Sen. Ben Cardin (D-Md.) said Congress needs to have access to the loan data to carry out effective oversight. He also criticized the SBA for not notifying borrowers about important policy changes affecting them. Cardin said the Government Accountability Office, a nonpartisan executive-branch oversight body, was also stonewalled.
“How can we know which businesses still need help if we do not know which businesses have received help?” Cardin said. “We need the data to ensure this assistance is as effective as possible.”
Senate Republicans at the hearing also expressed frustration that the loan data is not being disclosed, although their concerns focused more closely on reports that Planned Parenthood has received money through the program. The SBA has sent letters to at least a dozen local Planned Parenthood affiliates requesting that they return the money, although it is unclear whether any of them have done so. One Planned Parenthood affiliate told The Post that much of its loan funding had already been spent.
Asked about the Planned Parenthood loans by Sen. Josh Hawley (R-Mo.), Carranza, the SBA administrator, declined to discuss the issue.
“I have to take the position that I’m not able to share that borrower information at this time,” she said, offering to follow up with him privately.
Hawley appeared unsatisfied with that offer and asked why she wouldn’t discuss the issue under oath.
“How are we going to conduct oversight if you won’t give us any of the details?” he asked.