More Shake Shacks are sitting quiet on small business Covid-19 bailout money, aided & abetted by big banks while mom & pops suffer
Restaurant chain Shake Shack has dutifully returned bailout money small businesses should have gotten as the US government’s bailout fund for mom-and-pops runs dry. But their virtue signaling doesn’t fix an institutional problem.
Shake Shack announced on Sunday it is returning a $10 million loan received through the Paycheck Protection Program (PPP) – the government bailout fund for “small and medium-size” businesses that ran dry last week after handing out $350 billion in low-interest loans to foundering enterprises suffering amid the coronavirus economic shutdown.
But the chain didn’t give the money back out of the goodness of its heart – it did so only after the media exposed it as one of many large chain restaurants, hotels, and other large corporations to receive the coveted “small business” loans before the fund ran dry, even as countless actual small businesses were unable to access it. Giving back the money is little more than virtue signaling from a well-heeled business caught with its hand in the proverbial cookie jar.Also on rt.com As Covid-19 relief program runs out of money, Democrats blame ‘KILLING’ of small businesses on Mnuchin – and fill up on ice cream
Explaining they had secured alternate funding, Shake Shack and its parent company’s CEOs pleaded confusion regarding their decision to apply for the small business loans in the first place, pointing out that the bailout program “came with no user manual” and that they had fewer than 500 employees at each of their 189 restaurants, making each technically a “small or medium-sized” enterprise despite the thousands of employees they had on the payroll in total.
Thanks to loopholes included in the bailout by lobbyists for the restaurant and hotel industries, this absurdist accounting was actually permissible under the PPP rules – and the well-heeled burger chain wasn’t even the worst offender. Because restaurants and hotels were particularly hard-hit by the shutdown, lobbyists reasoned chains should be allowed to apply for one loan for every location. As a result, some chains with thousands of employees pulled down 10 or more fat loans, outraging government watchdogs, one of whom called the inequality “a slap in the face to the untold thousands of legitimate small businesses that will not survive this crisis.”
Nor did the inequality stop at chains being given more than one bite at the bailout apple. Wells Fargo was hauled into court on Sunday for supposedly putting large corporations first in doling out PPP loans. While the bank claimed earlier this month that it was prioritizing loan applications for businesses with fewer than 50 employees, a class action lawsuit pointed to data from the Small Business Association (which helped administer the loans), which revealed Wells Fargo processed the largest loan applications first, leaving the small businesses until the fund was almost empty.
Wells Fargo isn’t the only big bank to be called out for unfair treatment. A lawsuit brought against Bank of America in Baltimore was thrown out of court after the judge ruled the mega-lender was allowed to exclude customers who were not already in debt to the bank from applying for loans – even those with decades-long banking relationships. Bank of America had been deluged by complaints from customers protesting the fine-print regulations barring non-debtors from applying for PPP loans.
Another suit filed in Maryland on Friday has accused the US Treasury Department of favoring large businesses for PPP loans in a way that discriminated against minorities and women, claiming “the businesses they [were] making wait [to apply] are disproportionately owned by women and minorities.”
“They knew these people weren’t going to get funding and they excluded them from the program,” the plaintiffs complained.Also on rt.com US Federal Reserve props up zombie companies that should have collapsed – RT’s Keiser Report
While half the employed population of the US works for “small businesses,” it is the large corporations that make policy – by donating to political campaigns and, more recently, by participating in President Donald Trump’s economic reopening council. Nowhere is this clearer than in Congress’ treatment of small versus large corporations. While so-called “zombie” corporations – large firms that couldn’t survive in a true free market, plus moribund industries like shale oil drilling – remain afloat thanks in part to generous political contributions to the policymakers, Congress remains deadlocked on re-upping the small business bailout fund as of Monday. Over 22 million Americans have filed for unemployment in the last month as states continue their coronavirus shutdowns, and experts have warned that the country – and the world – are facing an unprecedented economic depression.
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