May 13, 2020 / 6:23 PM / 24 days ago

Hey SBA, taxpayers deserve to know who’s getting COVID-19 relief loans

(Reuters) - Five news organizations sued the U.S. Small Business Administration on Tuesday, asking the federal court in Washington, D.C., to order the SBA to comply with their requests under the Freedom of Information Act for the names of recipients of hundreds of billions of dollars of government loans under two COVID-19 assistance programs.

The Washington Post, Bloomberg, Dow Jones & Company Inc, Pro Publica and The New York Times Company allege that the SBA routinely provides information about borrowers who receive loans through the agency’s longstanding financial assistance program. In the Coronavirus Aid, Relief and Economic Security Act, Congress expanded that program in the $660 billion Paycheck Protection Program, which has already approved about 4 million loans, totaling more than $525 billion, to qualifying businesses and non-profits. Applicants for PPP loans were notified that their names and other identifying information were subject to FOIA requests. Yet the SBA has so far not disclosed who received loans under the PPP or the $50 billion Economic Injury Disaster Loan Program.

That hasn’t been for lack of trying by the news organizations, according to the complaint. Each of them filed at least one FOIA request last month for the names of PPP recipients, as well as other information that the SBA typically discloses about borrowers. All asked for expedited processing of their requests, asserting the need for public oversight of the SBA programs, which are the pillar of the government’s economic response to COVID-19 shutdowns. The SBA either denied expedition or didn’t respond. So far, according to the new organizations’ lawyers at Ballard Spahr, the SBA has offered only boilerplate, suggesting that “in the near future,” it will attempt to disclose loan-specific data to the public.

“The SBA’s responses provide no concrete indication of what that data will include or when that data will actually be made available,” the complaint said.

SBA spokeswoman Carol Wilkerson declined my email request for comment on the lawsuit.

I don’t think there’s any doubt that U.S. taxpayers deserve to know as soon as possible who is getting our money. Remember, for all of the controversy over banks’ handling of PPP loan applications, financial institutions didn’t actually put up the money for the loans. That $660 billion comes from us. And the loans are forgivable if borrowers meet particular criteria for how they spend the money.

There’s already furor over who got PPP money. As the news organizations’ complaint discussed, well-capitalized public companies including Shake Shack and Ruth’s Chris Steak House returned PPP loans after criticism that the loans were intended for small businesses and nonprofits without other access to capital. The U.S. House of Representatives’ Committee on Oversight and Reform sent letters to five large public companies that received more than $10 million apiece in PPP loans, calling on them to give back the money. Elite private schools and well-endowed nonprofits have had to justify why they needed millions of dollars from a program billed as relief for small businesses with nowhere else to turn. Even the SBA’s inspector general said in a May 8 report on the PPP that rural businesses and those owned by women or minorities may not have received as large as share of the loan pool as Congress intended.

At the moment, we only know the identities of loan recipients that have admitted to receiving taxpayer money or have reported loans in public filings. That kind of piecemeal, distorted disclosure doesn’t serve the SBA or the government loan programs well. Of the millions of businesses and non-profits that received government loans to offset the impact of COVID-19, the overwhelming majority won’t be of public note – assuming, of course, that most of the money Congress allocated did, indeed, go to recipients without other options. It will enhance the credibility of the SBA, Congress and the financial institutions that processed the loans if taxpayers can look at the long list of recipients without recognizing their names. If, on the other hand, the list is laden with recognizable recipients, taxpayers deserve explanations.

Either way, we need to know. And we need to know soon.

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