“If you torture the data long enough, it will confess to anything.”
— Economist Ronald Coase
Two reports released in preparation for Sept. 1’s oversight hearing on the Paycheck Protection Program (PPP) illustrate the deep political divides that have dogged the program since its creation. While both reports use the same data—the select subcommittee was granted access to a complete set of data on PPP loans approved from the program’s five-month run, including details that have not been made public—the conclusions are starkly different.
The Democratic staff report called out multiple instances of fraud, claiming over $1 billion went to small businesses that received multiple loans (the report does not mention this amount is roughly 0.2% of PPP funds dispersed). The Democrats’ report also cited $96 million (0.02%) in loans going to firms barred from doing business with the federal government. The subcommittee staff also flagged over 11,000 PPP borrowers (with a total of almost $3 billion in loans, or about 0.6%) for using information in their applications that mismatches data contained in the federal government’s System for Award Management (SAM) database.
The Democrats’ report also focused on “risks of waste,” and recommended that Treasury and SBA tighten internal controls for loan forgiveness, expand oversight of borrowers, and cooperate with congressional investigators.
On the flip side, the Republican staff report for the House Select Subcommittee on the Coronavirus Crisis called PPP a “resounding success.” Their report acknowledges the program’s rocky start—including over a dozen rule changes—but focuses on the program’s success in saving millions of jobs by keeping small businesses afloat through shutdowns as the country wrestled with COVID-19.
Addressing allegations from Democrats that some financial institutions prioritized existing customers in making PPP loans, the GOP report pointed to banks’ compliance with Bank Secrecy Act and know-your-customer requirements. “The evidence... confirmed that the banks were limited by the requirement to collect and verify BSA/AML information from any new customers,” the report said.
While the two parties remained in gridlock concerning passage of another legislative relief package heading into the August recess, it is expected that upon their return later in September Congress will act to pass PPP legislation, opening up the program again but with different terms.