If the protesters who clashed with police and made their way through the US Capitol on Jan. 6, 2021, really wanted to “stop the theft,” perhaps their anger should have been directed a few blocks south.
Apparently, while the Capitol was in chaos, the Small Business Administration (SBA) bureaucrats — three blocks away — were also pretty busy. About 1.8 million “flags” on loans issued under the Paycheck Protection Program (PPP) were mass-flashed on Jan. 6, suggesting the loans might be fraudulent or otherwise misissued, according to a new report deleted from the files.
The mass closure of these flags paved the way for the cancellation of billions of dollars of PPP debt in the final days of the Trump administration, seemingly without due diligence on the part of federal bureaucrats tasked with preventing fraud.
In all, the SBA has flagged nearly 2.3 million PPP loans worth at least $189 billion, according to a report released Thursday by the Project on Government Oversight (POGO), a monitoring group that compiled the data from the SBA received an open recording request. “A flagged PPP loan does not necessarily mean fraud occurred, but some flags — if accurate — indicate clear reasons why a recipient would not have been eligible for the taxpayer-backed loan,” the report explains.
But the SBA has now cleared 95 percent of those loans. More than 40 percent of the evictions occurred on January 6, far more than any other day. “This means that a significant number of loans that were potentially given to fraudsters or unauthorized recipients have now been made,” the POGO report concludes.
Perhaps that’s why other reviews of the program have found that up to $100 billion of the $820 billion distributed via PPP loans was stolen by scammers.
According to the report, 57 different types of flags have been applied to different PPP loans. The most common said the business applying for the loan did not exist before February 15, 2020 — the deadline for applicants intended to stop scammers from starting new businesses to collect pandemic aid. This flag was applied to 785,089 loans.
Every $2 million loan was automatically flagged for review under a Treasury Department policy passed in 2020 to subject the largest PPP loans to more rigorous scrutiny. But the POGO report shows that 99 percent of the roughly 28,000 loans flagged for this reason were settled during the final days of the Trump administration in January 2021.
“The mass closure of most of these flags,” the POGO report said, “suggests that not all of these large loans have received the ‘full review’ that then-Treasury Secretary Steven Mnuchin promised.”
It is worth reading the full details of the POGO report. It’s an illustrative look inside a government bureaucracy that seems overwhelmed by the obligation to push unprecedented mountains of money out the door. In the first 33 days after the opening of the PPP program in April 2020, the SBA lent out more than 20 times what it took in every full year before this time. A high level of fraud and waste was inevitable.
Even if the money did go to a legitimate, actual company, much of it ended up in the pockets of the business owners – rather than the paychecks of the employees – at a huge cost to taxpayers.
“Only 23 to 34 percent of the program’s funds went directly to workers who would otherwise have lost their jobs,” a study by the National Bureau of Economic Research found. Another study by the Federal Reserve Bank of St. Louis found that taxpayers paid approximately $4 for every dollar paid to workers in wages and benefits.
“Originally, the PPP promised companies that kept workers on their payrolls for eight weeks to pay back loans and essentially turned those loans into grants.” reason‘s Peter Suderman detailed in February. “But as the pandemic dragged on and additional funding was added to the program, the requirements disappeared and the PPP eventually became more of a federally funded all-purpose fund for small business owners.”
In a report released in May, the SBA’s inspector general pointed out that by February 2022 – nearly two years after the PPP loans began and well beyond – the agency would not have a “central entity to design, govern and manage fraud risk.” had the majority of them been forgiven. This is obviously far too late to do much.
“The millions of flagged PPP loans worth billions of dollars,” the POGO report concludes, “and the lack of scrutiny that led to their forgiveness shows that the great pandemic hoax was aided and abetted by the SBA’s lax oversight .”
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