WASHINGTON (CN) — Telling senators that the federal lending program for small businesses facing coronavirus-related financial difficulty has overcome an admittedly shaky rollout, Treasury Secretary Steve Mnuchin said Wednesday that the economy is poised to rebound with gusto.
Secretary Mnuchin was called to testify this morning as the Senate Small Business Committee reviews the $600 billion Paycheck Protection Program, which was part of the greater $2 trillion CARES Act package Congress cobbled together this spring in response to the global pandemic.
The initiative was beset by initial “complications,” Mnuchin acknowledged, alluding to issues like Ruth’s Chris Steak House and the NBA’s $4 billion Los Angeles Lakers franchise receiving federal loans intended for small businesses.
Caving to public pressure, Ruth’s Chris, which made $42 million in 2019, agreed in April to repay the $20 million in federal relief that it was granted, as did the Lakers with their $4.6 million loan.
With large corporations gobbling up the initial tranche of PPP funding in two weeks, relief for thousands of American small business owners faced a lengthy setback as the Treasury Department drew up new guidance aimed at vetting companies more closely.
Mnuchin said Wednesday he was proud of how quickly problems were resolved, touting the roughly $530 billion that the Paycheck Protection Program has delivered to more than 4 million companies.
The program has been a savior and creator of jobs, he said, estimating that it has shored up 50 million jobs since inception and protected over 75% of all small business payrolls in the United States.
Even as the Organization for Economic Cooperation and Development released a biannual economic outlook Wednesday that predicts the global economy will shrink by at least 6% this year — the most dire economic crisis since World War II — Mnuchin said he saw good omens for the third and fourth quarter of the fiscal year.
“Several indicators show we are in position for a strong phased reopening of our economy,” he said.
The OECD anticipates American gross domestic product to drop 7.3% even without a second wave of Covid-19 infections. GDP would drop 8.5% in the event of a second wave, with only a 1.9% increase in 2021.
A report published Monday by the World Bank was somewhat less bleak, saying the U.S. economy will shrink 6.1%, as the global economy contracts 5.2%, before bouncing back 4% next year.
At Wednesday’s committee hearing, there was no mention of the second potential outbreak of the novel coronavirus that infectious disease experts like Dr. Anthony Fauci has regularly warned Americans to expect.
Mnuchin instead focused on a new chapter of the Small Business Administration’s lending program that will offer loan forgiveness for those who borrowed money at the pandemic’s outset. More details are expected by the end of this week, he said.
Another round of loans for still-floundering companies is possible but Mnuchin emphasized his concern that additional relief might deter people from returning to work.
“I think this is all going to be about getting people back to work,” he said. “Whatever we do going forward needs to be much more targeted to the industries and small businesses having the most trouble going forward.”
Information about entities or individuals that have already borrowed funds is not likely to emerge anytime soon. The secretary on Wednesday would not commit to providing Congress information about who, specifically, received the loans.
“We believe that is proprietary information,” Mnuchin said, adding that in many cases financial information for small businesses was confidential.
The lack of transparency is at odds with existing federal loan disclosure rules. Typically, businesses that take federal loans must disclose borrower information.
A representative for the SBA did not immediately return request for comment Wednesday.
For now, some $130 billion sits in the paycheck protection relief till, the secretary noted.
“I definitely think we are going to need another bipartisan piece of legislation to put more money into the economy,” he said.