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The federal government’s $670 billion program to aid small businesses will come under a spotlight when Congress rolls back into action, with many lawmakers planning to target what they say are shortcomings in the program, the Wall Street Journal reported. Proposals include extending the number of weeks that small businesses can spend money from the government’s forgivable loans under the Paycheck Protection Program, and allowing businesses to use more of the funds for overhead costs. Some lawmakers want to create new funding vehicles, including allocating aid to local governments to disburse as they see fit amid the coronavirus pandemic. Sen. Ron Wyden (D-Ore.) said that the smallest businesses have struggled to access loans through the PPP. He has proposed direct cash payments equal to 30 percent of gross receipts, up to $75,000, to firms with $1 million or less in gross receipts and 50 or fewer employees. Proposals for additional funding could face obstacles from lawmakers who say they are concerned about the debt being accrued. “I think it’s also time to begin to think about the amount of debt that we’re adding to our country and the future impact of that,” Senate Majority Leader Mitch McConnell (R-Ky.). The Senate plans to return to Washington, D.C., on Monday, while the House delayed its return date due to health concerns over the coronavirus pandemic. Read more. (Subscription required.) 

In related news, White House economic adviser Larry Kudlow said yesterday that he would not rule out anything in a new relief bill to ease the “tremendous hardships” of the coronavirus outbreak, including more money for state and local governments and small businesses, Reuters reported. More than 30 million Americans have joined the unemployment benefit rolls over the past six weeks and lawmakers on Capitol Hill are discussing a fourth coronavirus relief bill. Democrats are pushing for additional aid to help cities and states cope with lost revenue from a shut-down economy and some governors have warned of massive layoffs if they fail to get it. Some advisers to Republican President Donald Trump have said the need for another stimulus bill is not yet clear. But Kudlow said that “there may well be additional legislation” as officials study how the billions included in the last bill take effect. Read more.

Publicly traded companies have received more than $1 billion in funds meant for small businesses from the federal government’s economic stimulus package, according to data from securities filings compiled by the Washington Post. Nearly 300 public companies have reported receiving money from the fund, called the Paycheck Protection Program, according to the data compiled by the Post. Recipients include 43 companies with more than 500 workers, the maximum typically allowed by the program. Several other recipients were prosperous enough to pay executives $2 million or more. After the first pool of $349 billion ran dry, leaving more than 80 percent of applicants without funding, outrage over the millions of dollars that went to larger firms prompted some companies to return the money. As of Thursday, public companies had reported returning more than $125 million. Read more.

Dan Bearden thought that getting a $947,000 COVID-19 relief loan would be just the lifeline that Dancor, his trucking company, needed to survive bankruptcy reorganization. But the U.S. Small Business Administration denied Dancor Transit Inc.’s application for the Paycheck Protection Program because the company is in chapter 11 bankruptcy, Arkansas Business reported. Dancor, like several other companies across the country in bankruptcy restructuring, sued the SBA for preventing firms in bankruptcy from accessing forgivable loans under the federal Coronavirus Aid, Relief & Economic Security Act. Dancor filed a complaint against the SBA on April 20 inside its case in U.S. Bankruptcy Court in Fort Smith. It wants the judge to remove the phrase on the loan application that asks if a company is “presently involved in any bankruptcy.” “Without a PPP loan, it is questionable whether Dancor can meet payroll, rent, utility, or debt obligations as they continually come due,” Dancor’s attorney, Kevin Keech of Little Rock, wrote in the filing. “Without a PPP loan, Dancor may cease to be a viable company and may have to convert its case to a chapter 7 liquidation, which will result in many of its creditors receiving little to no payment in satisfaction of their debts.” Meanwhile, Dancor has reapplied for a PPP loan, and a case in Texas offers some encouragement. A bankruptcy judge there criticized the SBA for denying the Hidalgo County Emergency Service Foundation’s PPP loan just because it is in bankruptcy. Read more.

Read more about In re Hidalgo County Emergency Service Foundation in the RDW.

Congressional leaders are girding for a fight over the reentry of millions of Americans to the workplace, with Senate Majority Leader Mitch McConnell (R-Ky.) insisting that employers be shielded from liability if their workers contract the coronavirus, the Washington Post reported. He appears to have the backing of top White House officials. Democratic leaders have declared that they will oppose such blanket protections. The battle has unleashed a frenzy of lobbying, with major industry groups, technology firms, insurers, manufacturers, labor unions, and plaintiffs lawyers all squaring off. Key GOP senators are circulating drafts of legislation to set up legal protections they say would give businesses the confidence to reopen without worrying about lawsuits. “It seems intuitive to me that if you’re a marginal small business and you’re making the decision whether to hang in there and try to survive, or whether you’re just going to give up and either declare bankruptcy or just become insolvent, that this would around the margins, this could make the difference,” said Sen. John Cornyn (R-Tex.). Cornyn is working on legislation that would shield businesses from liability over coronavirus-related claims as long as they comply with government guidelines.

More troubled businesses and nonprofits — from Catholic dioceses to rural hospitals — are suing the Small Business Administration for blocking companies in bankruptcy from getting COVID-19 relief loans, WSJ Pro Bankruptcy reported. At least a dozen lawsuits have been filed in courts across the U.S. that seek access to Paycheck Protection Program loans for businesses restructuring in chapter 11. The companies, joined by legal experts and some members of Congress, say there is nothing in the CARES Act, the law authorizing the loan program, that makes businesses in chapter 11 ineligible for the emergency funding. Companies on the front lines of the pandemic have sued the SBA for barring them from the loan program because of their bankruptcies. Texas-based ambulance company Hidalgo County EMS, Springfield Hospital in Vermont as well as the Calais Regional Hospital and Penobscot Valley Hospital in Maine have filed lawsuits seeking a total of nearly $10 million in PPP loans. Businesses want access to the emergency funding because the PPP loans don’t have to be paid back if the money is used to cover employee paychecks, avoiding layoffs. SBA chief Jovita Carranza, in consultation with Treasury Secretary Steven Mnuchin, determined that providing PPP loans to companies in bankruptcy “would present an unacceptably high risk of an unauthorized use of funds or non-repayment of unforgiven loans,” the SBA said on Friday. Several members of Congress have urged Carranza to amend PPP applications or waive the agency’s bankruptcy restriction to allow funding to critical-access hospitals and federally qualified health centers. Sens. Bernie Sanders (I-Vt.), Patrick Leahy (D-Vt.) and Rep. Peter Welch (D-Vt.) recently wrote to Carranza, saying that the SBA’s decision “denies the potential for critical funding to hospitals, health centers, and other essential services that are reorganizing their debt in a responsible way.” Sen. Susan Collins (R-Maine) and Sen. Angus King Jr. (I-Maine) also urged the SBA to allow financially distressed hospitals to access PPP loans.

Federal Reserve Chairman Jerome Powell delivered an uncharacteristically blunt call yesterday for Congress and the White House to spend more money to prevent deeper economic damage from the coronavirus pandemic, the Wall Street Journal reported. Congress and President Trump have provided more than $2.6 trillion in several economic assistance measures over the last two months, and Powell lauded those efforts as appropriate. “Will there be a need to do more though? I think the answer to that will be yes,” he said at a news conference conducted remotely. Powell said that policy makers should focus their efforts on protecting workers, businesses and households from “avoidable insolvency.” Those policies, he added, “will come with a hefty price tag, but we would come out of this eventually with a stronger economy.” The Fed didn’t announce new policy measures yesterday after the conclusion of a two-day meeting, but pledged in a statement to use “its full range of tools to support the U.S. economy in this challenging time.” Powell warned of greater economic deterioration to come, including a double-digit jobless rate in the April employment report, to be released next week.

Treasury Secretary Steven Mnuchin yesterday announced new plans to scrutinize the largest recipients of emergency small business loans and signaled potential criminal penalties if big companies misrepresented their financial situation to secure the money, Politico reported. Mnuchin in a CNBC interview scolded Wall Street-backed firms that received tens of millions of dollars in Paycheck Protection Program loans, which can be forgiven if businesses maintain their payrolls. "The purpose of this program was not social welfare for big business," he said. "The purpose of this program was to help small businesses." Mnuchin said the Small Business Administration planned to do a "full review" of any loans above $2 million before the loans are forgiven. He warned that borrowers have "criminal liability" if they falsely certified that they needed the funds to support operations. Shake Shack, Ruth's Hospitality Group and other well-known publicly traded companies were among the corporations that received loans before the first wave of funding ran out on April 16. Many have started to return the money amid pressure from the Trump administration and the public.

Sen. Elizabeth Warren of (D-Mass. and Rep. Alexandria Ocasio-Cortez (D-N.Y.) escalated pushback against M&A during the pandemic, the New York Times reported. The two introduced the Pandemic Anti-Monopoly Act, which would temporarily block many corporate acquisitions, including those by companies with more than $100 million in revenue and those owned by private equity or hedge funds. It would also direct the Federal Trade Commission to block deals that “pose a risk to the government’s ability to respond to a national emergency.” The legislation expands on a M&A moratorium proposed by Rep. David Cicilline (D-R.I.), who leads the House antitrust panel. It’s the latest shot across the bow of the deal industry, particularly private equity. Investment firms have argued that they shouldn’t be singled out for punishment during the pandemic, and they have successfully lobbied on issues like expanded lending programs from the Fed. The proposal is unlikely to go anywhere in the Senate, which is controlled by Republicans. Noah Joshua Phillips, an F.T.C. commissioner, recently argued that regulators were capable of carefully scrutinizing mergers during the crisis.

Minutes after a $310 billion aid program for small companies opened for business yesterday, the online portal for submitting applications crashed. And it kept crashing all day, much to the frustration of bankers around the country who were trying — and failing — to apply on behalf of desperate clients, the New York Times reported. Some bankers were so irritated that they vented on social media at the Small Business Administration, which is running the program. Rob Nichols, the chief executive of the American Bankers Association, wrote on Twitter that the trade group’s members were “deeply frustrated” at their inability to access the system. Until the problems were fixed, he said, “#AmericasBanks will not be able to help more struggling small businesses.” Pent-up demand for the funds has been intense, after the program’s initial $342 billion funding ran out in under two weeks, stranding hundreds of thousands of applicants whose loans did not get processed. Last week, Congress approved the additional $310 billion for small businesses hit by the coronavirus pandemic. Bankers were expecting the money to once again run out quickly, and so on Monday at 10:30 a.m., when round two opened, they were ready to go. But for the second time in a month, the relief effort, called the Paycheck Protection Program, turned into chaos, sowing confusion among lenders and borrowers. A centerpiece of the government’s $2 trillion economic stimulus package, the program offers small companies — typically those with up to 500 workers — forgivable loans of up to $10 million. The SBA is backing the loans, but customers must apply through financial institutions.