White House officials and Democratic leaders ended a three-hour negotiation yesterday without a coronavirus relief deal or even a clear path forward, with both sides remaining far apart on critical issues, the Washington Post reported. “We’re still a considerable amount apart,” said White House Chief of Staff Mark Meadows after emerging from the meeting with House Speaker Nancy Pelosi (D-Calif.), Senate Minority Leader Charles E. Schumer (D-N.Y.) and Treasury Secretary Steven Mnuchin. President Trump called into the meeting several times, but they were unable to resolve key issues. Pelosi called it a “consequential meeting” in which the differences between the two parties were on display. Mnuchin said after the meeting that if they decide Friday that further negotiations are futile, Trump would move ahead unilaterally with executive orders to address things like unemployment aid. Schumer countered that Democrats were “very disappointed” in how the meeting went and that any White House executive orders could be challenged in court. The political standoff comes as more than 30 million Americans are set to miss their second enhanced jobless benefits check in the next few days and millions of others are no longer protected by an eviction moratorium that expired last month. Democrats have sought a $3.4 trillion bill to provide more economic relief, while Republicans have sought a much narrower package. Negotiations have taken place for more than a week, and Mnuchin said that while they have made progress in certain areas, other issues — such as aid to states and cities — remain completely unsettled.
Small businesses that have filed for bankruptcy, or nearing that step, might get their own shot at a Small Business Administration Paycheck Protection Program loan under a stimulus provision being debated in Congress, the Washington Business Journal reported. The proposal, filed as part of broader stimulus measures last week by Sens. Marco Rubio (R-Fla.) and Susan Collins (R-Maine) would allow the SBA administrator to open the forgivable loan program to companies that are, or plan to be, in bankruptcy proceedings — a category of businesses that the SBA had initially shut out of the PPP. The bankruptcy court must agree to grant these businesses a PPP loan, which would then receive a “super priority” designation to ensure the SBA would be paid back for any unforgiven portions, according to the proposal. The move could open up the PPP to thousands or more companies mired in the bankruptcy process as the coronavirus pandemic drags on and local economies struggle to reopen. The CARES Act, which created the PPP when it was passed in late March, was silent on the issue of awarding loans to those in bankruptcy, said Eric Holland, a partner at law firm Reed Smith LLP. But SBA regulations for the program barred companies from getting a PPP loan while in bankruptcy, or even if they were planning to declare bankruptcy in the near future — and that put stress on business owners genuinely uncertain about their company’s future or fearful that they may eventually need to head down the bankruptcy path, Holland said. The SBA's prohibition was modeled after its traditional lending programs, one of several such rules it applied to the PPP that block certain businesses from participating, including chambers of commerce and adult-oriented businesses. That has made the SBA the target of a series of lawsuits, and Holland said courts have been split on whether companies in bankruptcy should be allowed to participate in the PPP. Read more.
In related news, a group of more than 170 trade associations is urging Congress to allow businesses to get tax deductions for expenses associated with loan forgiveness under the Paycheck Protection Program (PPP), The Hill reported. "As part of the next round of COVID19 relief, we request that Congress reaffirm its intent and restore the tax benefits it intended to give distressed Main Street businesses as part of the CARES Act," the groups wrote in a letter this week to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.). Groups that signed the letter include the American Farm Bureau Federation, American Institute of CPAs, the National Retail Federation and the National Association of Home Builders. Under the PPP, created by legislation President Trump signed in late March called the CARES Act, small businesses can get loans that are forgivable if the proceeds are used for payroll, rent, mortgage interest and utilities. The CARES Act specified that forgiveness of PPP loans is not taxable income. The IRS in April issued guidance stating that expenses are not deductible if payment of the expenses results in a PPP loan being forgiven. The guidance has been criticized by some key lawmakers on both sides of the aisle, who argue it goes against congressional intent. But Treasury Secretary Steven Mnuchin has defended the guidance, saying that businesses can't "double dip." The industry groups pushed back on the argument made by supporters of the IRS guidance. Read more.
U.S. Treasury Secretary Steven Mnuchin said the White House and Democrats aim to strike a deal on virus-relief legislation by the end of the week — even though the two sides remain far apart on some key issues, Bloomberg News reported. “We’re not at the point of being close to a deal, but we did try to agree to set a timeline,” Mnuchin said after meeting yesterday with House Speaker Nancy Pelosi (D-Calif.) and Senate Democratic leader Chuck Schumer (D-N.Y.). “We’re going to try to reach an overall agreement, if we can get one, by the end of this week — so that legislation could then pass next week.” Pelosi said yesterday that she also hoped a deal could be reached this week, with legislation drafted and passed next week. “We have to have an agreement And we will have an agreement,” she said. Mnuchin and White House Chief of Staff Mark Meadows said that Republicans would agree to a moratorium on evictions through the end of the year, and made an offer on supplemental unemployment insurance, one of the main sticking points in the negotiations. Earlier in the day, many lawmakers said they were skeptical that a deal could be in hand by Friday. Even if that were achieved, a vote likely wouldn’t be taken by the House and Senate until next week, meaning there would be a gap in the unemployment payments, which ran out last Friday.
A study from the Federal Reserve Bank of New York said that black small businesses have been harder hit by the COVID-19 pandemic than those owned by members of other racial groups, The Hill reported. "Black firms have been almost twice as likely to shutter as small firms overall," a brief by the bank's Assistant Vice President Claire Kramer Mills and senior analyst Jessica Battisto said. While small businesses are reeling across the board, the study noted, with a 22 percent drop in the number of small-business owners overall, Black business owners faced greater drops, with the Fed seeing 41 percent fewer of them. Thirty-two percent of Latinx-owned businesses have shuttered, followed by 26 percent of Asian-owned businesses. The drop in white business owners was 17 percent. Part of the reason is simply geography. Black communities tend to be more concentrated in cities, and cities have been harder hit by the virus than rural areas. "An under-appreciated point, underscored here, is the close ties between the health and economic effects of COVID-19 in specific communities: counties with the highest concentration of COVID-19 are also the areas with the highest concentration of Black businesses and networks," the authors wrote. But other factors played a part as well, included limited access to government relief programs such as the Paycheck Protection Program, and less access to finance and banking to begin with.
For nearly 70 years, the Small Business Administration’s disaster relief program has helped companies recover from catastrophes including wildfires, hurricanes and earthquakes. But it has never faced anything like the coronavirus crisis, the New York Times reported. Besieged by more than eight million applicants — and operating in the shadow of the hastily assembled Paycheck Protection Program — the disaster relief effort has given out more money in the past few months than it had in its entire history. But the demand has created a problem that is hobbling hundreds of thousands of applicants: The agency, afraid of running out of cash, capped its coronavirus loans at a fraction of what companies can normally borrow — even though the program has handed out less than half of the $360 billion it can lend.
For more than one-third of small U.S. business owners, keeping their ventures alive during the coronavirus pandemic is coming at a high personal cost, Bloomberg News reported. Seven in 10 small business owners say they’ve used some form of support for their business since March, according to a new CreditCards.com survey. The most common option was PPP loans, with 30 percent of respondents saying that they received one, followed by 24 percent saying they turned to personal credit cards and business savings accounts. In total, 35 percent of owners used either personal credit cards or savings accounts, with 10 percent using both, to support their business. Now, small business owners are looking to customers to help them out: Some 32 percent of respondents said they need sales to increase for them to stay afloat this year. About one-in-five said they would need government assistance — a $669 billion federal relief program has doled out funds, and more money is being considered. More than half of respondents say they won’t survive long past the new year without additional support. Read more.
In related news, U.S. states hit hardest by COVID-19 had some of the biggest jumps in small business loan defaults since the onset of the pandemic, and some of the highest rates of default overall, according to data provided to Reuters on Friday by PayNet, a division of credit tracking company Equifax Inc. From February, before the scourge, to June, the most recent data available, defaults among small businesses rose fastest in New York, where the disease has killed more people than in any other state. Louisiana, the state with the highest per-capita case count as of the end of July, had the fourth-highest default rate among small businesses, the PayNet data shows. Florida, with the fourth-highest per-capita COVID-19 case count, had the highest default rate of any state, at 4.29 percent. Read more.
As the coronavirus pandemic began shutting down the U.S. economy in March, Sen. Marco Rubio (R-Fla.) spearheaded legislation creating the $670 billion Paycheck Protection Program, one of the most expensive business-rescue frameworks in history. Rubio, who is chairman of the Senate’s Committee on Small Business and Entrepreneurship, now faces the challenge of steering more resources to millions of already ravaged companies so they can survive the next few months. Rubio in an interview with the Wall Street Journal discussed the small-business relief package that he and Sen. Susan Collins (R-Maine) proposed July 27 that is now being negotiated with Senate Democrats. The proposal includes $190 billion for a revamped PPP and creating a $100 billion program to provide long-term, low-cost loans to certain struggling businesses including those located in low-income areas. "We have to build a bridge between where we are today and over the next few months," Rubio said. "Part of it is helping these viable small businesses survive so they can be in a position to reinvent themselves when things begin to go back to a new normal."
Top Trump administration officials and lawmakers cautioned yesterday that a deal over a new relief package to help people and businesses weather the coronavirus crisis remained elusive even as the debate over the details of the aid was set to take center stage in the coming week, the New York Times reported. A meeting on Saturday in the Capitol Hill suite of Speaker Nancy Pelosi had been the most productive discussion in recent days, officials said, but they remain divided on a number of issues, including how to revive lapsed unemployment benefits for tens of millions of Americans and how broad any deal should be. “We still have a long ways to go,” Mark Meadows, the White House chief of staff, who is negotiating on behalf of the administration, said on CBS’s “Face the Nation.” “I’m not optimistic that there will be a solution in the very near term.” He continued to push for Democrats to agree to a stand-alone measure that would restore the weekly federal jobless benefits, which expired on Friday, as a way to continue providing relief. But Ms. Pelosi, who is expected to again meet with administration officials on Monday, reiterated that she would reject a so-called skinny bill in favor of a sweeping package that includes a national health strategy to counter the spread of the virus and extend the full $600-a-week unemployment benefit. Lawmakers have already approved spending nearly $3 trillion to address the public health crisis and economic collapse caused by the pandemic, but the two parties remain bitterly divided over the scope and cost of another relief package. Democrats, who remain publicly united behind the $3 trillion stimulus measure the House approved in May, contend that another significant infusion of cash is necessary. But at least 20 Senate Republicans are unlikely to support any additional spending, party leaders have acknowledged, in part because of concerns over the level of spending and its effect on the national debt. Under a $1 trillion plan Republicans unveiled on Monday — a narrower proposal than the Democrats’ plan — a number of provisions, including the $600 weekly federal unemployment benefit, would be severely curtailed. “We have to balance — there’s obviously a need to support workers, to support the economy, people who through no fault of their own are shut down because of this terrible disease,” Mnuchin said on ABC’s “This Week,” responding to criticism that Republicans took too long to introduce a proposal. “On the other hand, we have to be careful about not piling on enormous amounts of debt for future generations.” Read more.
In related news, the Trump administration is looking at options for unilateral actions it can take to try to address some of the economic fallout caused by the novel coronavirus pandemic if no relief deal is reached with Congress, the Washington Post reported. The discussions are a reflection of officials’ increasingly pessimistic outlook for the talks on Capitol Hill. The White House remains in close contact with Democratic leaders, but a wide gulf remains and deadlines have already been missed. It’s not clear what steps the administration could take without the help of Congress on issues such as lapsed enhanced unemployment benefits or the expired moratorium on evictions — the two matters President Trump has recently identified as his highest priorities in the ongoing talks. Both of those programs were authorized by Congress earlier this year but were designed to be temporary. The White House’s strategy in the negotiations has shifted multiple times in the past few weeks. Democrats passed a $3 trillion package in May that included an extension of unemployment benefits, new stimulus checks, aid for states and localities, and various other programs. The White House expressed opposition to that bill but did not begin negotiations with Democrats until recently. It also took the White House much longer than expected to broker a unified Republican proposal with the Senate GOP after blowback on several of the White House’s ideas. Read more.
The U.S. economy could benefit if the nation were to “lock down really hard” for four to six weeks, a top Federal Reserve official said yesterday, adding that Congress can well afford large sums for coronavirus relief efforts, Reuters reported. The economy, which in the second quarter suffered its biggest blow since the Great Depression, would be able to mount a robust recovery, but only if the virus were brought under control, Neel Kashkari, president of the Minneapolis Federal Reserve Bank, told CBS’ “Face the Nation.” “If we don’t do that and we just have this raging virus spreading throughout the country with flare-ups and local lockdowns for the next year or two, which is entirely possible, we’re going to see many, many more business bankruptcies,” Kashkari said. “That’s going to be a much slower recovery for all of us.” He said that Congress is positioned to spend big on coronavirus relief efforts because the nation’s budget gap can be financed without relying on foreign borrowing, given how much Americans are saving. “Those of us who are fortunate enough to still have our jobs, we’re saving a lot more money because we’re not going to restaurants or movie theaters or vacations,” Kashkari said. “That actually means that we have a lot more resources as a country to support those who have been laid off,” he said.
