11 ms·

Anger mounts after corporations tap small-business relief funds

212 points by spking 7y ago

otfc23 7y ago
Open the country!
edoceo 7y ago
Yes, Wells Fargo didn't even open proper application until the same day the SBA said they were out of money. Here's hoping I'll be part of another class action against them.
- beart 7y ago
  The only reason I can imagine staying with Wells Fargo is to keep a few bucks in an account to be part of the yearly class actions.
  - dboreham 7y ago
    Another reason is that I can write a heck of a lot of code in the time it would take for me to change my business to use another bank.
    - nulbyte 7y ago
      I'm not sure I understand this. Can you not continue writing code while moving to another bank? Did itnfor a no profit last year. Wasn't as difficult as I thought it would be.
- dehrmann 7y ago
  Unless they were contractually obligated to you to have the application open by a certain date, I'm not sure what they did wrong. Sorting out the logistics of a new type of loan is bound to take some time, and it's only been three weeks since the CARES Act was passed. Honestly, that's a fast turn around on their end. Take up the CARES Act being underfunded with your representatives.
save_ferris 7y ago
I think the anger here is justified, but part of me is also thinking: does this really surprise anyone? All of these companies are doing everything they can to stay afloat, including some really distasteful things like this. Do we really expect companies to start acting morally when the economy is tanking? They exist to make money, which isn’t inherently immoral, don’t get me wrong. But if you’re hitting $100M annual revenue, chances are that you’ve done something at some point that exists in an ethical gray area, because the end goal is making money, not being morally responsible. Reminds me of that piece on Gresham’s law from earlier today.
- WalterBright 7y ago
  I don't see any evidence whatsoever that being unethical has anything to do with the size of the company.
  - fxtentacle 7y ago
    Larger companies tend to attract different advisors. Like that friendly tax advisor who has a great idea for funneling a bit more cash tax-free into your own pockets.
    - chrisco255 7y ago
      If it's a legal loophole for paying less tax, that's fair game. Everyone does it. There's no one out there giving their extra cash to the U.S. treasury. Not that it's needed because they can just print unlimited amounts (within limits of what system can tolerate).
      - luckylion 7y ago
        > If it's a legal loophole for paying less tax, that's fair game. Legal != ethical. And even the legality is questionable, but it's hard to investigate those optimization strategies when top officials have extremely-well-paying side-gigs at tax consultancies (which is the German situation) and those benefiting from the loopholes are also donating large amounts to buy favors from those in power (which is the US situation).
adelHBN 7y ago
Well, in the O.C. people are out on the beach... and social distancing is not as strictly observed as one would expect.
olliej 7y ago
How many of these companies even report the bulk of their revenue in the US? Future bailouts should include specific provisions disallowing applications by companies that have less than (say) 2/3rds of their global (including subsidiaries) profit in the US (or whichever country they apply for aid from). Denmark, etc have this correct - you don't get to ask for government support from countries you avoid paying taxes to.
nimbius 7y ago
So ive got a few questions about this legislation now that its in effect... >Businesses rushed to apply for the loans, which the government said would be forgiven... Forgiven? Then its not a loan anymore is it? Its a bailout. Was the intention to give a handout of cash to small businesses free of charge? >Democrats have since called for rules that would ensure smaller, community banks, particularly those that service minority and underbanked populations, have a leg up in the lending process. I mean, the program ran out of money a week ago. What exactly are we legislating? these are businesses that are likely already shuttered after waiting five weeks to be told they either dont qualify or the money sacks empty. This isnt something you get a do-over on. Rubio doesnt seem to care that Hilton is a nine billion dollar multinational corporation that could afford to keep the lights on in every hotel they franchise for the next year, easily, without federal aid. They could give away old hotels as makeshift hospitals. Hilton is the thirty-sixth largest company in the USA and the fact that they qualified for something called a small business relief fund can only be attributed to a completely detached legislature if you're being amicable and giving the current legislation a fair chance to be anything but corrupt but frankly thats hard to do when the presidents friends are getting kickbacks from this program. https://www.npr.org/2020/04/20/839455480/company-with-ties-to-trump-receives-millions-from-small-business-loan-program https://www.npr.org/2020/04/20/839455480/company-with-ties-t... What Rubio has basically managed to do is wipe out coffee houses, machine shops, shoe repair businesses, daycares and nail salons in every north american city. Its pretty transparent that this funding was never intended to make it to taco trucks and barbers.
- linuxftw 7y ago
  > Forgiven? Then its not a loan anymore is it? Its a bailout. Was the intention to give a handout of cash to small businesses free of charge? Yes, it's handing out free money to some and not others based on basically nothing. What's worse, the banks are collecting a cool 1% whether someone pays back the loan or not. 300B in loans is 3B to the banks, 0 risk. > Its pretty transparent that this funding was never intended to make it to taco trucks and barbers. Sadly, I don't think the congress people are that smart. They probably actually thought this program would work in some useful capacity.
mgleason_3 7y ago
Greedy bastards. Apparently the law says companies with fewer than 500 employees are eligible - that's 500 employees per location! No wonder the money ran out.
- barbegal 7y ago
  Its not 500 employees per location [1], it is 500 employees total but there are exceptions for restaurants, hotels and franchises. [1] https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.p...
w0utert 7y ago
We have the same discussion here in the Netherlands now, one of the poster childs of the (entirely rightful) public anger being Booking.com. Companies like this have been raking in billions of revenue and profit until very, very recently, but instead of using even a tiny proportion of it for contingency planning they decided to take on more debt and buy back their own shares to boost their stock price instead, to 'reward' their shareholders. And at the same time they used every loophole imaginable to evade taxes, effectively contributing next to nothing to tax revenue to be used for the public cause. Now things went sour and within 1 month they are already out of money and cannot continue paying their employees, so they are begging to be bailed out with money that was intended to save small businesses that were forced to close by the government. They made $15 billion of profit last year alone, which would be enough to pay their ~17.5K employees for years to come, but decided to throw it at all their shareholders. The hotels and BnB's that use their platform will go down because the government aid is limited, but Booking.com needs to be saved... Privatize the profits, socialize the losses, always the same thing. It's frankly quite disgusting and I have no sympathy for these companies at all.
- matonias 7y ago
  More info (in Dutch): https://www.ftm.nl/artikelen/bookingcom-staatssteun-coronacrisis https://www.ftm.nl/artikelen/bookingcom-staatssteun-coronacr...
- haissam 7y ago
  this opinion piece on the NY times mentions Booking, and sums up the situation quite well. Its conclusion if you don't have time to read it entirely: > The economy needs help, and fast. Yet it is hard to escape the conclusion that the $2 trillion aid package validates and indeed further rewards the questionable practices of the last decade. In a normal bankruptcy proceeding, equity holders and shareholders would incur significant losses based on the taking of risks that were not unknown. It is true that the $2 trillion aid package has a condition that would, going forward, temporarily bar further stock buybacks for companies that receive taxpayer loans. But viewed in context, the relief package still amounts to a bailout of private capital and the endorsement of a decade of self-enriching practices.
- 7y ago
jessaustin 7y ago
This is a convenient sideshow. PPP is a pittance compared to the >$4B the Fed will be distributing to favored wealthy cronies. No one believes in "capitalism" anymore. In a system of free enterprise, we'd be happy to see businesses fail while the state supported humans in need. Instead, we have the opposite: humans are forced to suffer while corporations are bailed out with their money.
- jessaustin 7y ago
  Haha of course I meant ">$4T". The number is so big my fingers can't type it. Thanks for the corrective downvotes!
- akoncius 7y ago
  that's the issue - politicians keep saying that USA is free market, capitalist country but it's not. it is socialist capitalism with inversed relationship as you mentioned. it's time to start naming things as they are in reality
  - jessaustin 7y ago
    It's not just politicians, as evidenced by the legions of HN status quo defenders eager to downvote this sort of message.
PeterStuer 7y ago
Typical Create crisis through destroying government by a thousand cuts. Resort to greasy palms Pork Barrel Politics under the umbrella of "hey, at least I'm doing something in this crisis". When called out say "see, I told you government doesn't work"
dbancajas 7y ago
why not limit SBA to companies with <10M yearly revenue?
mjberg01 7y ago
Odd that more aren't discussing the incentives for banks to secure the funding for their clients who have debt on the books with the banks. e.g. take two companies who both applied at the same time and each is doing $1M in revenue. However, company A has $250k in debt with the bank whereas company B does not. Now all of a sudden the banks give the cash to the company with the debt because they know if they fail they will have to eat that on their balance sheet. They are incentivized to distribute the $ in a priority that fits them not on a 'first come first serve' basis which is the fair approach.
- AbrahamParangi 7y ago
  This would also explain why Bank of America initially required an existing credit account. It makes sense that they would want to bail out their own bad debt with PPP money.
  - Paradigma11 7y ago
    I do not think that this criticism is fair. Banks asked but were not allowed to relax their legal KYC criterias. Existing customers already fullfill these so they can be served while the others are processed. And ofcourse the whole system is completely swamped. That being said i don't doubt that banks would have acted like this anyway.
    - AbrahamParangi 7y ago
      Hanlon's razor is usually true but assuming the opposite is usually wise.
anticsapp 7y ago
The whole system is rigged. It always has been. And I don't mean the last twenty years. Want to invade Germania? You better know a great banker. Want to be the first on the block to buy a couple of these new things called printing presses? Better know a well-connected banker.
- m463 7y ago
  Want to unblock your online video? Want to fix a bad online review?
- Fjolsvith 7y ago
  How else would it have happened?
GoodJokes 7y ago
I love how the Democrats’ big win in the package was ensuring strict oversight. Everyone remember that manufactured narrative in the media?
anm89 7y ago
This always confuses me when people are mad at the businesses. You are mad that a company, a legal entity which exists for the sole purpose of making money, which has a legal obligation to its shareholders to try to produce returns, is taking an opportunity to get free money? I mean, be mad I guess, but surely don't be surprised. This is the least surprising, most rational behavior ever. Maybe we should get mad at the politicians who are creating the legislation that hands it to them.
richycaat 7y ago
Still hard to believe. Just pray it's a live and let live. Get rid of the bullies and manipulators.move forward always.
jsilence 7y ago
Simply give the money to the people, not to the businesses.

212 points by spking 7y ago

Open the country!

Yes, Wells Fargo didn't even open proper application until the same day the SBA said they were out of money. Here's hoping I'll be part of another class action against them.

beart 7y ago
The only reason I can imagine staying with Wells Fargo is to keep a few bucks in an account to be part of the yearly class actions.
- dboreham 7y ago
  Another reason is that I can write a heck of a lot of code in the time it would take for me to change my business to use another bank.
  - nulbyte 7y ago
    I'm not sure I understand this. Can you not continue writing code while moving to another bank? Did itnfor a no profit last year. Wasn't as difficult as I thought it would be.
dehrmann 7y ago
Unless they were contractually obligated to you to have the application open by a certain date, I'm not sure what they did wrong. Sorting out the logistics of a new type of loan is bound to take some time, and it's only been three weeks since the CARES Act was passed. Honestly, that's a fast turn around on their end. Take up the CARES Act being underfunded with your representatives.

save_ferris 7y ago

I think the anger here is justified, but part of me is also thinking: does this really surprise anyone? All of these companies are doing everything they can to stay afloat, including some really distasteful things like this. Do we really expect companies to start acting morally when the economy is tanking? They exist to make money, which isn’t inherently immoral, don’t get me wrong. But if you’re hitting $100M annual revenue, chances are that you’ve done something at some point that exists in an ethical gray area, because the end goal is making money, not being morally responsible. Reminds me of that piece on Gresham’s law from earlier today.

WalterBright 7y ago
I don't see any evidence whatsoever that being unethical has anything to do with the size of the company.
- fxtentacle 7y ago
  Larger companies tend to attract different advisors. Like that friendly tax advisor who has a great idea for funneling a bit more cash tax-free into your own pockets.
  - chrisco255 7y ago
    If it's a legal loophole for paying less tax, that's fair game. Everyone does it. There's no one out there giving their extra cash to the U.S. treasury. Not that it's needed because they can just print unlimited amounts (within limits of what system can tolerate).
    - luckylion 7y ago
      > If it's a legal loophole for paying less tax, that's fair game. Legal != ethical. And even the legality is questionable, but it's hard to investigate those optimization strategies when top officials have extremely-well-paying side-gigs at tax consultancies (which is the German situation) and those benefiting from the loopholes are also donating large amounts to buy favors from those in power (which is the US situation).

adelHBN 7y ago

Well, in the O.C. people are out on the beach... and social distancing is not as strictly observed as one would expect.

olliej 7y ago

How many of these companies even report the bulk of their revenue in the US? Future bailouts should include specific provisions disallowing applications by companies that have less than (say) 2/3rds of their global (including subsidiaries) profit in the US (or whichever country they apply for aid from). Denmark, etc have this correct - you don't get to ask for government support from countries you avoid paying taxes to.

nimbius 7y ago

So ive got a few questions about this legislation now that its in effect... >Businesses rushed to apply for the loans, which the government said would be forgiven... Forgiven? Then its not a loan anymore is it? Its a bailout. Was the intention to give a handout of cash to small businesses free of charge? >Democrats have since called for rules that would ensure smaller, community banks, particularly those that service minority and underbanked populations, have a leg up in the lending process. I mean, the program ran out of money a week ago. What exactly are we legislating? these are businesses that are likely already shuttered after waiting five weeks to be told they either dont qualify or the money sacks empty. This isnt something you get a do-over on. Rubio doesnt seem to care that Hilton is a nine billion dollar multinational corporation that could afford to keep the lights on in every hotel they franchise for the next year, easily, without federal aid. They could give away old hotels as makeshift hospitals. Hilton is the thirty-sixth largest company in the USA and the fact that they qualified for something called a small business relief fund can only be attributed to a completely detached legislature if you're being amicable and giving the current legislation a fair chance to be anything but corrupt but frankly thats hard to do when the presidents friends are getting kickbacks from this program. https://www.npr.org/2020/04/20/839455480/company-with-ties-to-trump-receives-millions-from-small-business-loan-program https://www.npr.org/2020/04/20/839455480/company-with-ties-t... What Rubio has basically managed to do is wipe out coffee houses, machine shops, shoe repair businesses, daycares and nail salons in every north american city. Its pretty transparent that this funding was never intended to make it to taco trucks and barbers.

linuxftw 7y ago
> Forgiven? Then its not a loan anymore is it? Its a bailout. Was the intention to give a handout of cash to small businesses free of charge? Yes, it's handing out free money to some and not others based on basically nothing. What's worse, the banks are collecting a cool 1% whether someone pays back the loan or not. 300B in loans is 3B to the banks, 0 risk. > Its pretty transparent that this funding was never intended to make it to taco trucks and barbers. Sadly, I don't think the congress people are that smart. They probably actually thought this program would work in some useful capacity.

mgleason_3 7y ago

Greedy bastards. Apparently the law says companies with fewer than 500 employees are eligible - that's 500 employees per location! No wonder the money ran out.

barbegal 7y ago
Its not 500 employees per location [1], it is 500 employees total but there are exceptions for restaurants, hotels and franchises. [1] https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.p...

w0utert 7y ago

We have the same discussion here in the Netherlands now, one of the poster childs of the (entirely rightful) public anger being Booking.com. Companies like this have been raking in billions of revenue and profit until very, very recently, but instead of using even a tiny proportion of it for contingency planning they decided to take on more debt and buy back their own shares to boost their stock price instead, to 'reward' their shareholders. And at the same time they used every loophole imaginable to evade taxes, effectively contributing next to nothing to tax revenue to be used for the public cause. Now things went sour and within 1 month they are already out of money and cannot continue paying their employees, so they are begging to be bailed out with money that was intended to save small businesses that were forced to close by the government. They made $15 billion of profit last year alone, which would be enough to pay their ~17.5K employees for years to come, but decided to throw it at all their shareholders. The hotels and BnB's that use their platform will go down because the government aid is limited, but Booking.com needs to be saved... Privatize the profits, socialize the losses, always the same thing. It's frankly quite disgusting and I have no sympathy for these companies at all.

matonias 7y ago
More info (in Dutch): https://www.ftm.nl/artikelen/bookingcom-staatssteun-coronacrisis https://www.ftm.nl/artikelen/bookingcom-staatssteun-coronacr...
haissam 7y ago
this opinion piece on the NY times mentions Booking, and sums up the situation quite well. Its conclusion if you don't have time to read it entirely: > The economy needs help, and fast. Yet it is hard to escape the conclusion that the $2 trillion aid package validates and indeed further rewards the questionable practices of the last decade. In a normal bankruptcy proceeding, equity holders and shareholders would incur significant losses based on the taking of risks that were not unknown. It is true that the $2 trillion aid package has a condition that would, going forward, temporarily bar further stock buybacks for companies that receive taxpayer loans. But viewed in context, the relief package still amounts to a bailout of private capital and the endorsement of a decade of self-enriching practices.
7y ago

jessaustin 7y ago

This is a convenient sideshow. PPP is a pittance compared to the >$4B the Fed will be distributing to favored wealthy cronies. No one believes in "capitalism" anymore. In a system of free enterprise, we'd be happy to see businesses fail while the state supported humans in need. Instead, we have the opposite: humans are forced to suffer while corporations are bailed out with their money.

jessaustin 7y ago
Haha of course I meant ">$4T". The number is so big my fingers can't type it. Thanks for the corrective downvotes!
akoncius 7y ago
that's the issue - politicians keep saying that USA is free market, capitalist country but it's not. it is socialist capitalism with inversed relationship as you mentioned. it's time to start naming things as they are in reality
- jessaustin 7y ago
  It's not just politicians, as evidenced by the legions of HN status quo defenders eager to downvote this sort of message.

PeterStuer 7y ago

Typical Create crisis through destroying government by a thousand cuts. Resort to greasy palms Pork Barrel Politics under the umbrella of "hey, at least I'm doing something in this crisis". When called out say "see, I told you government doesn't work"

dbancajas 7y ago

why not limit SBA to companies with <10M yearly revenue?

mjberg01 7y ago

Odd that more aren't discussing the incentives for banks to secure the funding for their clients who have debt on the books with the banks. e.g. take two companies who both applied at the same time and each is doing $1M in revenue. However, company A has $250k in debt with the bank whereas company B does not. Now all of a sudden the banks give the cash to the company with the debt because they know if they fail they will have to eat that on their balance sheet. They are incentivized to distribute the $ in a priority that fits them not on a 'first come first serve' basis which is the fair approach.

AbrahamParangi 7y ago
This would also explain why Bank of America initially required an existing credit account. It makes sense that they would want to bail out their own bad debt with PPP money.
- Paradigma11 7y ago
  I do not think that this criticism is fair. Banks asked but were not allowed to relax their legal KYC criterias. Existing customers already fullfill these so they can be served while the others are processed. And ofcourse the whole system is completely swamped. That being said i don't doubt that banks would have acted like this anyway.
  - AbrahamParangi 7y ago
    Hanlon's razor is usually true but assuming the opposite is usually wise.

anticsapp 7y ago

The whole system is rigged. It always has been. And I don't mean the last twenty years. Want to invade Germania? You better know a great banker. Want to be the first on the block to buy a couple of these new things called printing presses? Better know a well-connected banker.

m463 7y ago
Want to unblock your online video? Want to fix a bad online review?
Fjolsvith 7y ago
How else would it have happened?

GoodJokes 7y ago

I love how the Democrats’ big win in the package was ensuring strict oversight. Everyone remember that manufactured narrative in the media?

anm89 7y ago

This always confuses me when people are mad at the businesses. You are mad that a company, a legal entity which exists for the sole purpose of making money, which has a legal obligation to its shareholders to try to produce returns, is taking an opportunity to get free money? I mean, be mad I guess, but surely don't be surprised. This is the least surprising, most rational behavior ever. Maybe we should get mad at the politicians who are creating the legislation that hands it to them.

richycaat 7y ago

Still hard to believe. Just pray it's a live and let live. Get rid of the bullies and manipulators.move forward always.

jsilence 7y ago

Simply give the money to the people, not to the businesses.