U.S. workers won’t interact directly with the so-called Paycheck Protection Program that launches Friday, but if it works as intended, it could have a big impact on their lives.
Whether it can work as intended emerged as a major question Thursday as some banks said they wouldn’t be ready to take applications on Friday.
The way it’s supposed to work is that the government will essentially pay eight weeks of an eligible employer’s labor costs through a loan that will be entirely forgiven if that employer retains its workers for eight weeks without slashing their pay.
The effort is meant to prevent layoffs, as businesses have already dismissed more than 10 million workers in just the past two weeks because of the coronavirus pandemic. This unprecedented surge in unemployment puts incredible strain on workers and their families.
Notably, if a company already laid people off, it can still qualify for the paycheck protection loan if it re-hires them by the end of June.
“As long as you hire the people back, the loan is forgiven,” Treasury Secretary Steven Mnuchin said during a CNBC appearance on Wednesday to promote the program. (The Treasury’s website has more information on the initiative.)
The coronavirus bill Congress passed earlier this month provided $350 billion for the payroll scheme ― more than was earmarked for either expanded unemployment insurance benefits or rebate checks that will soon go out to most U.S. households. And Mnuchin has said he would ask Congress for more funding if that $350 billion runs out.
William Winecoff, a political science professor at the Indiana University Bloomington, said the program hasn’t gotten enough attention. He compared it favorably to European wage subsidies enacted in response to the coronavirus pandemic. Denmark, for instance, is paying up to 90% of workers’ salaries.
“This is actually more generous than that,” Winecoff said. “It’s full payroll support and that includes benefits, as well, for up to two months.”
Business owners have told HuffPost they eagerly anticipate enrolling in the program. Russell Cox, owner of a small, Dallas-based art consulting firm that also makes picture frames, said he’s already in touch with his lender and is going to apply as soon as he can on Friday. Dallas County ordered nonessential businesses to close last month to limit the spread of the coronavirus.
“It’s all looking pretty good ― it’s just a matter of getting through the approval process and getting the money,” Cox said, adding that he has four employees, all of whom have been with his firm for at least a decade.
But trouble could afflict the program. It runs through banks, some of which are complaining that they’ve only gotten fuzzy guidelines. Bank officials also have expressed worries about having to respond to an “overwhelming” demand for the loans, which are capped at $10 million per firm.
JPMorgan Chase, the largest bank in the U.S., said Thursday that it’s still waiting for more guidance from Treasury. “As a result, Chase will most likely not be able to start accepting applications on Friday, April 3rd, as we had hoped,” the bank said in a statement on its website.
Nevertheless, Mnuchin and President Donald Trump said the program would still launch Friday.
A past partnership between the Treasury Department and banks, designed to reduce foreclosures in the wake of the Great Recession, was pretty much a failure, as the department did little to enforce program rules and homeowners were strung along.
Thursday’s news that JPMorgan Chase might not be ready came as a cold shower after much optimism around the Paycheck Protection Program. Michael Strain, director of economic policy studies at the conservative American Enterprise Institute, wrote in an issue brief that the program “may prove to be the most important part of the government’s economic-policy response to the coronavirus.”
Strain noted that lenders will receive “generous fees” from administering the loans and are shielded from penalties so long as they receive documentation from borrowers that they didn’t lay off workers or cut wages.
Sen. Marco Rubio (R-Fla.), one of the architects of the program, tweeted Thursday that banks shouldn’t whine, noting the loans are fully guaranteed and that banks get “5% for basically verifying payroll & no liability if they get it wrong.”
“Now America needs them to step up,” he wrote.
This article has been updated to include a statement from JPMorgan Chase.
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