Why PPP’s high loan forgiveness rate bothers many people

Most of the Paycheck Protection Program loans issued to small businesses during the COVID-19 pandemic have been forgiven, but new data shows the program is prone to fraud.


Interesting new information is available on the Payment Protection Program, or PPP for short. Government loan forgiveness was given to small businesses during the COVID, and statistics show that many of those loans have been forgiven. Sacha Pfeiffer of NPR’s research team is here to explain why many people struggle with the level of forgiveness. So, Sacha, the people who got these loans were hoping that they would be forgiven. What’s not to like about these new numbers, then?

SACHA PFEIFFER, BYLINE: So there’s no doubt that these loans are a lifeline for many companies. And anyone who has received PPP financing may be pleased to hear that 92% of all loans have been forgiven or forgiven now. According to Small Business Administration data released this month. But most of that money went to businesses that don’t need it – rich celebrities like Khloe Kardashian and Tom Brady, for example. They have companies that each have a PPP loan of about $1,000,000 that has been fully forgiven. In addition, many businesses that thrived during the COVID had their loans forgiven, such as some manufacturing and construction industries.

MARTINEZ: But was it legal for them to take that money?

PFEIFFER: Yes, there was. To qualify for a loan, you have to say that you think you need it and to be forgiven, you don’t have to prove the money you need. This means that not only did people get loans they didn’t really need, but it also attracted scammers. This is how University of Texas finance professor Sam Kruger explained it.

SAM KRUGER: The PPP program appears to have created billions of dollars in fraudulent loans that ended up being aid.

PFEIFFER: He estimated that $64 billion of the nearly $800 billion in loans showed signs of fraud.

MARTÍNEZ: Okay, so why wasn’t the government serious about forgiveness? I mean, couldn’t they have tried harder to weed out the scammers or tell the businesses that are doing well during the COVID time to actually pay the money back?

PFEIFFER: I spent a lot of time asking those questions. The simple answer is that the government wanted to get a lot of money out quickly, and was willing to accept waste. It also made it easier to forgive because that was what drove business in Congress. So only 2% of the more than 11 million loans issued by auditors were manually reviewed. And of that small number of loans reviewed, only 0.2% could not be forgiven – little. But I want to play something that was said to me by the former official of the Ministry of Finance under President Trump. His name is Michael Faulkender.

MICHAEL FAULKENDER: Since the PPP was up and running, we didn’t know the disaster that would have happened if we had failed. What does bread lines look like during a disease? Do we want to know? I didn’t do it. And so we’re going to run that program.

PFEIFFER: It is said that the government prioritizes speed over accuracy when granting loans.

MARTÍNEZ: But was it just me, Sacha, or was it a bit sarcastic?

PFEIFFER: He seemed like a witness to me, too. I’d say he definitely is. And so did an SBA official in the Biden administration named Patrick Kelley. He told me that he was not happy when his discretion in the program was criticized for simply implementing a law passed by Congress. And he pointed out that Congress voted repeatedly to give more loans and make it easier to forgive, even when problems were revealed in the program. This is Patrick Kelley.

PATRICK KELLEY: It’s an easy feeling to say, well, the government will go again. Why didn’t they do it right? But to me, it ignores the horror of what was done right. I have met many, many, many, many more people who are grateful for their PPP loans.

MARTINEZ: All right. Now he is focusing on the good that money has done. But can defaulted PPP loans be recovered?

PFEIFFER: Well, it takes lawyers up to 10 years to pursue fraud, but no one is going to tell rich people who didn’t need a loan to please pay it back. That’s the money they keep. Meanwhile, the PPP has contributed to the federal debt, which recently reached $31 million. Paying for that could result in higher taxes and fewer government services, even for future generations. It’s very disappointing to the entrepreneurs I’ve interviewed, like Roy Thurston. He owns a Cape Cod library that received $14,000 in PPP loans that have all been forgiven. Then he said.

ROY THURSTON: What bothers me is that the people who took the money know better than to take the money. It should have been for people who really needed it.

PFEIFFER: And of course, the 92% pardon rate – it’s expected to continue to be high as more pardon applications are processed.

MARTINEZ: All right. NPR’s Sacha Pfeiffer. Sacha, thank you.

PFEIFFER: Absolutely.

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