How PPP Loan Distribution Became the New Red Line – Mother Jones


A street in Philadelphia in May 2020.Matt Rourke / AP

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The paycheck protection program was supposed to help small businesses struggling with the crippling financial effects of the coronavirus pandemic. But the benefits, as with other government responses to the crisis, have spilled over disproportionately on white communities.

A new investigation of Reveal, who analyzed the distribution of more than five million PPP loans, found that the program was plagued by widespread racial disparities. The results show a persistence of the type of structural racism – exemplified by 20th century racial pacts and redlining policies – that has long prevented communities of color from thriving. Reveal found, for example, that in the “vast majority” of large metropolitan areas, businesses in predominantly white neighborhoods were approved for loans at much higher rates than those in predominantly Latino, black or Asian neighborhoods. According to the survey, published in partnership with the Los Angeles Times:

Los Angeles has seen some of the worst [disparities] in the nation. Although communities of color have been hit much harder by COVID-19, businesses in predominantly white areas received loans at twice the rate of predominantly Latinx leaflets, one and a half times the rate for businesses in predominantly black areas and 1.2 times the rate in Asian areas.

The New York metropolitan area, which includes Newark and Jersey City in New Jersey, has seen equally stark disparities, with white areas receiving loans at twice the rate in Latinx areas, 1.8 times the rate in black areas. and 1.2 times the rate for Asian areas.

In other metropolitan areas, including Dallas, San Francisco, San Diego, Las Vegas, and Phoenix, businesses in predominantly white areas have also received loans at a rate roughly twice that of those in predominantly Latinx areas.

The first batch of loans, totaling $ 349 billion, was granted last spring, days after Congress passed the CARES Act. But in the midst of the hasty deployment, a lack of federal guidance meant that, as Reveal put it, “Any obstacle, such as missing documents or a lack of an existing relationship with a bank, risked leaving a business last.”

In early April, Malik Muhammad, owner of a Los Angeles bookstore specializing in African-American literature, contacted Wells Fargo, a bank that “Communities of color actually starved for PPP money”, Reveal reports. Muhammad heard nothing of his loan request for weeks. At the beginning of June, he received a standard letter: “We cannot confirm that all requests will be submitted and processed by the ASB before funds are exhausted, and we anticipate that the request will exceed the funds available.” He never received a follow-up communication from Wells Fargo, although he was later successful in securing a small loan from Square. “I know we are not big companies, but we deserve a call,” he said..

The CARES law had asked the Federal Small Business Administration to prioritize “socially and economically disadvantaged people,” according to an October 2020 congressional subcommittee. report Quoted by Reveal. But the SBA, the Treasury Department and the big banks administering PPP loans have ignored these guidelines. In fact, the subcommittee found that the Treasury had privately encouraged banks to limit their initial lending to existing customers, to the exclusion of many minority and female-owned businesses.

None of the lenders interviewed by the subcommittee recalled the Trump administration’s advice on how to prioritize underserved communities, and several set up lending programs in which large commercial clients benefited from. ‘a “separate and faster process”. In some cases, PPP loans for better-off clients were processed twice as fast as loans for really needy small businesses.

Reveal had reported In April 2020, small business owners in Republican states with no stay-at-home orders were more likely to have obtained P3s loans than those in Democratic states where COVID hit hard first. In December, the New York Times and Washington post both said the majority of PPP money went to large corporations, including dozens of national chains, many of which were publicly traded. That same month, when Congress passed its second COVID relief package, the legislation included a bipartisan provision that helped all P3 recipients, but was most beneficial for companies with the largest loans, resulting in resulted in an estimated $ 120 billion in tax relief for America’s richest business owners. .

The botched rollout of a program meant to help small businesses and their employees has been devastating for many, especially black homeowners, who are much more likely to be sole proprietors. Reveal quotes a study by the Federal Reserve Bank of New York, which find that from February to April 2020, the number of active companies fell 22%, but the number of black and Latin American companies fell by 41% and 32%, respectively.


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