By Victor Reklaitis, MarketWatch
Treasury Secretary Steven Mnuchin has pushed back on calls to change a key requirement for small businesses to obtain aid under the government’s Paycheck Protection Program, while House Speaker Nancy Pelosi sounds open to loosening it.
Mnuchin on Monday rejected the requests for a change that have come from those groups and other organizations.
“This is the way the program was designed by Congress, and we think it has the right intent to get the money to employees. I don’t have the flexibility to change that,” he said in an interview on Fox Business Network.
Mnuchin also said he thinks allowing 25% of proceeds for other expenses “is very fair,” adding that “people who say they want to use more money for overhead — they can go out and borrow an EIDL loan,” referring to the government’s Economic Injury Disaster Loan program.
Pelosi, on the other hand, has signaled she might be willing to amend the 75% rule.
“I don’t even know why we have that in there,” the California Democrat said on Tuesday during a virtual townhall. “I guess to make sure people are spending it on employees, but we want to help the business. We don’t want to complicate.”
In a letter to top U.S. lawmakers a week ago , the American Hotel & Lodging Association, whose members include public hotel companies such as Marriott /zigman2/quotes/200170042/composite MAR +2.79% , called for “reducing the payroll threshold to 50% which will allow similar overall levels of support to go to our employees while also better assuring the long-term viability of the hotel as a place of employment.”
The PPP quickly ran through its initial allocation of $350 billion that came in late March through the $2.2 trillion CARES Act, and then in late April got an additional $320 billion as President Donald Trump signed into law the $484 billion Paycheck Protection Program and Health Care Enhancement Act.
Mnuchin on Monday said the PPP so far had used $175 billion from its second round of funding, with 2.2 million loans made at an average size of $79,000.
“We’re really seeing this as going directly to small businesses,” he said, adding that the second round is “already way over” the first round level of 1.7 million loans made.
While speaking on Monday to Fox Business, Mnuchin also said it’s too early to tell if international travel will get opened up this year, and he addressed the battle between Republicans and Democrats over how the next coronavirus package will aid state and local governments.
“As we’ve said before, we’re not going to bail out states that had financial issues ahead of time,” the Treasury secretary said. “We will look at helping states as we’ve done, and we’ve also set up with the Federal Reserve a lending facility for cities and states.”
This is an updated version of a report first published on May 4, 2020.
MarketWatch’s Chris Matthews contributed to this report.