To receive a slice of the $150 billion in emergency virus aid Republican senators are proposing, a company will have to prove to the Treasury secretary it’s distressed and possibly agree to make Uncle Sam a co-investor.
The latest GOP-backed virus stimulus bill, expected to top $1 trillion, calls for Treasury Secretary Steven Mnuchin to oversee a $208 billion loan program via the department’s Exchange Stabilization Fund, which is used to buy and sell foreign currencies, among other functions.
Of that amount, $50 billion would be allocated to passenger airlines while $8 billion is reserved for cargo haulers. The remaining $150 billion is set aside for other “severely distressed sectors” that have been pushed to the brink by the virus, according to the bill text. Another $300 billion is aimed at helping smaller businesses.
It’s unclear how the virus bailout money will be administered, but the most recent precedent comes from the 2009 financial crisis, when the U.S. allocated $700 billion to bail out banks and automakers as the collapse of high-risk mortgages rippled through the American economy. The government took stakes in car companies and banks that gave it oversight over many aspects of their operations.
The so-called Troubled Asset Relief Program, or TARP, ultimately distributed $443 billion of the $700 billion allocated in assistance for banks, the auto industry and mortgage assistance, most of which was repaid to the government. The ultimate cost to taxpayers was $31 billion, according to an April 2019 report by the Congressional Budget Office.
Lisa Gilbert, a lobbyist for consumer advocacy groupPublic Citizen, said the latest Senate proposal will spark a lobbying blitz that could see large businesses and powerful groups better-placed to influence how the money is distributed, even though some of it is earmarked for small businesses.
“As long as there is stimulus on the table and bailout, I expect we will continue to see K Street ratchet up their activity,” Gilbert said.
Much of that activity seems focused on stressing the economic importance of various potential recipients. The cruise industry, for example, says its thousands of workers are at risk.
“We know that every 1% decline in cruisers from the U.S. alone results in the loss of 2,000 jobs,” theCruise Lines International Association said in a statement. “Those jobs are primarily small businesses and independent business owners — and they extend beyond the cruise industry,” including travel agents and other small agencies.
TheU.S. Travel Association, along with related groups and businesses, on Friday urged lawmakers to provide them with more aid, warning the sector could shed some 4.6 million jobs over the next six weeks. The groups asked for $150 billion in grants to keep sector employment at pre-outbreak levels, loans in excess of the $150 billion currently planned and at least $10 billion in grants for airports.
Groups representing taxicabs, bus drivers, limousines, and other ground carriers sent a letter to President Donald Trump earlier this week asking him to declare their industries an “essential service” to exempt them from local quarantine orders. The groups requested $12 billion in cash grants, among other aide.
Under the proposed legislation, businesses would be eligible to receive loans if they’re unable to reasonably access credit by other means. Companies will be eligible for loans only if their continued operations are jeopardized by losses linked directly to the outbreak, as determined by Mnuchin, according to the summary.
Treasury hasn’t decided how it will handle the funds, according to a person familiar with the matter.
The legislation, which is still in initial drafts and could change after negotiations with Senate Democrats, would also require companies seeking the loans to first agree to cap executive pay at 2019 levels through 2022 and cap so-called golden parachutes to no more than twice an executive’s total compensation last year.
These provisions would apply to executives who earned total pay of more $425,000 in the 2019 calendar year. The provision would not apply to unionized workers, whose pay was determined by existing collective bargaining agreements.
The proposal permits the federal government to take an equity stake in companies that receive loan assistance, “contingent on the financial success of the eligible business.”The legislation calls for the Treasury Department to draw up application procedures and minimum requirements within 10 days of the bill’s enactment.
Congress is pushing to pass the measurequickly as industries race to make the case that their sector is being harmed by the pandemic sweeping the nation — and push for more money.
“It’s not clear that the $150 billion would be sufficient to assist midsize and larger companies with both their current obligations and payroll obligations,” Neil Bradley, the chief policy officer of theU.S. Chamber of Commerce, told reporters on Friday. “Having a cap like that means that some folks are going to be able to get the loans and pay their employees and some employers won’t.”
TheNational Association of Manufacturers is seeking a $1.4 trillion “manufacturing resiliency fund” to provide loans to large and small producers, while the restaurant industry has asked for $325 billion and travel groups are seeking a $250 billion stabilization fund to keep workers employed.
With huge swaths of the retail industry shut down due to the virus, “it’s reasonable for us to believe we are a severely distressed and impacted industry,” said Brian Dodge, president of theRetail Industry Leaders Association, which representsWalmart Inc. andBest Buy Co., among others. “There will be a lot of industries that will be seeking relief from the funds that are created here and the question will ultimately be how does that work and will it be enough?”
TheSolar Energy Industries Association, which represents panel makers and installers, is seeking an extension of an investment tax credit as well as other aid such as grants, citing the crisis’ impact on its labor pool supply chain and other logistical challenges.
“When you’re teleworking it’s hard to build solar panels in your living room,” said Abigail Ross Hopper, the group’s president.
— With assistance by David McLaughlin, James Rowley, Saleha Mohsin, and Ari Natter
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