It’s easy — and fair, to a point — to pin this on Shack Shack, but as I often write … legislate in haste, repent at leisure. As the Trump administration struggles to get Congress back to work to replenish the Paycheck Protection Program, Treasury will shortly get $10 million of the COVID-19 relief funds back. Fast-food chain Shake Shack issued apologies today for exploiting the PPP in order to get a massive grant while small businesses are getting locked out of relief.
This station calls it “giving back,” but it’s somewhat less virtuous than that:
The burger chain was just one of several large restaurant operators and publicly traded companies that secured tens of millions of dollars in “Paycheck Protection Program” loans before the Trump administration announced Thursday that the funding was exhausted because of huge demand.
Other chains that reported receiving the loans include Potbelly, Ruth’s Hospitality Group, Taco Cabana and J. Alexander’s. The disclosures infuriated small business owners who were unable to get loans in time. The program, which is intended to avert massive layoffs during the coronavirus pandemic, is focused on businesses with fewer than 500 employees but allowed large restaurant operators to also apply.
In a post on LinkedIn, Shake Shack CEO Randy Garutti and Chairman Danny Meyer said the company was fortunate on Friday to raise more capital in the markets — $150 million — and that it planned to return its entire Paycheck Protection Program loan “so that those restaurants who need it most can get it now.” They called on Congress to adequately fund the program, as lawmakers near an agreement on another $300 billion.
“Our people would benefit from a $10 million PPP loan but we’re fortunate to now have access to capital that others do not,” they said. “Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours.”
This explanation doesn’t make a lot of sense, at least not if you take their explanation at face value. Shake Shack has a market cap of $1.7 billion as of this morning, which means they had capital on which to rely from the start. Like the other companies mentioned, they made a smart if morally reprehensible decision to get their hands on small-business cash because the interest-free loan-cum-grant was too juicy to pass up. Not only did they rush to take advantage of this relief program for small businesses, they had far more resources with which to take advantage of the program than most of their smaller competitors for the helicopter money.
Shake Shack got shamed into giving back the cash, but not because it was illegal. Thanks to the way the PPP got structured by Congress, Shake Shack and all of these other recipients of emergency funds qualified for the loans. Had Congress wanted to keep Shake Shack out of the PPP, they could have written the bill to put better restrictions on the qualifications for applicants. Even if those hadn’t been in the original bill, Congress could have quickly added more restrictions to the PPP once it became clear that larger businesses were bigfooting the money at the expense of the smaller businesses Congress intended to rescue with the fund.
That, of course, assumes that Congress would have stayed on the job in the crisis rather than take a powder. They didn’t stick around, and they still haven’t returned despite the fact that the fund has been empty for days now. Nancy Pelosi is still issuing ultimatums from Ice-Cream Stash Central, using the “unanimous consent” tactic to bypass the other 434 elected representatives in the House. By keeping the House out of session, Pelosi can sideline them — and their potential desire to get a deal done quickly that cleanly replenishes and refines the PPP.
Shake Shack and others may have acted without many scruples in sucking up that money rather than applying for the more restrictive corporate relief program in the CARES Act. They didn’t violate the law Congress created in doing so, and at least they didn’t abdicate their responsibilities to their stakeholders. Put the blame for this where it actually belongs — on the Brave Sir Robin Congress.
Update: Still nothing doing from Democrats on replenishing the PPP:
McConnell announces the Senate will try to pass small business package tomorrow. “At this hour, our Democratic colleagues are still prolonging their discussions with the Administration, so the Senate regretfully won’t be able to pass more funding for Americans’ paychecks today.”
— Manu Raju (@mkraju) April 20, 2020
Another day, another zero dollars.