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Comment by PragmaticPulp | Hacker News Reader

I’ve been working with several contractors lately. They’ve all been bragging about getting Coronavirus small business loans they don’t need, as demand for home renovation contractors is way up while everyone is working from home. One of them asked me if I had any ideas for investing the loan somewhere that would earn him extra money.

Meanwhile, we’re starting to see a steady stream of questionable loans granted to large businesses such as Kanye West’s or Mitch McConnell’s wife.

I’m sure these loans were helpful to some people somewhere (food service industry is a good example) but the overall execution and monitoring have been generally quite poor.

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Wasn't the whole point minimal means-testing to get this done quickly? Plenty of small businesses would have had to lay off employees while waiting for someone to decide if the application was good enough.

Construction is an interesting outlier, I know of plenty of people in service industries who at least got something rather than just being completely screwed.

As someone who could have collected quite a bit of money from this program but didn't need it, this really ticks me off. You're not supposed to apply for the loan/grant unless you are expecting to lay people off.

This was determined to be a grift from the start. The fact that the head of the executive branch fired the person agreed upon to provide oversight 2 days after the bill was signed made that abundantly clear.

Yes it's wrong that small business are taking money they don't need. But that's because it was essentially used as a slush fund as is now coming to light.

The need more openness in government technology. There should be a platform right now where anyone can look up who received money from this fund larger than some amount.

FWIW thanks for being responsible.

I'm just a W2 worker but have seen plenty of rationalization around this including "well my competitors are taking the forgivable loans so unless I do I'm at a disadvantage and thus negatively impacted" or "I can't plan 100% for the future and that worries me, so therefore I'm impacted." And that's just the small fishes; a sibling comment mentions our leaders promised to cooperate with oversight then immediately about-faced. No consequences anymore. I know they're supposed to be used for wages but I've seen someone take it anyway as a non-qualifying business because they expect the requirement to follow up with documentation will go out the window since it'll be too much work (to be fair, this last thing was one isolated case).

I think it's unfortunate how much grifting and opportunism goes on, and as we get closer to the election or need to prop up more businesses with more aid, we'll have further programs and rounds with avenues for abuse.

I specifically haven't taken my loan yet because I do not need it. I have heard similar stories and it rubs me the wrong way to think of how many people are taking advantage of the system and displacing others who need it more.

To play devil's advocate, though, it is hard to watch corrupt institutions like American Airlines get billions in bailout money and not feel like you deserve to claw as hard as you can to get your own (dismal) slice of the pie.

The loans aren’t supposed to be need-based charity. They’re an economic measure intended to preserve the status quo during the shut down—to keep the economy’s web of obligations from unraveling. If you saw your revenue fall, you were supposed to get a loan so you didn’t fall behind on your payroll, etc.

American Airlines got the loans and should have gotten the loans. Airlines are low-margin businesses. Last year, AA had $45.8 billion in revenues and $42.7 billion in expenses. Airlines are always living in the edge of a small shift in one of those numbers pushing them into the red. During the first quarter of this year it had $8.5 billion in revenue and $11.8 billion in expenses—almost completely wiping out all of last’s year’s profits. And that was just through March! If AA didn’t get the loans, it would have to lay everyone off, suppliers would stop getting paid, etc., and that would trigger exactly the unwinding of the economy that would make recovery protracted and painful.

Is AA the airline that spent their incredible surpluses on stock buybacks which put them in a financially vulnerable position?

From July 2014 to December 2019 AA spent $12.4 billion in stock buybacks. Over that period, they had $235 billion in revenue and $200+ billion in expenses. Is it unreasonable to return $12 billion to investors over that period, amounting to 5.1% of revenue really so unreasonable? By comparison Google bought back $18 billion of shares last year, amounting to 11.1% of revenue.

Yes, it is completely unreasonable. $12B represents a far more significant sum to AA than it does to Google.

- Unlike AA, Google has enough cash on hand to cover expenses for close to a year

- Unlike AA, the service Google provides is not commoditized and highly profitable

- Google's market cap is 100x that of AA

- Unlike AA, Google's services are not highly susceptible to disruption by things like fossil fuel prices, terrorist attacks, politics and global pandemics

> - Unlike AA, Google's services are not highly susceptible to disruption by things like ...

Advertising is actually one of the first things to be scaled back in an uncertain economy, and due to the way most of Google's advertising business is based on auction based pricing, if 1% of companies pull their ads, Google will lose more than 1% of revenue, since prices also fall, so there is an amplification effect.

Google is still in a much better position than AA though.

Hindsight is 20/20, and not really fair, but leaving any judging tone out of it, yes, AAL would have benefited from more cash on hand. Or, maybe it was the right decision after all if they get bailed out.

There's also more than revenue and profits.... AAL may also have had debt or a lack of spare cash; I couldn't find exact breakdowns but some articles suggest their buybacks caused negative free cash flow

https://www.bloomberg.com/news/articles/2020-03-16/u-s-airli...

Contrast with AAPL and GOOG who had, and have, tons of cash on hand. As of 2019, $102B and $117B respectively, which makes them them #2 and #1.

https://www.latimes.com/business/story/2019-07-31/move-over-...

They are supposed to be need based. You have to certify that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant."

Regarding the contractors, that sounds like outright fraud. My hope would be that eventually the bill comes due for people who fraudulently claimed funds, and they either pay up with interest or face criminal charges. Unfortunately some high profile folks will get away with it - just like they get away with dodging taxes.

For something executed that quickly, I think execution was ok. Of course, there were frauds, but you cannot design and implement fraud-free process for $500B in just few weeks. And hopefully, over next few years, they'll be properly investigated and followed up on.

Anecdotally, most of my friends who kept their jobs felt guilt or shame for taking their economic impact payment when they didn't "need" it as much as someone else.

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