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    The Economy Is Improving Faster Than Expected, the U.S. Budget Office Says

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesSee Your Local RiskVaccine InformationWuhan, One Year LaterAdvertisementContinue reading the main storySupported byContinue reading the main storyThe Economy Is Improving Faster Than Expected, the U.S. Budget Office SaysLarge sectors of the economy are adapting to the pandemic better than originally expected, and December’s economic aid package helped to increase growth, adding another twist to stimulus talks.A shuttered business in Los Angeles. It may take years to return to the pre-pandemic levels of employment.Credit…Kendrick Brinson for The New York TimesFeb. 1, 2021Updated 3:14 p.m. ETThe American economy will return to its pre-pandemic size by the middle of this year, even if Congress does not approve any more federal aid for the recovery, but it will be years before everyone thrown off the job by the pandemic is able to return to work, the Congressional Budget Office projected on Monday.The new projections from the office, which is nonpartisan and issues regular budgetary and economic forecasts, are an improvement from the office’s forecasts last summer. Officials told reporters on Monday that the brightening outlook was a result of large sectors of the economy adapting better and more rapidly to the pandemic than originally expected.They also reflect increased growth from a $900 billion economic aid package that Congress passed in December, which included $600 direct checks to individuals and more generous unemployment benefits.The budget office now expects the unemployment rate to fall to 5.3 percent at the end of the year, down from an 8.4 percent projection last July. The economy is expected to grow 3.7 percent for the year, after recording a much smaller contraction in 2020 than the budget office initially expected.The rosier projections are likely to inject even more debate into the discussions over whether to pass President Biden’s $1.9 trillion economic rescue package. It could embolden Republicans who have pushed Mr. Biden to scale back the plan significantly, saying the economy does not need so much additional federal support and that another big package could “overheat” the economy.But the report shows little risk of that happening. The economy is projected to remain below potential levels until 2025 on its current path. And big economic risks remain. The number of employed Americans will not return to its pre-pandemic levels until 2024, officials predicted, reflecting the prolonged difficulties of shaking off the virus and returning to full levels of economic activity.The Federal Reserve chair, Jerome H. Powell, warned last week that the economy was “a long way from a full recovery” with millions still out of work and many small businesses facing pressure.Budget officials said the rebound in growth and employment could be significantly accelerated if public health authorities were able to more rapidly deploy coronavirus vaccines across the population.As it stands, the budget office sees little evidence of growth running hot enough in the years to come to spur a rapid increase in inflation. It forecast inflation levels below the Federal Reserve’s target of 2 percent for years to come, even with the Fed holding interest rates near zero.Other independent forecasts, including one from the Brookings Institution last week, have projected that another dose of economic aid — like the $1.9 trillion package Mr. Biden has proposed — would help the economy grow more rapidly, topping its pre-pandemic path by year’s end.AdvertisementContinue reading the main story More

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    PPP Aid to Small Businesses: How Much Did $500 Billion Help?

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesSee Your Local RiskVaccine InformationWuhan, One Year LaterAdvertisementContinue reading the main storySupported byContinue reading the main story$500 Billion in Aid to Small Businesses: How Much Did It Help?Some economists say the Paycheck Protection Program has not proved as useful as other aid. The debate could sway the new administration’s plans.Small businesses line a street in Westwood, N.J. A $900 billion federal relief package included $325 billion in small business aid, most of it for the Paycheck Protection Program.Credit…Mohamed Sadek for The New York TimesBen Casselman and Feb. 1, 2021, 3:00 a.m. ETAs Democrats and Republicans spent months last fall arguing over how to rescue the economy, one provision drew widespread support from lawmakers: reviving the Paycheck Protection Program, the government’s marquee effort to help small businesses weather the pandemic.The Senate Republican leader, Mitch McConnell of Kentucky, called the lending program “a bipartisan slam dunk.” House Democrats included an extension and expansion of the program in aid packages in the summer and the fall. And Treasury economists said in December that the program might have saved nearly 19 million jobs.Yet there is dissent from one notable contingent: Academic economists who have studied the program have concluded that it has saved relatively few jobs and that, at a cost of more than half a trillion dollars, it has been far less efficient than other government efforts to help the economy.“A very large chunk of the benefit went to a very small share of the firms, and those were probably the firms least in need,” said David Autor, an M.I.T. economist who led one study.The divergence in views over the program’s economic payoff stems in part from ambiguity about its goals: saving jobs or saving businesses.Using different methodology than the Treasury economists, Mr. Autor says the Paycheck Protection Program saved 1.4 million to 3.2 million jobs. Other researchers have offered broadly similar estimates.Given the program’s cost, saving jobs on that scale doesn’t necessarily qualify as a success. Unemployment benefits also provide income, at far less expense, and programs like food assistance and aid to state and local governments pack a larger economic punch, according to many assessments.And because the paycheck program was designed to reach as many businesses as possible, much of the money went to companies that were at little risk of laying off workers, or that would have brought them back quickly even without the help.“It’s just a really inefficient use of funds,” said Eric Zwick, an economist at the University of Chicago’s business school who has studied the program.Many policy experts on Wall Street and in Washington — as well as businesses and banks on Main Streets across the country — say the program’s merits should be assessed instead on what it did to save businesses. On that basis, they say, it helped prevent a greater calamity and fostered economic healing.“A major goal was to keep these businesses alive so that when the economy started to recover and then the economy reopened, there would be businesses around to hire unemployed workers,” said Michael R. Strain, an economist at the American Enterprise Institute, a conservative think tank. Preliminary evidence suggests that the program has succeeded by that metric, he said.In the short term, the program’s proponents are winning the argument. When Congress approved a $900 billion relief package in December, most of the $325 billion in small-business assistance was for a slightly modified version of the Paycheck Protection Program. Businesses began applying for the aid last month.But the debate over the program’s merits could shape the next round of aid. President Biden’s $1.9 trillion pandemic relief plan includes billions for small businesses, but no new money for the program. His aides are weighing what to do about funds already allocated.Mr. Biden’s proposal includes direct grants for the hardest-hit small businesses and a request for Congress to find new ways to help restaurants struggling with consumer pullbacks and state and local restrictions.Many Democrats on Capitol Hill, along with some advocates for small-business relief in think tanks and lobbying shops around Washington, say lawmakers should move on to a more focused and efficient method for supporting small businesses until widespread vaccination fully reopens the economy.Congress created the Paycheck Protection Program in March as businesses shut down early in the pandemic. The program sought to stem layoffs by providing forgivable, low-interest loans to help pay employees even if they weren’t working.The Coronavirus Outbreak More

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    Ghosts of 2009 Drive Democrats’ Push for Robust Crisis Response

    #masthead-section-label, #masthead-bar-one { display: none }The New WashingtonLatest UpdatesExpanding Health CoverageBiden’s CabinetPandemic ResponseAdvertisementContinue reading the main storySupported byContinue reading the main storyNews AnalysisGhosts of 2009 Drive Democrats’ Push for Robust Crisis ResponseIn their quest for Republican backing, Democrats say they missed opportunities in 2009 for a stronger response to the Great Recession. They are determined not to repeat the mistake.Senator Chuck Schumer of New York, the new majority leader, at the Capitol on Wednesday. “We should have learned the lesson of 2008 and 2009, when Congress was too timid and constrained in its response to the financial crisis,” he said last week.Credit…Oliver Contreras for The New York TimesJan. 31, 2021Updated 5:27 p.m. ETWASHINGTON — Ten Republican senators asked President Biden on Sunday to drastically scale back his $1.9 trillion pandemic aid bill, offering a $600 billion alternative that they said could pass quickly with bipartisan support.But their proposal met a tepid reception from Democrats, who are preparing this week to move forward with their own sweeping package — even if it means eventually cutting Republicans out of the process. Haunted by what they see as their miscalculations in 2009, the last time they controlled the government and faced an economic crisis, the White House and top Democrats are determined to move quickly this time on their stimulus plan, and reluctant to pare it back or make significant changes that would dilute it with no certainty of bringing Republicans on board.“The dangers of undershooting our response are far greater than overshooting,” said Senator Chuck Schumer, Democrat of New York and the new majority leader. “We should have learned the lesson of 2008 and 2009, when Congress was too timid and constrained in its response to the financial crisis.”Their strategy can be traced to 12 years ago, when Barack Obama became president, Democrats controlled both houses of Congress, and they tackled both an economic rescue package and a sweeping health care overhaul.In retrospect, in the quest to win Republican backing for both, Democrats say, they settled for too small an economic stimulus and extended talks on the health care measure for too long. That view was driving the party’s unenthusiastic response on Sunday to the new offer from the Senate Republicans who asked for a meeting with Mr. Biden to lay out a substantially smaller stimulus proposal. In a letter, the 10 senators — notably enough to defeat a filibuster — said their priorities aligned with Mr. Biden’s on crucial areas such as vaccine distribution.But members of the group made clear in interviews on Sunday that their plan amounted to less than a third of Mr. Biden’s proposal. Democrats said they would review it, but would insist on a comprehensive legislative response.While talks with Republicans are expected to continue, Democrats are set this week to put in motion a budget process known as reconciliation that is not subject to a filibuster, allowing them to push through pandemic legislation on their own if no bipartisan agreement emerges.That possibility has Republicans squawking that Democrats are abandoning their bipartisan pledge without giving it a chance and warning that the effort will poison their ability to reach bipartisan deals. The objection ignores the fact that when they controlled Congress, Republicans rolled over Democrats in January 2017 and began their own reconciliation process even before Donald J. Trump was sworn in as president, paving the way for the enactment of a $1.5 trillion tax package that was muscled through without a single Democratic vote.“We’re giving an opportunity to come together on important and timely legislation, so why wouldn’t you do that rather than trying to move it through with reconciliation and having a fully partisan product?” asked Senator Lisa Murkowski, Republican of Alaska and one of the signers of the new letter.While they have yet to roll out their plan, members of the group said it would omit Democrats’ proposal for a federal minimum wage increase and scale back direct stimulus payments to individuals, excluding Americans earning more than $50,000 a year or families with a combined income exceeding $100,000.“Let’s focus on those who are struggling,” Senator Rob Portman, Republican of Ohio, said on the CNN program “State of the Union” on Sunday.But to Democrats, the scars from 2009 cut deep. First, they believe they were too accommodating to Republicans, who called for restraint in providing stimulus for the economy. Then Democrats saw themselves as sandbagged by Republicans who engaged in prolonged negotiations over health care before pulling the plug entirely, opposing legislation that they had helped draft and inflaming a partisan fight that cost Democrats dearly in the 2010 midterm elections.This time, Democrats say the new aid must be robust and delivered quickly. They do not intend to allow Republicans to dictate the timing nor the reach of the legislation.“I’m not going to let Republican senators stall for the sole purpose of stalling,” Senator Ron Wyden, Democrat of Oregon and the incoming chairman of the Senate Finance Committee, said on a conference call hosted by the advocacy group Invest in America. He added that his view grew out of his own experience serving as a junior member of the panel during the Great Recession.Mr. Biden would no doubt prefer to push his proposal through with bipartisan support to show he is able to bridge the differences between the two parties. But the White House has been adamant that it will not chop up his plan to try to secure Republican backing and that while the scope could be adjusted, the changes will not be too substantial.“We have learned from past crises that the risk is not doing too much,” Mr. Biden, who was vice president in 2009, said on Friday at the White House, striking the same theme as Mr. Schumer. “The risk is not doing enough.”Like Mr. Biden this year, Mr. Obama entered the White House in 2009 optimistic he could cooperate with Republicans, and there had been promising signs in 2008. In the face of a dire economic emergency, congressional Republicans, Democrats and George W. Bush’s administration had worked closely to approve the $700 billion Wall Street bailout. Republicans also seemed dispirited by steep election losses in November, suggesting some might be open to cooperation.But to an extent that was not immediately apparent, top Republicans in the House and Senate quickly decided that their best path to reclaiming power was to remain united against Mr. Obama’s agenda, a stance Republicans later acknowledged.As a result, the administration and Democratic leaders had to make multiple concessions to ensure the votes of three Republicans and a few moderate Democrats needed to provide the bare minimum of 60 votes to overcome deep Republican opposition to the stimulus package. That meant holding the amount to $787 billion, less than what some economists at the time said was needed, and potentially slowing the recovery.President Obama speaking about health care in 2009. Democrats say they settled for too small an economic stimulus to gain needed Republican support while also extending talks on health care for too long.Credit…Stephen Crowley/The New York TimesThen came the health care law. Democrats were determined to both expand access to affordable health insurance and to work with Republicans in doing so. They were also concerned then about repeating past mistakes, particularly the Clinton health care effort in 1994, whose spectacular collapse was attributed partly to a failure to involve Republicans from the start.While many Republicans were considered out of reach in 2009, a group of three senators influential on health care policy — Charles E. Grassley of Iowa, Mike Enzi of Wyoming and Olympia Snowe of Maine — engaged in lengthy negotiations with three Democratic counterparts, in a group that came to be known as the Gang of Six.To bring them along, Democrats proposed a market-based approach rather than the kind of government-run, single-payer program sought by many liberals. They even eschewed a limited public option to mollify Republicans and some moderate Democrats. Still, the talks dragged, and Republicans began pulling back amid a rash of raucous protests at congressional town hall events across the country.Frustrated and believing Democrats were being strung along, Mr. Obama in September 2009 summoned Mr. Grassley to the White House along with Senator Max Baucus, Democrat of Montana, who was leading the Gang of Six.Mr. Obama recounted the scene in his new memoir, writing that he had pressed Mr. Grassley on whether, “if Max took every one of your latest suggestions, could you support the bill?” Mr. Grassley was hesitant. “Are there any changes — any at all — that would get us your vote?” Mr. Obama asked, drawing what he described as an awkward silence from the Republican senator.“I guess not, Mr. President,” Mr. Grassley eventually responded.As they plunge forward this year, Democrats say they do not want to find themselves in a similar position, working with Republicans only to come up short with an insufficient response that does not draw bipartisan support.Some Democrats still hold out hope of reaching bipartisan agreement on at least some elements of the administration’s coronavirus response and say the party must make a legitimate attempt to come together with Republicans.“We ought to try to do what we can do in a bipartisan way,” Senator Joe Manchin III of West Virginia, a leading Democrat in the bipartisan talks, told reporters. He said it would then be appropriate for Mr. Schumer to use “other means to move things along” if progress could not be made.Emily Cochrane More

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    America’s Next Great Economic Experiment: What if We Run It Hot?

    AdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyAmerica’s Next Great Economic Experiment: What if We Run It Hot?Supporters of aggressive stimulus see an opportunity to finally correct the mistakes of the last recession and achieve boom times quickly.Credit…Thomas White/ReutersJan. 29, 2021, 5:00 a.m. ETPresident Biden’s proposed $1.9 trillion pandemic rescue package includes money for many goals: expediting the rollout of coronavirus vaccines; reopening schools; expanding unemployment benefits; sending more cash payments to most Americans.But when you skip the line-by-line details and look at the overall numbers, something striking becomes evident. The administration’s proposal, when combined with the $900 billion in pandemic aid agreed to in December, would amount to a bigger surge of spending, both in absolute terms and relative to the depth of the nation’s economic hole, than has been attempted in modern American history.Mr. Biden’s proposal — or even more limited versions of it that appear to have a better shot of winning congressional approval — would pump enough money into the economy to, in effect, intentionally overheat it. Or at minimum it would push the limits of how fast the American economy can rev.Supporters of aggressive stimulus aid view that as a positive thing, a means to finally correct the mistakes of the last recession and achieve a boom-time economy quickly, rather than muddle along with millions out of work for years.Mark Zandi of Moody’s Analytics, whose work on the impact of fiscal stimulus President Biden has frequently cited, estimates that the United States currently has an “output gap” — a gap between actual activity and economic potential — of 4 percent to 5 percent of G.D.P., and that the Biden proposal would amount to 8 percent to 9 percent of this year’s G.D.P.Even if scaled back somewhat to gain moderates’ support, the Biden plan implies enough fuel to get the economy burning hot.“It’s better to err on the side of too much rather than too little,” Mr. Zandi said. “Interest rates are at zero, inflation is low, unemployment is high. You don’t need a textbook to know this is when you push on the fiscal accelerator. Let’s go.”To skeptics, it would be a risky use of the power of the Treasury, with far-reaching implications for inflation, financial bubbles and the sustainability of the national debt.“We’re already in uncharted territory,” said Douglas Holtz-Eakin, president of the American Action Forum and a former director of the Congressional Budget Office who has advised Republicans. He noted that fourth-quarter G.D.P. was only about $119 billion below its level of a year earlier: “Do we need another $1.9 trillion to deal with that problem? I have an arithmetic problem with where we are.”Traditional fiscal policy to address a recession goes something like this. First make your best projection of how the economy will perform in the months ahead. Then make your best guess at how much smaller that is compared with the economy’s potential if healthy — for example, the value of G.D.P. if everyone who wanted a job was working and factories were running at full capacity.At that point, try to analyze the “fiscal multipliers” of policies under consideration: how much economic activity each dollar of spending is likely to trigger. Then size your fiscal stimulus package accordingly, essentially using federal dollars to replace the economic activity that has evaporated because of the recession.In practice, of course, it’s never that simple. It includes a lot of estimates and projections, and congressional politics will ultimately determine the size and content of stimulus legislation. Constrained by Congress, President Barack Obama’s signature fiscal stimulus program, enacted in early 2009, was a poor match for the economic crisis at hand. It pumped an average of $240 billion into the economy each of its first three years, at a time the “output gap” approached $1 trillion per year.The approach of both parties in fighting the pandemic-induced downturn has focused less on the big picture. It has been more about assembling provisions to help individuals and businesses weather the crisis, whatever the price tag. Under that approach, large bipartisan majorities enacted the $2 trillion CARES Act in the spring and several smaller provisions, including the $900 billion package a month ago.These efforts are less fiscal stimulus in the traditional sense — using government money to replace missing demand in the economy — and more an effort to directly alleviate the problems the pandemic has caused.“This package is sized not simply to fill the hole,” said Wendy Edelberg, director of the Hamilton Project at the Brookings Institution. “It’s trying to do somewhat different things. A lot of people and businesses are desperately hurting right now, so this money is relief aimed at those people, and in order to be really confident you’re reaching them all, you need to send a lot of money.”But that doesn’t change the fact that the aggregate money the government is pumping out adds up to more than the missing economic activity, which could have meaningful consequences for the years ahead. And that is before accounting for other expected proposals from the Biden administration, such as large-scale funding of new infrastructure.“There are pros and cons,” she said. “Running the economy hot might be a good thing, but there also might be a painful adjustment with a period of slow growth on the other side of the mountain.”In an economy running hot, employers face shortages of workers and must bid up their wages to attract staff. This, along with potential shortages of various commodities, can, in theory, fuel a vicious cycle of rising prices.For the last 13 years, arguably longer, the United States has had the opposite problem. Large numbers of Americans of prime working age — 25 to 54 — have been either unemployed or outside the labor force altogether. Wage growth has been weak most of that time, and inflation persistently below the levels the Federal Reserve aims for.Some argue that estimates of potential output by the C.B.O. and private economists are too pessimistic — that Americans should dare to dream bigger. “We don’t really know what the G.D.P. output gap truly is,” said Mark Paul, an economist at New College of Florida. “Economists for decades have erred and been too cautious, thinking that full production is significantly lower than it actually is. We’ve been consistently running a cold economy, creating massive problems for social cohesion.”In a paper published in December, he said a pandemic aid package of more than $3 trillion would be justified based on the scale of job losses that have been endured. The output gap looks worse based on employment than it does when you look at G.D.P., in part because job losses have disproportionately occurred in sectors that generate relatively low economic output per worker, such as restaurants.Still, the scale of the pandemic aid already in train helps explain why Mr. Biden faces a tricky road toward finding a Senate majority for the next bill, even among Republicans who are not dead set against stimulus spending conceptually.“It’s hard for me to see, when we just passed $900 billion of assistance, why we would have a package that big,” Senator Susan Collins, the Maine Republican, said recently. “Maybe a couple of months from now, the needs will be evident and we will need to do something significant, but I’m not seeing it now.”A key case for going large revolves around risk management. With the economy mired in a cycle of weak labor markets and low inflation, a little overheating might be welcome. If, for example, the Federal Reserve needed to raise interest rates down the road to keep inflation from taking off, it could be a positive thing for creating a more balanced economy less reliant on monetary policy and booming asset prices.Jerome Powell, the Federal Reserve chair, has said that ensuring the long-term productive capacity of the economy is a more urgent priority than tamping down inflation.“I’m much more worried about falling short of a complete recovery, and losing people’s careers and lives that they built, because they don’t get back to work in time,” Mr. Powell said in a news conference Wednesday. “I’m more concerned about that than about the possibility which exists of higher inflation. Frankly, we welcome slightly higher inflation.”Put differently: It’s hard to worry too much about getting burned after a decade-long winter out in the cold.AdvertisementContinue reading the main story More

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    When Can I Apply for a P.P.P. Loan?

    AdvertisementContinue reading the main storySupported byContinue reading the main storySmall-Business Loan Program Will Restart Monday, but Not for AllA small group of lenders that focus on underserved borrowers will get priority when the Paycheck Protection Program resumes.Businesses that received loans in the first round will be eligible to receive second loans, with stricter eligibility.Credit…Brendan Smialowski/Agence France-Presse — Getty ImagesJan. 8, 2021Updated 4:46 p.m. ETLenders who specialize in working with Black- and minority-owned small businesses will have a head start in tapping Paycheck Protection Program funds when the program reopens next week, a move meant to address complaints that the aid was not distributed equitably the last time around.Starting on Monday, borrowers will be able to apply for new loans through the P.P.P., but only through a small group of community lenders, government officials said on Friday. Community lenders are specially designated institutions that focus on underserved borrowers, including women-led businesses and those run by Black, Latino and Asian owners and other minorities.Government officials did not set a timeline for when larger banks and lenders will be allowed to start processing loans, saying only that it would happen “shortly.”The decision is certain to frustrate many borrowers eager to seek aid through the relief program, which offers small businesses forgivable loans to help them retain and pay their workers. The program closed in August after distributing $523 billion to more than 5 million businesses, but last month’s stimulus package included $284 billion in new funding to restart the relief effort.The move to prioritize community lenders came after criticism that the initial round of Paycheck Protection Program funding was unevenly and unfairly distributed. The program’s structure favored businesses with existing banking relationships, creating unique challenges for some of the most vulnerable business owners.When the program opened in April, the money ran out in just 13 days, inflaming borrowers who were shut out. Congress allocated additional funds, which proved sufficient: When the program ended, more than $120 billion was left unspent.Borrowers were previously limited to just one loan, but the new funding will be available to both first-time and returning borrowers. Businesses will be eligible for a second loan if they suffered a sales drop of at 25 percent or more in at least one quarter of 2020, compared with the previous year. Second loans will be restricted to businesses with no more than 300 employees; initial loans are available to larger companies, generally those with up to 500 workers.An administration official said on Friday that the Treasury Department, which has called the shots on the loan program, is confident there will be enough money to satisfy all qualified borrowers’ needs.“It’s not just that we don’t anticipate the money to run out in a week; we don’t anticipate the money to run out,” the official, speaking on the condition that he not be named, said at a briefing for reporters.The move to resurrect the Paycheck Protection Program — which is explicitly aimed at keeping small business owners from laying off workers — comes as the employment picture is once again darkening. U.S. employers cut 140,000 jobs in December, the first decline since April, the Labor Department said Friday.Banks are expecting heavy demand for the new round of loans, as the virus continues to surge and restrictions on activity are reintroduced.Credit…Mohamed Sadek for The New York TimesThe Small Business Administration, which manages the program, said it will begin accepting applications on Monday from community lenders seeking loans for first-time borrowers. On Wednesday, those lenders will be able to submit applications from people seeking second-round loans.Community lenders make up around 10 percent of the program’s more than 5,000 lenders, according to S.B.A. officials. They include Community Development Financial Institutions, Minority Depository Institutions and Certified Development Companies.Business & EconomyLatest UpdatesUpdated Jan. 7, 2021, 12:58 p.m. ETElon Musk has become the world’s richest person, as Tesla’s stock rallies.Simon & Schuster drops Senator Hawley’s book.Daimler responds: ‘We depend on a reliable and stable political framework.’“We appreciate the effort the S.B.A. is making to ensure that some of the hardest to reach and underserved businesses are first in line,” said José Martinez, the president of Prestamos CDFI, a division of the nonprofit social service group Chicanos Por La Causa. “We’ve been receiving a lot of calls from clients who don’t want to be left behind.”Prestamos lent nearly $27 million to more than 900 borrowers during the relief program’s initial phase. Mr. Martinez said he expects most to return for a second loan.President-elect Joseph R. Biden Jr.’s nominee to head the Small Business Administration — Isabel Guzman, a former top official at the agency during the Obama administration — spoke on Friday about the agency she will inherit.She did not directly mention the Paycheck Protection Program — the largest lending program by far in the agency’s nearly 70-year history — but she acknowledged the turmoil many companies are experiencing.“So many small businesses across the country have been devastated by the pandemic and economic crisis,” Ms. Guzman said. “A disproportionate impact has fallen, as it often does, on our businesses owned by people of color.”Most of the program’s financiers, including some of the country’s largest banks, said they plan to resume lending. Bank of America, JPMorgan Chase, Cross River Bank and Wells Fargo, which collectively made more than one million loans, said they intend to start taking applications as soon as the S.B.A. gives them the green light.Bankers said their borrowers are clamoring to apply for a second loan.“We think we are likely in for a very tough winter until the vaccine is more widely available, and we expect there will be a pretty heavy demand,” said John Asbury, the chief executive of Atlantic Union Bank, in Richmond, Va., which made more than 11,000 loans through the program’s first iteration.The relief loans, which are backed by the government but issued by banks, are designed to be forgiven so long as borrowers use most of the money to pay their workers. The rare offer of essentially free money has been a lifeline for business owners grappling with the pandemic’s forced shutdowns and other economic shocks.Holly Schaffner, the owner of Mrs. Turbo’s Cookies, a bakery in Ohio, received two P.P.P. loans totaling $48,000 for her two stores. Before the pandemic, she had 20 employees; in March, as the crisis took hold and she was briefly forced to close, her staff plunged to six. Her sales dropped as much as 70 percent in some months last year.The relief loans allowed her to rehire several people she had laid off. “If it hadn’t been for that money, I’m not sure I would have had the revenue to be able to make a payroll,” she said. “It was incredibly helpful.”Ms. Schaffner plans to apply for a second loan once her bank starts taking applications. She now has 12 workers and hopes to hire more soon.S.B.A officials said they are making changes to try to avoid a reoccurance of the technical meltdowns and other debacles that plagued the initial lending rounds. When the program opened in April, bankers overwhelmed the system with applications, leading to days of delays and frustrating both lenders and applicants. The problems resurfaced when a second round of funding was released a few weeks later.This time, the agency is using a new system that it hopes will scale to meet demand.It is also abandoning the practice of approving loan applications instantaneously, which allowed some borrowers to receive their loan funds just hours after they applied. In response to concerns about fraud — which some lenders and watchdogs fear was extensive — the agency is adding some automated data-verification steps before applications will be approved. Approvals will generally take at least one day, an agency official said on Friday.AdvertisementContinue reading the main story More